(Originally published on Deltek Blog May 19, 2022)
Architecture and engineering firms around the world are constantly looking for ways to be more competitive, more efficient and more financially stable. Firms need to stay current on industry trends while also determining if their firm is moving in the right direction ─ and to do this, they have to look outside their own business.
This week, Deltek launched its 43rd Annual Deltek Clarity Architecture and Engineering Industry Study for the United States and Canada and 3rd Annual Deltek Clarity Architecture and Engineering Industry Study for Europe and Asia Pacific. This annual report delivers actionable data that architects and engineers can use to measure themselves against their peers and see how their business stacks up against the best firms in the industry.
This year’s results capture responses from more than 1,100 firms of all sizes and complexities across 10 countries and delivers more than 100 benchmarks and trends.
The Deltek Clarity Architecture & Engineering Industry Study is the longest-running and most comprehensive report focused specifically on the market conditions, industry trends and benchmarks for A&E firms. We provide this in-depth research as a complimentary service to show our commitment to the industry, and we’re proud to partner with firms and find specific, measurable ways to make their business more efficient and effective.
With the business landscape constantly evolving, firms large and small are striving to keep up with the pace of change. Each year, we deliver Clarity reports to help business leaders determine where they are today, how they compare to others and strategize how to drive their business forward through the use of technology.
What’s Happening in the A&E Industry Today?
People, projects and technology are front and center in the Deltek Clarity results around the globe. In the midst of a talent crisis, closing the staffing and technology gaps will be required for firms to deliver successful projects. Overall, firms are very optimistic about their pipeline, specifically in North America, but financial performance could be at risk with rising labor costs and inflation.
HERE ARE A FEW KEY TAKEAWAYS FROM THIS YEAR’S REPORTS:
- Firms in North America are projecting a 17% growth in net revenue for 2022, the highest year-over-year projected growth in more than a decade
- Nearly 65% of business leaders in Europe and APAC reported that the pandemic highlighted weaknesses in their operations model
- Average operating profit on net revenue in North America is down more than 6 percentage points year over year while average collection period jumped nearly 14 days
- More than half of companies in Europe and APAC expect to lose market share in two years without digital transformation
- Employee turnover increased globally with Europe and APAC seeing an average of 18% and North America reported nearly 14% average turnover
Staffing Challenges Impact Every Area of the Business
It’s no surprise that A&E firms are facing significant staffing challenges, but how wide the ripples extend continues to evolve. Survey respondents reported that staffing challenges are at the top of the list in nearly every area of the business, with 64% of firms identifying staff shortages as one of the top challenges for project management.
A stunning, 78% of financial leaders noted finding and retaining qualified staff is a top challenge for managing the bottom line. While firms are looking to hiring more qualified staff across the business, companies need to look for ways to upskilling and retaining existing staff, improving efficiencies so they can deliver more projects with fewer people and leverage technology to fill the resource gap.
Firms Prioritizing Digital Maturity and Tech Investment
Firms have expressed a renewed interest in technology trends and anticipate increased investment to support core business areas. With more than half indicating they expect to lose market share in two years without digital transformation, A&E firms are focused on improving their digital maturity. While only 8% of firms in North America and 2% of firms in Europe and APAC describe their level of digital maturity as low, more than two-thirds expect to be in a mature or advanced stage of digital maturity in just five years.
As architecture and engineering firms evaluate their tech investments, strategic and purposeful investments will be critical ─ and firms will need to prioritize these investments to stay competitive with clients and potential employees.
Optimistic Industry Outlook and Higher Confidence in Project Performance
Architecture and engineering firms are expecting revenue growth in North America at levels that haven’t been seen in more than a decade. Growth is expected primarily in the water/wastewater/stormwater market as well as the transportation and energy/power markets, which are significantly influenced by the Infrastructure Investment and Jobs Act.
Many firms are already benefiting from a healthy backlog of nearly nine months and it will become that much more critical for teams to be selective in project pursuits, proactive in project management and diligent in project delivery. Globally, A&E firms are more confident in the accuracy of their project reporting and are seeing more projects on or under budget, but the percentage of projects on or ahead of schedule continues to slip. Architects and engineers will need to look for ways to better leverage technology and change their processes to keep projects on track and know when adjustments need to be made.
Financial Performance at Risk with Rising Costs
Overall, A&E firms saw stable financial performance globally, but as attrition and project demands increase, firms may start to see an impact to the bottom line. In Europe and APAC, 2 out of 5 companies reported an operating profit on net revenue between 16 and 25% while firms on average in North America reported 12.8%.
As labor costs increase, companies are seeing tighter margins and are looking for operational efficiencies. European and Asia Pacific firms are focused on increasing cash flow and profitability as well as managing growth while firms in North America are focusing on training project managers to be more financially savvy, improve business processes and increase spending for talent acquisition and retention.
Bring Clarity to Your Conversations and Your Business
While the path forward may not be certain, it is clear that architecture and engineering firms are confident in the outlook for the industry, but still have room for improvement to help their firms be more competitive, more attractive to potential and current employees and more profitable.
The Deltek Clarity report provides one avenue to identify areas for improvement and can be the catalyst to drive better strategy, visibility and collaboration in your firm. Now is the time to align your business plans, leverage technology to gain efficiencies and improve business performance so you can deliver better projects.
At Deltek, we are more than just a software provider, we are a trusted partner with industry-leading solutions designed to help companies understand how they can bring more clarity to their business and reach the next level of excellence. Let Deltek help you get to your future state through technology, business process automation and industry best practices.
Download the full report today for greater insight into the where your business is today and where you want to be in the future.