WHITEPAPER

2019 PROFESSIONAL SERVICES AUTOMATION BUYER’S GUIDE

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The Professional Services Marketplace

In a business climate driven by technology, disruption and skilled talent shortages, professional services (PS) organizations must themselves become technology-enabled. In the past, PS technology use was confined to operations and service execution. It now has become mandatory, extending virtual workspaces, enhancing collaboration and knowledge sharing, providing the basis for effective recruiting, hiring and employee engagement, and furnishing the tools for planning, budgeting, forecasting and analyzing. High- performing services organizations have deployed integrated business applications across all aspects of the business, giving them unprecedented visibility and control to see and take advantage of business opportunities in real-time.

In the services sector, technology use has become a strategic imperative to exploit globalization and drive market growth. Barriers to entry are being lowered as faster, nimbler, more technology-savvy firms seize top clients and markets. In this climate, new entrants focused on niches, specific functions and underserved constituents can quickly grow and make an impact on larger, more entrenched players. At the same time, consultants are demanding easy-to-use, contextual, socially aware systems which mimic the applications they use in their personal lives. Mobile is no longer a nice to have, it has become a strategic imperative to reach an increasingly global and virtual client base and workforce.

• Allow users to record and allocate resources based on requirements, skills and availability
• Provide project management and control for projects and tasks
• Track time and expense on a client or project level
• Provide visibility into the operations of projects

Who Needs PSA?

Firms in the professional service industry provide accounting, advertising and marketing, architectural, management consulting, engineering, IT, technology, legal, and research services. These companies provide the knowledge and skills of their employees, typically on an assignment basis, where an individual or team is responsible for the delivery of high value services to the client.

Today, the global professional services industry is made up of over 10 million independent and embedded professional services organizations with combined annual revenue of more than $4 trillion. It is also highly fragmented as the top 200 largest firms (each with more than 5,000 employees) account for less than 5 percent of that revenue. The service industry is dominated by small and midsize firms; their growth has consistently outpaced the overall market.

Globalization, centralization, modernization and streamlining operations are the key drivers for PSA investment among project- and services- based organizations. According to Service Performance Insight’s (SPI Research) extensive service economy research, the majority of more than 3,000 organizations surveyed have invested in a PSA solution. Yet all organizations still rely on texts, email and spreadsheets to manage some aspects of the business. Firms of all sizes are buying new PSA solutions to replace legacy, on-premise solutions and to consolidate a hodge-podge of point solutions, spreadsheets and email schedules onto a single platform.

The following figure depicts the primary buyers and influencers for PSA purchase decisions as well as the challenges PSA solves:

The Benefits of PSA


• Project revenue and cost data is contained in a central database.
• The user interface is consistent across all applications. • Costs and deliverables reside in the same place so productivity can be measured, analyzed and improved at the territory, account, project and individual resource level.
• Reporting and analytics are embedded within the application, alerting decision-makers to issues before they become problems.
• A more seamless audit trail to better identify success and failure points.
• Enhanced support for global operations with multicurrency, multilingual applications, which conform to local regulations and taxes.
• Lower administration costs due to fewer manual, error-prone spreadsheets and costly data re-entry.
• One-source of the truth – real-time information visibility, constantly updated.

When it comes to PSA solutions, project- and services-based organizations now have a range of attractive cloud-based choices – systems that are designed to support the needs of the always-on, virtual, mobile service economy by providing several key benefits:

• Project revenue and cost data is contained in a central database.
• The user interface is consistent across all applications. • Costs and deliverables reside in the same place so productivity can be measured, analyzed and improved at the territory, account, project and individual resource level.
• Reporting and analytics are embedded within the application, alerting decision-makers to issues before they become problems.
• A more seamless audit trail to better identify success and failure points.
• Enhanced support for global operations with multicurrency, multilingual applications, which conform to local regulations and taxes.
• Lower administration costs due to fewer manual, error-prone spreadsheets and costly data re-entry.
• One-source of the truth – real-time information visibility, constantly updated.

Professional Services Automation solutions drive significant operational performance benefits, which ultimately yield higher revenue and profit for professional services organizations. The use of PSA is on the rise due to the need to better manage projects and resources, especially in more technical disciplines, as it has become increasingly difficult to find, hire, retain and deploy talent. PSA solutions help match the right resources, with the right skills at the right time to the right projects.

PSA Modules

PSA vendors segment their products into application modules that emphasize the management of costs, clients and resources:

• Opportunity Management: The management of client information, sales activities, proposals, and contracts to improve sales effectiveness. Some PSA solutions let a CRM tool handle opportunity management; and instead focus on resource demand management and forecasting functions based on the opportunities tracked in the CRM application.
• EngagementManagement:Themanagementandcontrolofthe overall set of project deliverables.
• Resource Management: The management processes associated with resources (people, material, equipment, etc.) used during the services delivery lifecycle. Includes capacity planning and resource scheduling.
• Project Management: The initiation, planning, execution, close and control of projects.
• Project Accounting: The tracking of project-related costs to determine budget to actual costs and profitability. • Time and Expense Management: The capture and tracking of project-related time and expense information.
• Invoice Management: The preparation and presentation of invoices based on information captured from the time and expense module or from pre-assigned time or project completion milestones.
• Practice / Management Reporting: Core reports include project dashboards, resource management and utilization dashboards, capacity planning and forecasting, project profitability.

