Transcript Blog- The Global Impact of COVID-19 on the Professional Services Industry
On this episode of Industry Insights by SAP, Josephine Monberg interviews Jonathan Rhodes, Global VP and Head of Professional Services Industry Unit at SAP. Jonathan gives his perspective on how the professional services industry has been impacted by the coronavirus pandemic and how technology will be able to help going forward.
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Welcome to the industry insights by SAP podcast series. My name is Josephine Monberg and I am your host. You are now listening to the COVID19 special edition of our show. Welcome to our podcast. Hey guys, welcome to this episode of her podcast. As you just heard in the introduction, we are looking at different industries and how they’re being impacted by COVID 19 cause we are obviously seeing huge impact on the different industries and today we’re going to be looking at the professional services industry, so very broad industry that is impacting many different ways. And to do this, I am joined by Jonathan Rhodes who is sitting in his home virtual studio. Hey John, thank you for being with us.
Thanks Josephine. It makes you sound very, very Posh.
Yeah, right. Well you’re British. That is supposed to be very posh. Yeah. So, um, I’m very excited to be talking about this uh, industry and I know it’s, it includes a lot of different um, jobs of course, but I still think it’s going to be really interesting to look at how it’s being impacted. But before we get into that, tell me a little bit about your role at SAP. Cause you head up the professional services industry at SAP.
Yeah, sure is. Um, absolutely correct. Cause I head up the, what we call the industry business unit at SAP and we look after the strategy for the industry globally. Um, so that’s really understanding what’s happening in the industry, the trends, what customers are trying to achieve and we have to almost decode that and translate that back into an understanding for our developers to build solutions that add a lot of value and we take a full lifecycle of view. So it’s from the requirements development and then working closely with customers to realize value from it. Um, so it’s a longterm relationship we have with customers, but um, yeah, great role really.
Yeah. Yeah. Really, really exciting road. We were just talking about before the interview, how you get to kind of, you get the best of both worlds cause he has to go out to the customer, but you also want to take it back to the business and really create solutions that are very customer centric. So, um, very, very interesting role. And I just alluded to this before by, sorry, calling you posh, which is sometimes connected to being British, which is not a bad thing at all. But where are the world? Are you right now?
Yeah, so I’m in London, West London, which is where I’m based and uh, enjoying, uh, which will be date list, but the one is locked down in London. But, uh, it’s uh, interesting times as we’ll talk about. Yeah,
very, very interesting times. Yes. And um, so let’s, let’s talk about the professional services industry. How is it being impacted by Covid 19? I’m sure you’re seeing a massive impact.
Yeah, it is a massive impact. And if you look at work, some of the analysts say they view it as quite severe and that’s understandable. Really. It’s a people based business. And often these people are on customer sites and it is a varied industry. So these could be doing projects, providing services, and in a social distance, in lockdown scenario, they just can’t do this anymore. They’re not able to over for reasons of their own social distancing or because their customer says we don’t want you on site and they’re struggling to do that. So it’s having a big impact. And also I think in, in the short term, uh, professional service firms also have to think about the safety of their employees. So, so they don’t want to be saying to them, you know, you need to keep on going out and working. So that’s been a huge challenge. Uh, and I think that that’s one of the biggest things that have to grapple with is how do we continue to deliver services to their customers in a world where predominantly it’s a face to face approach or has been for a lot of customers.
Yeah. And just to, just to narrow down what kind of roles or professions could we be talking about when talking about professional services?
Yeah. Yeah. And it’s very broad and it will vary the impact. So I, I, I like to say that, uh, my industry area covers everything from cleaners to lows or architects and everything in between. So obviously some of the things which are more on the manual labor side of things. Um, some of it’s continuing cause I’ve used just key workers so, so they will still be there and that provides a challenge to employers cause they need to be able to track what people are doing and try and keep them safe and figure out how to do it through to the uh, consulting type of engagements where normally they would be people on site. And to be fair, they are trying to continue to service their customers remotely. I mean remote working. It’s amazing how quickly people got used to it. I been on many workshops with customers and uh, and our partners who are delivering services and very, very quickly it’s become effective and it’s become a new normal. And that will be interesting to see in future if our new normal stays. That’s one of the things we can talk about later in terms of what the future holds.
