The professional services industry continues to grow, with a 4.8% compounded annual growth rate (CAGR) projected for 2024. The growth trajectory reflects modern business realities. As organizations navigate digital transformation, cybersecurity threats, sustainability mandates and an evolving workforce, the need for the specialized expertise provided by professional services firms is increasingly essential.
Still, despite the increasing market demand, growth isn’t automatic for professional services firms. Competition is tight, requiring investments in technology, analytics and skilled talent. Many firms continue to pursue mergers and acquisitions (M&A) to add capabilities, expand market scope and accelerate digital transformation. Overall, M&A activity is up, with accounting, legal, IT and technology services firms leading the way.
Strong growth rates in the professional services industry are projected to continue through 2028, driven by five key trends that are reshaping the landscape.
5 Trends Defining the Industry’s Future
1. Accelerating digital transformation
Digital transformation is a core strategy embedded within many of the trends shaping the future of the professional service industry. The transformation is well underway across the sector, with firms leveraging innovative technologies to enhance operational efficiencies and deliver value to clients. Ever-advancing technology and tangible returns on investment are prompting firms to prioritize digital strategies.
The main objectives of digital transformation initiatives in the industry include:
- Improved client experiences
- Operational efficiencies
- Data-driven decision making
- Collaboration and agility
- Cost reduction
Despite high awareness and value, 70% of professional services firms believe they are lagging behind in digital transformation. Accounting firms lead the industry, with 62% reporting their transformation is in progress, followed by technology services firms (53%), consulting firms (46%) and marketing firms (43%). Legal firms and architectural-engineering firms are less likely to have an active digital transformation strategy in place.
2. AI integration
Since the launch of ChatGPT in 2022 moved artificial intelligence (AI) into the mainstream, use cases for the technology have multiplied. Seventy-seven percent of professional services workers expect AI to have a significant impact on the industry, with most pointing to operational efficiencies as the top benefit.
The adoption of AI comes with risks that firms are grappling with in real-time. Beyond standalone AI tools, over one-third of SaaS products integrate AI, with another 42% preparing to implement AI-driven enhancements. As a result, firms and employees may not be aware of how often they’re using AI or the potential risks, including bias and data privacy.
Firms should start by taking an inventory of all software and apps in use by employees. Based on the inventory, a firm can conduct a thorough risk assessment, including vendors’ AI governance. Every firm should implement an acceptable use policy for AI, outlining appropriate use cases, data guidelines and employee roles and responsibilities.
3. Cybersecurity threats
Digital transformation and increased AI usage make robust cybersecurity practices more crucial than ever. Cyber attacks are more sophisticated and harder to detect, with AI enabling attackers to mimic normal system behavior and create voice clones for phishing schemes. AI also dramatically boosts the automation of cyber attacks, expanding their scope and scale.
As digital transformation advances, cybersecurity is essential for professional services firms handling sensitive client information. Effective practices should include regular risk assessments, access controls, multi-factor authentication (MFA), employee training and an incident response plan. For firms with small IT teams, partnering with outside experts to assess, manage and test cybersecurity can help reduce risk.
4. Tax considerations
As of now, the increased estate and gift tax exemptions established by the Tax Cuts and Jobs Act (TCJA) of 2017 are scheduled to sunset on Dec. 31, 2025. However, the new administration and Congress are expected to prioritize tax legislation, including making some TCJA provisions permanent.
High-earning professional services executives should consider taking action under current provisions to lock in significant tax savings when transferring wealth to the next generation. For example, under the TCJA, up to $13.99 million per individual and $27.98 million per couple are exempt from federal gift and estate taxes in 2025. If the Act sunsets as planned, these maximums will revert to the 2017 amounts of $5.6 million per person and $11.18 million per married couple, adjusted for inflation.
Optimizing available tax exemptions takes careful and strategic planning. For professional services industry executives, an expert estate planning advisor can help navigate evolving guidelines affecting personal wealth management, including cash, investments, properties and partnership equity.
5. The workforce evolution
The dynamics of talent acquisition are evolving, creating new challenges and opportunities for professional services firms. In a 2024 survey, industry leaders ranked the failure to attract or retain top talent as one of the sector’s top risks, following only cyber attacks. While competition for specialized talent has always been tight, the playing field has expanded. Professional services leaders now find themselves competing with well-funded tech startups and digital-first companies to pursue the same pool of professionals skilled in cloud services, AI and emerging technologies.
The competitive talent landscape, along with transformed employee expectations around workplace flexibility and personal well-being, has firms reimagining their talent strategies beyond traditional compensation and benefits packages. Firms are responding to generational preferences with enhanced mental health support, expanded lifestyle benefits and career progression planning and support. Firms are developing these targeted and customized strategies based on deep understanding of specific talent segments.
For professional services firms, the convergence of digital transformation, cybersecurity challenges and evolving talent dynamics has created opportunities for innovation, reinvention and value creation. The professional services industry experts at CBIZ can help you optimize your firm’s strategies with insights and guidance tailored for your situation. Connect with a member of our team and gain access to more resources here.
This article includes input from John Verry, Managing Director of Cybersecurity, and Anne Long, President of CBIZ Individual Insurance Solutions. Through their collaboration, CBIZ can assist your team in addressing today’s critical AI challenges and take advantage of strategic planning opportunities.