Over the past few blog posts we’ve examined how service organizations can enhance their profitability by implementing a professional services automation (PSA) solution. We covered increasing utilization, improving project margins, and using PSA software to deliver more successful projects. Today, we’ll take a look at professional services software from an operational efficiency perspective—delivering more with less.
Because services automation software contributes to every aspect of the delivery process, it should come as little surprise that PSA software can help increase an organization’s delivery and revenue efficiency. From managing the supply and demand of resources to automating the billing and project accounting process, organizations that run on a professional services automation platform are able to do more, with less.
Focus on Efficiency
Services firms sometimes have a myopic focus on increasing their resource utilization—or the percentage of billable hours that employees work. Although high utilization will strengthen a firm’s bottom line in the short-term, over the long haul it can lead to employee burn out, result in high churn, and is ultimately unsustainable. To maintain healthy utilization levels, and overall profitability, service firms need to run an efficient delivery operation. The fewer non-billable or overhead hours worked, the stronger the organization’s bottom line.
In our recent PSA software infographic, 8 Fast Facts about Professional Services Automation, we highlighted how service organizations that run their business on a PSA are consistently managed more efficiently than their peers. There are two sides to the efficiency equation for service firms—maintaining optimal utilization of billable resources and streamlining non-billable activities. For each $1 million in revenue generated by firms that use PSA software they will need fewer billable consultants and a smaller non-billable support staff than organizations not using a PSA tool. If we translate this efficiency gain into labor costs and assume, for the sake of simplicity, that delivering $1 million in revenue with a PSA system can save a services firm over $100,000 per year (due to needing fewer resources), the effect of implementing a PSA solution can be seen very clearly. If we extend those same efficiency gains to an organization doing $10 million in revenue a year—about average for a 50 person service firm—they turn into $1 million worth of bottom line profit growth. This profit growth is a direct result of stronger resource utilization and improved delivery efficiency, and does not rely on winning new work.
Many services firms use the phrase “on the bench” to describe resources that are not currently assigned to billable work. Although the borrowed sports metaphor is just that, a metaphor, keeping a close eye on resource mix, project needs and utilization can have a dramatic effect on an organization’s delivery efficiency. Organizations that use professional services software to manage their resource pool are able to better anticipate staffing needs and make critical staffing decisions in a proactive, instead reactive, manner.
As projects are planned, staffing requirements are defined up front and an outline for the types of resources needed for each project takes shape. Whether it involves specific skills, past experiences, geographic location or seniority, once the resource profile is built, it can be compared to the organization’s resource pool to find the closest fit. This process not only helps support healthy utilization levels and balanced workloads, but it also opens up the opportunity for some higher level resource forecasting and analysis. Service managers can easily compare the organization’s resource needs with capacity to identify gaps and influence hiring and staff development decisions—addressing capacity issues early to reduce urgency and allow for a more seamless flow of work.
In addition to helping organizations efficiently staff their projects, service automation software also helps streamline each stage of the delivery process. From the start, projects can be created from templates to eliminate time consuming setup work and leverage best practices learned on projects past. For organizations that deliver highly productized services, project templates will often include detailed work breakdowns, budgets, and resource requirements. As projects move into their delivery phases, budgets will be updated automatically as time and expenses flow into the system and resources are able to communicate their progress to managers as they log their work. Throughout every stage of a project, managers are able check on their plans, schedules, or budgets from consolidated dashboards and, in the event a project might be running off course, automatic alerts will be sent out to the management team.
Each aspect of a project’s delivery that is optimized may seem nominal in isolation, but when combined can have a significant effect on delivery efficiency. