Survey respondents – which included more than 300 firms of all sizes, representing a broad spectrum of the government consulting industry – reported that they are once again investing in diversification, merger and acquisition, and perhaps most important of all, their people, as composite fringe rates rose for the first time in four years.
Their top financial challenges reflect this changing climate. The majority of respondents ranked increasing profitability as their overwhelming top challenge, followed by cash flow and the decreasing and/or unpredictable federal spending environment. As diversification and efficiency of operations take over, organic growth – once higher on the list – has become less important.
Net profit is down by 4% to 6% on average across all respondents, but has normalized over the past six years. Meanwhile, with profitability declining for the first time in four years, companies are investing in diversification and growth strategy – and growth is now slowly inching back up.
The purpose of Clarity is to give insight into what companies can do about their challenges. So, what are the most profitable companies doing?
Collaboration. Clarity respondents using a purpose-built collaboration tool reported experiencing near triple growth and 40% more profit versus companies that used home-grown collaboration tools or just email.
High project visibility. Firms reporting very high project visibility reported higher profit: 65.4% more profit on average than all other visibility categories. How are these firms gaining better visibility into their projects? We found that more companies reporting high project visibility were performing Scheduled Risk Analysis (SRA) during all project phases – including proposal, project initiation and execution – rather than just during a single phase.
Leveraging the cloud. There is a greater than 20% adoption rate of social media, Human Resources, Accounting & Finance, and CRM SaaS solutions– and that is predicted to increase to a rate of 40% adoption within the next 12 months. However, there is still room for improvement, with more than 50% of respondents indicating that they still had no cloud plans. Cloud adoption is increasing for small- to medium-sized businesses; in fact, 42% of participating small firms go with accounting in the cloud.
Why should you follow their example?
Collaboration: Purpose-built tools help focus on core competencies rather than building out software solutions. These tools offer an evolving solution to connecting project team members and making them more efficient. Well-run, efficient projects equal more profitable projects.
Visibility: The very best companies are performing Scheduled Risk Analysis (SRA) in more of a routine way so that leadership can have better visibility and take corrective action when needed.
Cloud: Companies that invest in cloud applications report higher rates of profitability. In fact, participating firms with accounting and finance capabilities in the cloud reported three times more profit than other firms.
What does this all mean? In a word, efficiency.
Increased efficiency is the key to surviving and thriving in any spending environment. By seeking out efficiencies whenever possible, your firm will be on the right path to success.
To learn more, download the full Clarity report.
Warren Linscott is vice president of product strategy and management at Herndon-based Deltek, the leading global provider of enterprise software and information solutions for government contractors, and can be found at www.deltek.com.