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Advancing AE profitability in 2026: How to stay ahead of 5 key market forces
- January 23, 2025
- Posted by: Febiani Marsa
- Category: Cross-functional
Businesses in architecture and engineering (AE) are bracing for a potential slowdown — with spending on non-residential buildings projected to see just 2% growth in 2025 (compared to the 7% increase projected for 2024).
In the uncertain environment ahead of them, AE businesses will be counting on their CFOs to make financial decisions that bolster organizational resilience and drive bottom line results. Making the right decisions, and responding fast to changing market dynamics, requires a holistic view of the business — but not all CFOs have clear visibility into the profitability of past and active projects or the costs being incurred across functions.
Integrating and connecting functions like project management, client relationship management (CRM), timekeeping, billing, and finance gives CFOs the visibility, insights, and agility they need to identify patterns and trends — and help their businesses seize cost-saving and growth opportunities — amid uncertainty. Using a connected cloud solution that ties together functions like enterprise resource planning (ERP), CRM, and human capital management (HCM) can be especially helpful in navigating the following five market forces, which are all expected to impact architecture and engineering businesses in the year ahead.
Interest rate changes
In 2024, AE businesses faced multiple challenges stemming from high inflation and high interest rates — both of which affected the lending and investing environments AE businesses were operating in.
Following an initial rate cut in September 2024, short-term rates are likely to decrease in coming years according to Deloitte. But there are no guarantees further rate reductions will happen quickly. With capital still costing more than it did in recent years, CFOs of AE businesses need to keep their companies’ cash flow top of mind.
Avoiding liquidity risks, and allocating the right amounts to budgets, takes timely, accurate insights — and having the ability to create cash flow models (with a view into future cash balance) helps CFOs stay ahead. Using dynamic cash flow management tools also enables CFOs to access robust, timely insights into the trends and drivers affecting cash flow, which in turn helps them make smarter and more informed decisions.
Labor and workforce constraints
Recruiting, hiring, and retention are also challenging for AE firms. Talent shortages are acute in areas ranging from engineering to finance. According to Bain and Company research, the percentage of engineers quitting jobs at engineering companies globally reached between 16 and 17% in 2023 — a nearly 2% increase from 2020. And according to Avalara research, 84% of US and UK CFOs faced a talent shortage in accounting and finance in 2023 — with many noting that employee burnout contributed to a diminished talent pool.
Overall, 73% of engineering- and R&D-focused companies report talent gaps, according to 2023 Bain and Company research. AE businesses’ changing skill needs — which will continue to shift as innovations in artificial intelligence (AI) and other technology emerge in coming years — also complicate their hiring needs and talent pressures.
Having tech-enabled operations can benefit businesses in attracting and retaining top talent, however. In finance, for example, automating time-consuming manual reporting and reconciliation processes frees up team members to focus on more analytical and strategic parts of their jobs — which can drive up employee satisfaction and make AE businesses into more attractive places to work.
Fierce competition
Technology and AI advancements are not only affecting AE businesses’ hiring needs, they are also tightening the margins on which both small and large firms have to compete. Advancements like automation, AI tools, and digital twins are helping firms reduce costs — and pass on savings to their clients.
Competition may heat up even further if interest rates go down. To help their AE businesses craft competitive, accurate bids for proposals in 2025, CFOs need deep insights and end-to-end visibility into how past projects performed. Understanding profitability is key, and using a connected platform (across ERP, CRM, and HCM) can ensure CFOs have seamless access to all of the information they need.
Climate considerations
AE businesses are at the forefront of creating more sustainable, resilient environments around the world. AE businesses’ efforts on this front are growing in importance — and being scrutinized more closely by both clients and regulators — as the globe’s climate crises continue.
Using a connected cloud toolset can help AE businesses address climate considerations. Having access to real-time data and streamlined reporting tools, for example, can help AE CFOs better navigate the business risks that come with environmentally-minded efforts, stay up-to-date with shifting compliance requirements, and greenlight ever-more complex projects that need to hit certain sustainability goals.
Fraud and cybersecurity threats
With remote work likely remaining a norm in their industries for years to come, AE businesses need to operate in ways that keep the risks of cyberattacks, fraud instances, and data breaches to a minimum.
Implementing a connected cloud solution can give AE businesses additional layers of protection from fraud and cybersecurity threats. Microsoft Azure confidential computing, for example, encrypts data while it’s being processed (not just while it’s at rest and in transit) so it cannot be accessed by malicious administrators or privileged software.
Conclusion: Countering uncertainty with agility, insights, and speed
Ultimately, AE businesses need to make data-informed decisions and operate with agility in order to remain competitive, and grow their bottom lines, amid fast changing market dynamics. Using a connected cloud solution to integrate functions across the business gives AE CFOs the information and end-to-end visibility they need to help their businesses stay ahead of shifting conditions.
Make the right business decisions from bid to build and beyond with sa.global’s Microsoft Industry Cloud for Architecture and Engineering.
Febiani Marsa
Febiani Marsa is a part of the Global Marketing team at sa.global, where she brings together her expertise in digital transformation, cloud ERP and CRM, and the Microsoft Dynamics 365 ecosystem. She works closely with product teams to communicate the value and impact of technology implementations—helping businesses understand how intelligent solutions drive efficiency, innovation, and measurable outcomes across their operations.