Connecting Commerce. Professional services industry confidence in the digital environment. Written by
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1 Connecting Commerce Professional services industry confidence in the digital environment Written by
2 About the research This article is part of the Connecting Commerce research programme from The Economist Intelligence Unit, commissioned by Telstra. The analysis is based on a survey of 2,620 executives in 45 cities across 11 industries conducted in June and July C-level respondents account for 42% of the survey sample, with the balance being other senior executives. Based on the survey, The Economist Intelligence Unit created a digital cities barometer for industry to assess and compare confidence in the digital transformation environment across industries. Business confidence is a highly subjective measure of a state of affairs, based on attitudes, and is not necessarily an indication of an industry s actual level of digital development. Executives in professional services have a relatively low level of confidence in the overall digital transformation environment supporting their organisations (ranking 10th out of 11 industries in the digital industry barometer, in which the utilities industry is last). Slightly fewer respondents (44%) in this industry also say digital transformation will be very important to their organisation compared with other industries (47%) over the next three years. Figure 1: Overall barometer readings professional services At the same time, professional services may soon undergo a quiet digital transformation. Some jobs in the industry appear to be at risk of being automated, primarily in accounting and auditing. For example, artificial intelligence (AI) was expected to replace about a third of business consulting resources by The industry must therefore confront digital transformation and introduce new business models at the same time as it continues to advise clients on many of the same issues, illustrating that no industry is safe. Score (out of 10) Rank (out of 11) Overall environment Innovation and entrepreneurship th th Financial environment th People and skills th Development of new technologies th ICT infrastructure th Telstra Connecting Commerce The Economist Intelligence Unit Limited
3 At risk The primary obstacle to digital transformation from an internal perspective is people and skills, according to Thomas Kautzsch, who is a partner and global head of the automotive and manufacturing industries practice at management consulting compnay Oliver Wyman. It is a tremendous issue, he says. Thousands of jobs will go away, and change is coming. The rise of AI, big data and analytics, and associated technologies offers considerable benefits in efficiency. By 2025, research house Gartner believes that up to a third of all jobs across industries could be handled by robots. 2 But, as is the case with many other technological trends, the positive effects may be overshadowed by implications for employment, as automation will potentially replace humans, particularly in this industry in auditing and accounting. Education and skills are likely to be the difference as to whether AI will replace workers or not. Top-tier consultancies are therefore looking to improve talent development. If they succeed in enhancing skills to support digital transformation instead of replacing workers with technology, the impact felt on jobs may be less than initially feared. At the same time, executives in the professional services industry are less likely to say that academic institutions consult local businesses about digital skills required in the future compared with all other industries (42% v 53%), illustrating the challenges ahead. Thousands of jobs will go away, and change is coming A view from the outside This is a fascinating time, says Paul Papas, global leader, of digital strategy and ix, IBM Global Business Services. We see change across every industry and geography and the speed of adoption is incredible. He considers the Internet of Things, blockchain, augmented and virtual reality, and AI as some of the key emerging technologies in digital transformation today. Ultimately, the combination of such technologies holds great promise for improving government digital transformation and citizen services. As a result, the progress of digital government services (or e-government) has been tracked globally by the UN since The now biennial survey shows great progress across the world, including using emerging technologies from which citizens and businesses both benefit. In the most recent survey, the UK was first, followed by Australia, South Korea, Singapore, Finland and Sweden. What is also interesting is the linkage between government and the private sector and how they can they work together, says Mr Papas. For example, using open government data, the private sector can create new apps for business use, such as maps of investment projects in cities and information to support tailored mortgages. Other areas for potential use of better analytics identified by Mr Papas include transport, crime, emergency services and health. At the moment, however, respondents in the professional services industry agree to a greater extent than those in all other industries that city governments make poor use of the data it collects (59% v 55%), which also leaves room for opportunity to improve. Publishing greater amounts of data sets allows the private sector, including professional services, to make more informed decisions. Professional services respondents are also less likely to agree that, over the next three years, the role of city support for digital transformation at organisations will increase in importance, compared with respondents across all industries (65% v 71%) Telstra Connecting Commerce The Economist Intelligence Unit Limited
4 Business as usual The professional services industry has a low level of confidence in the overall environment for digital transformation. One reason may be the nature of the industry. If you look at big data, I would say that any business-to-consumer industry is more advanced than businessto-business (B2B), because there are more customers and you can do it faster, says Mr Kautzsch. Anecdotally, B2B is also moving more slowly due to a number of large incumbents in various professional services, such as accounting where the big four (PwC, EY, Deloitte and KPMG) have dominated the landscape and barriers to entry remain high despite digital innovations. At the same time, many professional services firms often advise clients on business transformation can be slow to transform themselves given high barriers to entry in the industry, yet see the opportunities to gain a competitive advantage. Digital strategy is business strategy in a digital world, says Mr Papas. What has changed [from previous business reinvention] is the customer experience. It is one reason that other industries continue to turn to professional services for their insights. Figure 2: Barometer readings by region professional services OVERALL ENVIRONMENT US 7.21 ASIA 6.50 EMEA 6.33 INNOVATION AND ENTREPRENEURSHIP US 6.76 AUS 6.46 ASIA 6.41 FINANCIAL ENVIRONMENT US 6.49 ASIA 6.39 AUS 6.29 Regional takeaways for professional services firms AUS 6.23 EMEA 6.16 EMEA 6.21 PEOPLE AND SKILLS DEVELOPMENT OF NEW TECHNOLOGIES ICT INFRASTRUCTURE US 7.48 AUS 6.54 US 6.76 EMEA 6.70 EMEA 6.67 AUS EMEA 6.53 ASIA 6.39 ASIA 6.37 ASIA 6.32 AUS 6.35 US 6.31 US professional services executives rate their digital transformation environment higher than all other regions overall and in every single subcategory except for ICT infrastructure. Asia is second overall but fares poorly in subcategories, ranking second to last in three out of five and last in one of them (people and skills). Survey takers in EMEA rate the ICT infrastructure environment for supporting digital transformation as the highest in the world, possibly due to a number of EU-led initiatives, such as subsidised broadband development in rural areas. Australia ranks second in three (out of five) subcategories for digital transformation support: innovation and entrepreneurship, people and skills, and ICT infrastructure. 6 Telstra Connecting Commerce The Economist Intelligence Unit Limited
5 Written by
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