Yeah, yeah. It’s definitely very curious to see if it’s something that will sustain beyond a current global pandemic or if it’s something that it was the thing of COVID19. Um, but yes, sorry, please continue.
Yeah, and I think customers have adopted it a bit sort of customers of my customers. So, um, normally if it’s a time of materials, a time and expense based business, there’s a desire of a customer to see the consultants on site and, and to feel like getting value for money. You know, they’re paying sometimes quite a lot of money per, per hour or per day. And often there’s a desire to, you know, show me the work that you’re doing. Customers are becoming more flexible in terms of how they buy services from professional service firms. But also there’s a shift I think to rather than think of it as I’m paying per hour and this is accelerating, this was happening anyway, there’s a shift to outcome. So the simplistic form of that would be a fixed price and people are now say, well you know, we’ll deliver her either we can in a remote way and deliver to a fixed price for, for a deliverable.
Uh, but we’re also seeing firms straight to innovate and make it more digital delivery. And this was happening once again, but it’s accelerating hugely. And a lot of my customers and the professional service industry may have bench resources and they’re looking to see how they can take their resources, which may be benched and develop new digital services and remote services and charge on a usage basis or a digital basis. So it’s driving a number of different behaviors, birthing, having engaged with customers and also this type of services they will do. And don’t get me wrong, we identified these trends previously, but it’s been accelerated really significantly as a result of the current situation.
So COVID19 is really also does industry the accelerator of digital transformation?
It is, yeah, totally. If you look at the key trends which we’ve had in, you know, I’m sure we can link you to your white papers and it was really a move from face to face to digital, which we saw. We saw a shift in terms of the, uh, the type of workforce makeup, so an increase in automation and freelance and we’ll talk a little bit more about that and also new players who could deliver digital services globally rather than needing to be next to the customer. Uh, and we saw those trends anyway. It’s been hugely accelerated and I think that will continue and uh, people are now seeing the fact that the customers are, my customers who hadn’t responded to about previously are having to move quicker. Um, and there’s a number of implications that come with that as well in terms of infrastructure.
How do I support these new services I’m doing? And also culturally, um, a lot of cultures are based upon, uh, people owning employees and charging the employees out and getting revenue from that rather than having a service. But the upside is that we move into this concept of nonlinear growth. This idea of I can sell a person once, I can sell a service a thousand times. So each time I sell that service, that’s not people related. I’m getting more and more revenue. And you break the connection between people and revenue. And that’s why we saw it in the first instance coming along. But people are now starting to realize to realize if accelerate it, it can actually benefit them and it’s filling gaps in their revenue from traditional services. So it’s not all doom and gloom. I think we, um, we’ve been looking over the analyst predictions and, uh, professional services is obviously impacted, whether it’s a U shaped recovery and L-shaped recovery or V-shaped recovery depends on how firms react, whether they can actually embrace this digital transformation as you identified, uh, and really transform themselves. Um, and it’s opportunity to do it, I think, you know, rather than there could be a tendency to sit and panic and just look at pipeline and backlog dropping off. I think it’s really an opportunity to try and think about how you come out the other side and embrace that change.
Yeah. So you’re, so you’re, you’re, you’re seeing that, um, companies that you work with right now have responded positively and trying to kind of figure out how they can reimagine themselves with the right now to, um, take advantage of the situation as best as they can or to at least not, um, get out of this, um, or go through this crisis suffering. Um, largely. So when you speak to your customers now, what do you tell them? What is your, um, your advice in terms of what they should be doing?
And my advice really is to look at, um, not the whole, if you like a hole in what they have a hole in their finances, but having the pipeline but that have a, uh, are going to be prepped to come out the other side. And I think it’s slightly different to, if you look at, um, 2008 where there was a protracted recession, I think this is something where you’ve got a great opportunity to do. I’d say three things really. One is to look at the services you deliver and really evaluate whether you can move to more digital services, remote services, um, which prevent, cause we don’t know, this could be a series of peaks and troughs. It may just be one, but I, I doubt it. So to look and see how you can do that in future, this second is as well as services, look at the infrastructure and culture and how you would provide those going forward because, uh, it’s not something we can just flick a switch and suddenly you’ve got a digital store out there and in a way to provide things to customers.
