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From Billable Hours to Platform Economics

Once upon a time the professional-services industry was built on hourly billing models, partner-led engagements, and human-capital intensity. It’s undergoing a structural shift. Firms in accounting, consulting, legal, HR outsourcing, and advisory are more and more looking to platform-based, SaaS (software-as-a-service)-inspired models that combine human expertise, software-enabled delivery, and recurring revenue.

Traditionally, firms like accounting, law, consulting, and advisory were seen by investors as steady but with limited operations. They were treated as income-generating, not asset-building entities. With the integration of technology, platform firms can now generate revenue more predictably, achieve higher margins, and improve client retention.
In this article we examine how “platform firms” are emerging, what drives the shift, and how investors are responding.

The Anatomy of a Platform Firm

Platform firms are characterized by the combination of three elements: expertise delivered as a service, embedded software or digital infrastructure, and recurring revenue that works similar to that of SaaS businesses. Traditional services firms, like law, accounting, consulting, or advisory, operate on an engagement-by-engagement basis: time, scope, and deliverable. Platform firms use technology for certain aspects of service delivery, make use of subscriptions or usage-based pricing, and secure clients for longer terms by making them reliant on the use of the ecosystem and its data.

For example, an accounting-advisory business might couple its tax preparation and audit services with an online platform that gives clients access to dashboards that enable ongoing compliance monitoring and advisory alerts. This is a subscription rather than an annual fee.  This model generates greater visibility for future cash flows with better sustainability and higher retention. Additionally, investors see this as potential for expansion. 

SaaS Economics: Enter Professional Services

Software-as-a-service (SaaS) models have become the preference of investors, as their business model is predictable, scalable, and repeatable. This means SaaS businesses have strong recurring revenue (either monthly or annual), high gross margins, predictable churn, and excellent lifetime value of customers. However, until recently, professional services firms didn’t check these boxes. McKinsey & Company explains that the “Rule of 40,” when the sum of a software company’s growth rate and profit margin is greater than 40%, is harder to achieve for tech service businesses than software businesses. 

The platform-firm thesis says that by moving to a subscription model that supplies service-plus-software, professional firms can run like SaaS-like economics. Because this approach means recurring fees, client lock-in, the opportunity to upsell to additional services or tools, and scaled delivery. A recent article, by Rocketlane, argues that professional services tied to the SaaS model become more valuable due to the shift from satisfying one-time needs to providing continuous value. 

Investors who would historically attach high valuations to SaaS companies for their predictable recurring revenue, high margins, and scalable growth are now turning their attention to professional-services firms that make use of similar elements to scale. 

They use subscription-based offerings to build recurring revenue, strengthen client retention, and create opportunities for upselling. These are all key SaaS elements. “Platform firms” use a combination of human expertise together with digital delivery, subscription or usage-based pricing, and integrated data ecosystems.

As a result, investors are willing to value these companies closer to what is seen in SaaS deals because they offer both scale and predictability. 

Why Investors Are Paying Attention

A combination of factors is prompting interest from investors: 

1. Recurring revenue and predictability

Platform firms move from one-off, project-based billing to subscription or usage-based models. This means generating a steadier, more predictable recurring income throughout the year. This also means a lower dependence on “busy” seasons like audit cycles or tax season. For investors, this signals higher cash-flow visibility, less volatility, and a more reliable business model. All traits that are found in SaaS and infrastructure assets. 

2. Scale and technology leverage

Digital infrastructure allows firms to scale their offerings without the similar growth in team members. Cloud-based platforms, automation, and AI-driven tools help to extend a firm’s reach, with a standardized delivery, at a fraction of the cost. According to research from Deloitte, the industry’s migration is forcing a shift even in traditional firms toward hybrid and cloud delivery models. Those that fail to integrate technology may be at risk of losing their competitive edge, as the market will continue to be platform driven. 

3. Consolidation value creation

The fragmented nature of the majority of professional services means there’s the opportunity for consolidation. Smaller firms can join a tech-enabled platform to standardize delivery and expand across the joined client base. Private equity groups view this as a buy-and-build opportunity. Using technology to integrate while building a unified brand to combine niche firms into scalable, data-driven entities with higher value. 

