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Predictive Analytics Overview
Predictive analytics uses modeling and statistics to determine future performance based on current and historical data. There are several applications across industries, such as financial services, retail, manufacturing, and health insurance. Predictive analytics continues to become more prominent, with a global market projected to reach $10.95 billion by 2022, according to a Zion Market Research report.
Predictive analytics is seldom discussed in the services industry, yet the impact is substantial when leveraged correctly, leading to better cost estimation and budgeting in project management and improved resource utilization. Project-based teams consequently receive more help to hit their profit and utilization targets.
Most organizations have some method of forecasting their work, but visibility and accuracy typically declines further ahead into the future. Predictive analytics enables organizations to monitor their forecasts in tandem with their historical performance, analyze variance and variation, and refine predictions on a consistent basis. Consequently, leaders can understand in advance if they have the teams and capabilities required to take on another project, or if their pipeline is oversold. Better planning leads to better client outcomes and a more satisfying customer experience. Project management forecasting software provides the ability to reduce project-based uncertainties.
Resource Planning in Project Management Forecasting
Forecasting via predictive analytics with resource scheduling software unlocks insights into resource plans across multiple projects into the future. As task-level workstreams are translated into high-level resource management plans, delivery managers have the ability to understand if they will hit utilization targets, profit margins, and overall performance goals. At the same time, leaders receive real-time operational and financial data that provides reliable revenue and headcount projections to easily scale their organization.
Budget vs. Forecast
A budget and a forecast are not the same concept. As summarized by Investopedia, “Budgeting quantifies the expectation of revenues that a business wants to achieve for a future period, whereas financial forecasting estimates the number of revenues that will be achieved in a future period.”
Budget planning in project management typically takes place during the proposal process to ensure project profitability and accurate client pricing. As costs are incurred, the project manager updates the project budget template. While this sounds easy,, it becomes challenging to put into practice. As project dependencies and scope creep interfere, project budget management and tracking often becomes a reactive process. The tricky aspect is predicting where the actual project budget will land in the future, based on where the project stands today. This type of accurate budget forecasting is what delivery teams strive for.
Project budgeting and forecasting accounting software empowers services teams to leverage predictive analytics to calculate a budget’s estimate-at-completion, in addition to actuals-to-date. These early indicators for project performance inform project cost estimation and budgeting for the remainder of the client contract. As a result, services teams have an improved ability to impact the success of present and future projects. Project managers have the ability to predict the final outcome of a project by forecasting workstream and resourcing needs along with the foreseeable incurred costs. An on-time, under-budget project leads to happy clients.
Organizations need the ability to gather accurate, clean, and consistent data in order to best leverage predictive analytics. Technology that is specifically built for service-based organizations, such as Professional Services Automation (PSA) software, provides this data as a single source of the truth. PSA software not only acts as a platform for predictive analytics, but it also helps organizations exceed their client expectations by giving team members confidence that they understand what it will take to make a client contract successful with fewer unexpected mishaps.