US Professional and Technical Services Sector
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 976,264 professional and technical services establishments in the US provide specialized expertise to clients and typically operate as third-party contractors. As opposed to producing a physical product, professional service providers are primarily knowledge-based businesses that offer advice and make available the skills of their employees.
Dependence on Government Projects
The US government is one of the largest consumers of professional services, and federal, state, and local government organizations are important customers for several industries in the sector.
Dependence on Expensive, Skilled Labor
The professional and technical services industry is dependent on highly skilled labor and jobs that command high wages.
Industry size & Structure
The professional and technical services sector is comprised of 976,264 establishments that employ 10.8 million workers and generate $2.8 trillion in annual revenue, according to government sources.
- The professional services sector represents 6.7% of the nation's Gross Domestic Product (GDP) and employs 7% of the country's workers.
- The sector is fragmented with the 20 largest firms representing 11% of revenue.
- In addition to employer establishments, the professional services sector has 3.8 million owner-operated establishments with no employees. Subsectors with the highest numbers of nonemployer establishments are management, scientific, and technical consulting services (25%); accounting, tax preparation, bookkeeping, and payroll services (10%); and computer systems design and related services (9%). The owners of nonemployer establishments typically perform the work and may outsource support functions like marketing and accounting.
- The professional and technical services sector shed about 237,000 establishments in 2021, which equals about 14.7% of existing establishments, according to the Bureau of Labor Statistics. However, the sector added about 353,000 new establishments, which is equivalent to 22% of existing establishments. As a result, the sector had a growth rate of 7.2%.
- The professional and technical services sector is forecast to grow its employment base by 10.5% overall in 2023-2033, which is much higher than the national average of 4% for all jobs, according to the Bureau of Labor Statistics.
Industry Forecast
US Professional and Technical Services Sector Industry Growth
Recent Developments
Nov 22, 2024 - Corporate Productivity Drops Despite Tech Advances
- Despite rapid advancements in technology, 40% of large companies have seen negative productivity growth over the past 10 years, according to a recent report by consulting firm Accenture. However, the report also showed that the top quarter of firms are experiencing productivity gains of about 8% per year by focusing on cost and productivity strategies, including investments in generative AI and other technologies. The study found that the top 25 most productive firms invested twice as much in technology per employee compared to less productive companies and emphasized ongoing skills training. Top-performing firms improved revenues by 1.3% for a 1% increase in productivity investments. The study also found that generative AI has the potential to save 12% of working hours and improve output quality by 8%.
- The global market for AI-related hardware and software is forecast to rise by 40%-50% per year through 2027, reaching a value between $780 billion and $990 billion, according to a recent report by Bain & Company. Spending on AI is growing as firms move from the pilot project development phase to implementing AI initiatives across the enterprise. The computing power needed to scale AI growth will drive a massive increase in the size and costs of data centers. Today, data centers with 50-200 megawatts cost between $1 billion and $4 billion. Data centers could require more than a gigawatt of power in five years and cost between $10 billion and $25 billion. The Bain study also suggests that AI could increase demand for graphics processing units by more than 30% by 2026, which could strain global supply chains for data center chips, leading to semiconductor shortages. The study also found that AI currently saves between 10% and 15% on software engineering time but could improve development times by 30%.
- The role of “non-equity partner” is gaining popularity in some larger law firms, according to Reuters. Non-equity partners are paid a salary rather than sharing in a firm’s profits, and they typically have no input about the firm’s management decisions. Increasingly, an equity partner is expected to manage a firm’s teams and client relationships, while attracting enough new business to cover their salaries and the labor costs of the lawyers below them. Some firms use the non-equity partner role as a springboard for lawyers to learn the relationship building skills needed to become a full equity partner. According to a Reuters estimate, about 86% of the largest US law firms by revenue have non-equity partner positions.
- The electricity-hungry artificial intelligence boom is spurring big tech firms to seek out new sources of clean energy to help meet the emissions-cutting pledges they made just a few years ago, according to The Wall Street Journal. The tech industry’s quest for clean energy comes amid an anticipated rise in electricity demand fueled by AI. A search on a generative AI platform uses ten times the electricity of a typical Google search. AI’s energy needs have created more cooperation between large tech firms and utilities. Google is partnering with a Nevada-based firm to buy geothermal power, and the search giant, along with Amazon and Microsoft, is working with Duke Energy on power produced by small nuclear reactors. Tech firms also hope to offset their increased emissions by entering deals with firms pursuing carbon capture technologies.
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