4. Alignment with tech valuations

Historically, traditional service firms have traded at lower valuations than tech companies. This gap will continually narrow as they adopt platform-firm characteristics, like recurring revenue, scalable delivery, and ultimately better growth potential. When professional-services firms begin to present SaaS-like performance metrics, investors will assign them higher values. Tech-enabled services crossing the Rule of 40 threshold, where growth rate plus profit margin exceeds 40%, signal to the market that the value is placed on platform-style economics over legacy service models, now more than ever.

A Cycle of Growth: Data, Digital, Delivery

To function as a platform firm, businesses must build a cycle of tech-enabled growth. Consider the following components:

• Digital front door and self-service

Clients increasingly expect the same digital ease they experience on consumer platforms. Platform firms deliver this by using a digital front door: a portal where clients engage with dashboards rather than a static deliverable. This offers self-service access to up-to-date information like reports, analytics, and automated workflows, which, in turn, offers real-time visibility into their data. Therefore, it builds a more interactive relationship.

• Embedded human expertise

In the platform model, software takes on the repeatable and “busywork” like data entry, reconciliation, scheduling, or compliance checks, which leaves team members free to focus on advisory and strategic work. This combination of automation and expertise increases both efficiency and perceived value: clients receive information faster and more consistent outputs alongside personalized insight that tech tools alone can’t provide. Over time, this means human capital is supported by tech. 

• Data-driven monetization 

As more client data flows through a firm’s platform, the business has access to an up-to-date view of usage patterns, needs, and emerging opportunities. This helps refine the upsell and cross-sell opportunities, and firms can offer complementary services or premium insights based on behavior. This insight into consumer behavior also guides how usage-based pricing models are put together. Over time, this data-driven integration strengthens client retention, as customers become increasingly part of the firm’s ecosystem and reliant on its information.

• Network effects

As the client base grows, so does the volume of data on the platform, which means even more nuanced insights.  This information improves the platform value and functionality, which creates a snowball effect of making the service indispensable for clients.

• Operational leverage

Standardized software and streamlined processes make it easy for firms to onboard new clients with minimal extra effort: this improves operational efficiency and supports bigger profit margins.

These five elements are what differentiate platform firms from “services plus software” hybrids that still primarily sell human time.

Risks and Realities

While the platform-firm theory is compelling, like everything else, it carries risks:

• Commoditization risk: If the digital tool fails to deliver a valuable insight, clients may come to see the platform as a cost rather than a strategic tool.
   
• Talent & judgment still matter: Clients still value personal interaction and a human touch; underestimating it may cause concerns down the line.
   
• Change management and client adoption: Legacy clients may have objections regarding the transition and moving away from hourly billing towards a subscription or usage model.
   
• Regulatory and ethical concerns: In sectors like audit, legal, and tax, reliance on embedded software raises questions around liability, professional standards, and risk.
   
• Valuation expectation mismatch: Investors may assume SaaS-type businesses all grow at the same rate; however, the scale and retention differ from sector to sector.  Bantrr explains, “Revenue from professional-services engagements has much lower gross margins (30-40%) than software subscriptions (80-90%).” This means that investors place a lower value on the services sector.
   

In short, converting a traditional services firm to a full-fledged platform is not easy and not automatic. The ultimate value is only seen once the execution, technology, and business model are all aligned. Firms must integrate digital tools for delivery and recurring revenue mechanisms and make data-driven information available while maintaining the human connection that clients love and rely on. When all these elements work together, platform firms can grow rapidly. 

Professional Services as the Next Asset Class

The shift from hourly billing to subscription-style billing, platform-enabled professional services is the next gold for investors looking for predictable and scalable growth. Firms that can successfully integrate digital infrastructure, employ recurring revenue models, and use data for long-term buy-in can turn professional-service offerings into a piece of gold. For investors, the key is to identify suitable firms early, before they shift from services to platform.

In the same way that SaaS transformed software from product to service, platform firms are redefining professional services as an investable asset. It's the combination of human expertise, digital inclusion, and business models. 

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