|Tough Times Ahead for Providers of Professional Services|
|13-Jun-05 [ by Nophakhun Limsamarnphun ]||11850 Read and 1 Comment|
Larry Chao‚ a Bangkok-based 20-year veteran of the business-management consulting business‚ told me the other day that threats abound for high-end professionals‚ such as lawyers‚ accountants/auditors and human-resources (HR) managers. And it is especially true now‚ with demand appearing to have shifted to more specialized and differentiated services while profit margins for more standard and once-competitive products are shrinking.
The relentless force of globalization and rapid advancements in information technology have increasingly simplified and democratized certain standard services in recent years‚ which has resulted in sharp price cuts. For instance‚ law firms have found it increasingly difficult to sell basic legal services like compliance because standardized legal templates are now widely available.
Another example is the once-unique job-grading method developed by one US-based compensation consultancy for effective HR management. This point-based system has now been copied by other users worldwide including in Thailand‚ thus diminishing business prospects for the original practitioner.
Salary surveys within the same or across sectors for use in compensation restructuring are now available online at little cost‚ thus assisting in-house HR managers to devise their own corporate compensation programmes with no need for the services of outside consultants.
In addition‚ many professional-service firms have seen their staffs switch over to work for former clients‚ since career advancement prospects within individual firms have become less attractive.
For instance‚ the young lawyers today have less of a chance of becoming a partner in their law firms when compared with their counterparts of a decade or two ago‚ so some are moving to ex-clients for in-house legal counsel positions.
Overall‚ the demand for professional services seems to have shifted from saving costs and increasing efficiency to more innovative‚ specialized and differentiated services in which service providers may continue to command a premium price.
In Thailand‚ the market for professional services boomed in the wake of the 1997 economic crisis‚ when several large enterprises‚ especially banks and local units of multinational corporations‚ underwent drastic restructuring‚ entered into mergers and acquisitions or were ordered to privatise. That frenzy drew several big international players to the Thai market‚ each of which charged hefty fees for their services. The pace of business started to slow down in 2001.
Now‚ professional-service providers have found that prospective clients are smarter that they were in the old days‚ and standard services no longer fetch a premium. The order of the day is to help clients develop more strategic solutions specific to individual business needs.
It?s increasingly about ?thinking outside the box? and leveraging a company?s resources to boost revenues‚ not just saving costs or increasing operational efficiency via a redesign process that is limited because any achievements would be incremental and thus insufficient to stay ahead of the competition.
For professional-service providers like lawyers or business consultants to stay competitive‚ the focus is now on profitability per lawyer or per consultant‚ which can only be achieved through more strategic solutions for clients. For instance‚ Allen & Overy‚ a London-based law firm‚ earlier attempted to develop a global strategy that would help it take on the challenges of increased competition for market share. Once the firm?s global competitive strategies were agreed to‚ the implementation required general management skills that took into account the implications of these strategies on organizational structure‚ compensation‚ culture and skills.
A plan for practical change was proposed to create clear accountability‚ as well as to assess progress in the managed execution of the plan for distinct global positioning. In addition‚ clear targets for individuals and individual accountability were included in the overall programme.
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