RGP Pulse survey highlights impact of lower interest rates on corporate investment.
Global professional services firm RGP (Nasdaq: RGP) has released new research around how ongoing labor market challenges, growing digital transformation spend and the Federal Reserve's September interest rate cut are impacting workforce strategy decisions for U.S. companies.
More than half of financial decision makers (51%) polled after Federal Reserve's September meeting expect their organization to increase some investments before the end of 2024, while four in five (81%) expect to increase investments by the first half of 2025. Respondents cited business process optimization and automation as the top area of increased investment if a lower interest rate environment were to unlock new capital in 2025, followed by digital transformation and AI.
"Many organizations entered the first quarter of the year with the expectation that they'd be operating in a lower interest rate environment and our research shows that last month's rate cut is having a rather immediate impact on corporate investment," said Kate Duchene, Chief Executive Officer of RGP. "Skills gaps have widened or remained the same for two in five organizations that we surveyed. We're seeing that talent shortages and growing investment in change and transformation projects are driving organizations to rethink and increase their investment in workforce strategy in 2025."
Shifting Workforce Strategies
Nine out of 10 financial decision makers (88%) said their organization is currently planning to increase overall investment in workforce strategy development in 2025. While 39% of organizations are focused on increasing resources to reskill and upskill existing employees, 24% are planning to increase investment in outside talent to fill skill gaps. One in five (22%) respondents reported plans to increase investment in internal headcount.
Half of financial decision makers (49%) said that a growing urgency to better leverage AI and automation could have the biggest impact on their investment in workforce development in the next 12 months. Most respondents (65%) believe that AI will account for less than 10% of job elimination within their organization in the next two years, while half (47%) expect AI to account for 11-30% of job creation in the same period.
Digital Transformation and AI Investment Remains Significant
RGP's latest research illustrates the extent of digital transformation spending, which is expected to grow to a $9.15 trillion market by 2033.1 Nearly three in four respondents (71%) said their organization is spending $5 million or more on digital transformation projects in 2024, while 42% reported that their organization is spending more than $10 million this year.
Financial decision makers cited IT operations and security as the top priority within their organization's AI investment over the next 12 months, followed by product development and innovation, and HR and talent management.
Growing Importance of ERP
The enterprise resource planning (ERP) software market is projected to grow to $238.79 billion by 2032, as cloud migration remains a top priority for organizations readying their data management for AI adoption.2 More than half of respondents (53%) said their organization either completed a cloud migration within the last 12 months or is currently going through a cloud migration. However, 13% of financial decision makers reported that their organization has not yet gone through a cloud migration.
Organizations are also placing greater emphasis on ERP within their M&A plans. Among organizations that are considering M&A over the next 12 months, 85% said ERP and data are important or critical factors in their search criteria.
The findings are based on a poll of 204 U.S. full-time professionals conducted between Sept. 19 and Oct. 2, 2024. The poll consisted of respondents at the director level or above who influence finance decision-making at organizations with $500 million or more in annual revenue.
SOURCE: RGP
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