Uh, and you also need to be able to, uh, this classic approach of if every interaction with your customer is digital rather than face to face, how do you start capturing what was interactions are, whether the customer’s happy or not. So there’s a, there’s an entire infrastructure around that. And the third is really look at how you need to potentially risk all your employees. So if you look at, and some of the things which, um, you know, if you go out and look at the classic McKinsey article is to re-skill people for a, you know, socially distance or distance workforce. Um, so, so I think it’s almost, you know, what do you provide to your customers? How do you provide them in terms of infrastructure and technology? So digital, classic digital transformation and, and do you need to rescale your workforce to do that as well so that they’re not constantly going on site, that they’re innovating and inventing rather than, uh, delivering face-to-face.
So, so that’s the sort of advice and take advantage of it. Now, um, a lot of customers will have potential benched resources. Uh, so I had a great workshop with a customer, uh, yesterday where they said, okay, we’ve got bench resources, whatever white space areas you can see in your industry or other industries where we can start taking these resources and trying to develop some solutions to take into that white space when we come out of the trough of the other side. Um, and I think that’s the key. And it’s hard for leaders in these terms to do that because obviously they’re focused on day to day survival in some cases. But, but I think you’ve got to look at the, I won’t quite call it a silver lining cause I don’t think it’s better yet, but I think you’ve gotta look at the positives of how you can, uh, help transform as a result of this must. That’s our backs were getting really.
Yeah. No, it’s about finding the balance right between how do you respond right now and, um, how do you just deal with the situation you’re in, but also how do you get ready for what could be a new normal? Because I’ve also been talking to so many different industry leaders and now from SAP. And what I’m also seeing is that these impacts will be longterm, not just in terms of the business model and how it might change, but also if you look at the workforce when you go back to work, will the workforce just, you know, go back to it as though everything was normal? Probably not. Um, there’s going to be rules that governments will put in place, which will of course also impact businesses and, um, consumer behavior will probably also change in the longterm. So in that sense, it’s, it’s also balancing all of those into your strategy now to better prepare. Um, but what about the workforce? What impacts right now are you seeing on the workforce, uh, in your industry?
It’s really interesting cause we, um, we’d, we’d seen a trend of, um, we call it the talent networks and telling the economy where by firms were trying to have a, a more elastic approach to capacity. So they would want to take, uh, freelances and externals and, and, and different sources of supply so they could scale up and down accordingly. And that matched perfectly to a lot of cases, this millennial approach of I don’t want a permanent job, I’ll just gig a freelance. And it was a perfect storm of the workforce wanted to do that. Uh, employers wanted to do it and we had this very vibrant approach to matching demand and supply that may change in future because I think employers will still want to do that. They’ll still want to even more so want this capacity because if you’re able to flex up and down during, you know, from lockdown post lock down and locked down posts lock down, then that suits simply as perfectly.
Uh, if I’m a freelancer that doesn’t look that attractive anymore. In a lot of cases, depending on the, the, you know, the global country or where you are. Uh, in some countries it’s a real problem because you don’t get health benefits, you don’t get certain things you’d expect to get. So I think the gig economy, which is prevalent in a lot of professional services will increase from an employer perspective. I think it may decrease from the, uh, the freelancer’s they want a bit more security. Um, so, so that will be interesting to see about how that happens. And I think we may end up having more platforms who try to give some certainty to the freelancers. And we’ve seen a little bit already. Um, I mean, I mean, one thing which is quite good in professional services firms are pretty innovative, so they’ve jumped on a lot of this already.
Um, uh, Accenture has already put a platform out there, uh, in terms of his people and work connect where they’re trying to take some of the people who have been put out of work as a result of the crisis and, and, and rematch them and find them, uh, something that they can do. Uh, and also, uh, I can see we’ll get specialists, uh, platforms coming in to do that in future. Uh, it will be a challenge I think, because you’re still going to have this clash of I want to get trained, I want to be an employee more than a freelancer, but it will be interesting. Definitely. And also I guess getting re-skilled as well. I mentioned the distance economy skills for distance economy. Um, it’s hard to do that if you’re a freelancer because typically it’s on the job training as opposed to you have to take time out and, and refocus and do it yourself. So I do think some distance learning platforms already, there’s a number of free ones and people have made them free of charge. I think that will be something which we’ll see in future as well, both from professional service providers and some of the education providers.