Additional Modules

While every PSA solution is unique, some have expanded their capabilities through additional modules including:

• Social: The ability to easily incorporate social channel information from LinkedIn, Facebook, Twitter, etc. along with social collaboration to facilitate knowledge sharing.
• Collaboration Management: The management of information used to create effective communication and iterative knowledge sharing during the services delivery lifecycle.
• Knowledge Management: The centralization of information improves operational efficiency. This information can be anything related to the ongoing business and includes information on resources, projects, tools, templates, methods and clients.
• Revenue Management: PSA solutions provide deferred revenue and work in progress tracking and revenue reporting to automate revenue reporting for time and materials, fixed bid, milestone-based and term engagements.
• Performance Management: The use of information to determine effectiveness and budget to actual performance for different aspects of the organization. Why is PSA Integration Important?

The Benefits of PSA

Although standalone PSA solutions provide significant benefit, the rewards are amplified when PSA is integrated with the organization’s financial management application (or other applications). PSA financial integration enhances visibility and management control. It supports “open books” to give all team members one source of the truth so they are empowered to ensure their actions have a positive impact on the bottom-line. Each year SPI Research’s Professional Services MaturityTM benchmark quantifies the benefits achieved by services organizations with solutions that integrate Client Relationship Management and financial processes, Human Capital Management and financial processes, and Professional Services Automation and financial processes. Of course, the systems themselves are only part of a broader firm-wide commitment to behavioral change that fosters collaboration and enhanced communication, coordination and quality management.

The table highlights the benefit of integrated PSA versus standalone PSA. The results demonstrate integrated PSA enables organizations to operate at higher levels of efficiency. Perhaps most notable in this table is the increase in the percentage of billable employees and project revenues as PSOS move from spreadsheets to integrated PSA.

Integration enhances visibility and makes the firm more agile because decisions are based on fact, not intuition. Fact-based decisions help align firms around the types of projects, clients and markets where they excel while helping to standardize and streamline operating processes.

The Benefits of PSA

Service Performance Insight research, highlighted in the 2017 Professional Service MaturityTM Benchmark, provides an example of how PSOs have improved performance in all areas when Professional Services Automation has been deployed. PSA provides the necessary visibility to efficiently run projects with fewer overhead resources, resulting in better resource management and profit. PSOs can manage the business with less administrative overhead and deliver more projects on time, driving better financial performance. The bottom line is that organizations that use a PSA solution grow faster, are much more profitable, and simply operate far more efficiently.

Additional qualitative benefits include: Better visibility facilitates faster, fact-based decision making. All members of the team have visibility to the same information which is constantly updated and accurate. One source of the truth helps foster collaboration and knowledge sharing so all team members can provide accurate client updates, resulting in fewer project overruns and more timely change orders. Consultants have more control over their schedule and can bid on upcoming projects in line with their career goals and aspirations. Projects start and end on time resulting in improved client satisfaction. Ability to harvest project plans and artifacts to improve future project delivery. More accurate and timely invoices conforming to contract and purchase order guidelines, so clients are more likely to quickly pay, resulting in better cash management. The following chart shows the impact on productivity and profit from enhancements in service delivery effectiveness. PSA impacts all aspects of service delivery effectiveness, resulting in enhanced alignment, better visibility and management control combined with better reusability and consistency in service delivery. Service delivery effectiveness translates into significantly higher levels of productivity and profit with higher project and consultant revenue yields.

As shown below, PSA directly improves financial performance through improvements in billable utilization; enhanced project and subcontractor margins; higher revenue growth and fewer project cancellations.

PS organizations have two primary levers to improve profitability: higher billable utilization or higher realized bill rates. PSA impacts both profitability levers. Higher realized bill rates are produced by better estimating and fewer project overruns so PSOs are able to reduce non-billable project time.

At the same time, effective resource planning and management ensures resources are quickly assigned to projects and tasks, propelling higher levels of billable utilization. The following figure models the impact of increasing bill rates versus the impact of higher utilization on a 100 person organization with a loaded cost of $135,000 per employee. As the chart shows, both efforts result in significant profit improvement. This organization will break even at an average bill rate of $100 per hour if consultants achieve billable utilization of 70% (1,400 hours per year). Conversely if the average bill rate improves to $150 per hour, consultants must achieve billable utilization of 50% (1,000 hours per year) for the organization to break even.

PSA improves all aspects of operations by increasing revenue and reducing costs. Proven strategies simultaneously focus on capturing more revenue through better resource utilization and bill rate realization while reducing labor and administrative costs by streamlining business processes. Organizations are “right-size” to achieve revenue, growth and margin targets.

The Benefits of PSA

Well over 50 software solution providers claim some level of PSA functionality, but very few demonstrate the comprehensive functionality required to support all aspects of a professional services organization. The leading vendors provide strong resource and project management capabilities. They all target both independent and embedded professional services organizations while providing integration tools to leading CRM and ERP applications.

So, what should you look for in a PSA provider? Here are some of the important considerations when evaluating PSA solutions:

First and foremost, a good PSA solution will accurately model your business in the way that you think about it, rather than forcing you to change your business to fit the system.
• A good PSA provider should be a proven expert in integration, because PSA should work with existing on- premise and cloud- based information systems.
• It should provide powerful and flexible reports and dashboards to provide a variety of reports for better decision-making and analysis. Also, it should be easy to modify and build your own reports.
• A PSA solution that uses technologies and tools you are familiar with to reduce training time and costs and ensure that you have access to the expertise that is required to roll out and fully leverage the PSA solution and its reporting capabilities.
• It must provide automated and easy-to-use time and expense capture that supports mobile and offline access. Integration between time and expense capture and billing to produce timely and accurate invoices is mandatory. • For global organizations, support for multiple currencies and languages conforming to local revenue accounting and taxation rules.
• It should support complex billing rules for time and materials, work-in-process, milestone and fixed-price work that conform to your revenue recognition policies.
• Cloud-based PSA reduces the cost of implementing and maintaining the application while reducing the reliance on overburdened in-house IT staff.
• Cloud-based PSA providers continually improve the application so it tends to be more responsive and does not require expensive upgrades.
• Vendor partnerships like the Salesforce AppExchange and Microsoft Dynamics certification ensure the PSA application will easily support integration to market-leading CRM and financial applications.

PSA Differentiators

There are a variety of considerations in selecting a PSA solution. These range from technology infrastructure, to organization size, location and support for specific functionality. Just like no two project- or services-based organizations are alike, nor are PSA solutions. The following table highlights some of the most important aspects to consider. Each organization places a different emphasis on these criteria, so it is important the vendor you choose builds solutions to match your priorities.

CONCLUSION

One of the characteristics that differentiates this year’s top performers is the emphasis they place on building unique, employee-centered cultures, supported by integrated business applications. They run predictable, profitable businesses because they have visibility to all facets of operations, ensuring collaboration around client opportunities. More than average firms, they are truly passionate about building an exceptional organization, not just for today, but for decades to come. They are willing to honestly look at themselves and the business and make changes to ensure they continue to be the premium firm. Their sterling reputation for delivering high quality results is a key ingredient in their success as most often new business comes from referrals.

Each year it is inspiring to meet with leaders of the Best-of-the-Best organizations. They are justifiably proud of the unique Professional Services organizations they have built, but their pride is focused on their employees and client results, not on themselves. An area that sets the leaders apart is their in-depth knowledge of their markets and solutions. They understand and have visibility to all aspects of the business.

Excellence is within the grasp of all PS organizations – but it takes hard work, determination and constant vigilance. Congratulations to this year’ Best-of-the-Best – your hard work has paid off! Thank you for setting a great example for the Professional Services industry!

About Service Performance Insight

R. David Hofferberth, PE, Service Performance Insight managing director and licensed professional engineer, has served as an industry analyst, market consultant and product director. He is focused on the services economy, especially productivity and technologies that help organizations perform at their highest capacity.

Dave’s background includes application and analytical tool development to support business decision-making processes. He has over 30 years of domestic and international information technology experience with firms including the Aberdeen Group and Oracle. Contact Hofferberth at [email protected] or 513- 759-5443.


Jeanne Urich, Service Performance Insight managing director, is a management consultant specializing in improvement and transformation for project- and service-oriented organizations. She has been a corporate officer and leader of the worldwide service organizations of Vignette, Blue Martini and Clarify, responsible for leading the growth of their professional services, education, account management and alliances organizations.

Jeanne’s background includes over 30 years of leading and transforming the sales, marketing, operations and professional services organizations of several of the world’s great technology companies. She is a world-renowned thought-leader, speaker and author on all aspects of Professional Services. Contact Urich at [email protected] or 650-342-4690.

Service Performance Insight (SPI Research) is a global research and consulting organization dedicated to helping professional service organizations (PSOs) make quantum improvements in productivity and profit. In 2007, SPI developed the PS Maturity ModelTM as a strategic planning and management framework. It is now the industry-leading performance improvement tool used by over 20,000 service and project- oriented organizations to chart their course to service excellence. SPI provides a unique depth of operating experience combined with unsurpassed analytic capability. We not only diagnose areas for improvement but also provide the business value of change. We then work collaboratively with our clients to create new management processes to transform and ignite performance. Visit www.SPIresearch.com for more information on Service Performance Insight, LLC.