Yeah, and you’re right because I just heard, um, on the news this morning, somebody, I think he was from the UK talking about how this is an, I think he called it an endemic. So it’s something that it’s not going to end just because we find a vaccine is a new term. He was saying that this is something that could change our lives fundamentally for at least the next two and a half years, which I thought was quite thought provoking because in the beginning I thought, okay, well now it’s a global pandemic. Then we get out of it, then we find a vaccine, then things go back to normal. But that’s is looking like that’s probably not the case.
And I think that’s when usually professional services tends to be impacted by the highs and lows of our industries. Um, if I look at, uh, exactly what you’ve just been saying, the trouble they’re predicting from an airline perspective, international travel is not going to get back to normal until 20, 24, something like that. So imagine the armies of people who were involved in servicing, um, an airline in terms of meals, cleaners, maintenance, they’re typically all provided by separate professional service firms who provide business services. So a knock on effect through the service industry is, is pretty huge in a lot of industries. Um, and that’s why I think those industries who can somehow blend and it won’t apply to some of the ones I’ve just mentioned, it’s just not possible. But the ones who can provide a digital subscription, I’ve got a better chance of this V-shaped recovery rather than the ones who are going to be severely by, uh, the industries which we service. Um, but it, it’s, uh, I totally agree. I think it’s something which is going to be around for sometime to come and, and we need to adjust to it and look for new revenue streams for those industries or those service providers who are impacted by key industries.
Yeah. And we’ve already now talked about what the future holds, but if you were to give your, take out your crystal ball and give your predictions slash advisor recommendation in terms of one, what do you think businesses should do a very, very, very long term, but also what you think the future holds for the professional industries? Uh, professional services industry. I’m very curious to hear that.
Yeah. And it tightly, it’s very broad industry, so, so I’m trying to split it up into different sections. I think those who are able to provide more digital and remote and technical services, I think I’ll be a real kick in innovation. We’re seeing it already. Some of the providers have really responded. If I look at what I’ve been doing with, um, supporting governments with, uh, health protocols and apps and, and a whole bunch of clever things that they jumped on incredibly quickly, I think that will continue. So I think that’s, um, I won’t go as far as calling a bright, but it’s a positive future for the types of service providers that can do that. I think there’s some which are heavily focused on physical delivery of services and I think they will just need to get smarter in terms of the, the skilling of their resources.
I think they will get more flexible surveys, idea of an extended workforce with freelancers and contingents. I think that’s the way they will go forward in future to allow them to not have is a huge ups and downs swings. Um, I mean in the UK we as in other countries, we have this concept of, you know, the government taking over some of the salaries for some of workers in these key industries, that’s not going to be sustainable if it’s endemic that, you know, we can do it for short period of time. But over the years, that’s just not possible. So, uh, I think of the industries which can push into a digital future that will accelerate hugely. It will be a real kick in innovation for those which are more physically focused. I think it’s better resourcing and more flexible in terms of how they’re deployed. They’re the two key trends in terms of as two different types of organization.
Hmm. Very interesting. It’s going to be, it’s such an unpredictable time that we’re living in. I remember when I first heard of, um, of the Corona virus, uh, about how it started in China. I thought, well, I mean that sounds like that’s crazy what’s going on in China, but I never thought it would impact the rest of the world like it has. And we are definitely living in, um, I think w what we believe to be our new normal right now, which is going to sustain for who knows how long. So it’s going to be interesting to see what happens, especially in a, in the industry that you’re in. Cause it’s impacting so many, so many people. Any last words from you?
Oh, the only last word is I think you’ve hit the nail on the head. It to me it’s, I think a lot the temptation would be to sit and wait, wait, wait until this thing isn’t going to pass. Don’t sit. So you know, embrace that change. Be positive about it and go out and do something. Yeah, that’s my loss.
I completely agree with your lats, your last words. I think this is not the time to sit back and wait. I think it’s time to take action and see how we can make the most of the situation we’re in. Um, so John, thank you so much for coming on the podcast. It was so fun talking to you and to everybody who listened to this episode. Thank you so much for listening in. Hopefully
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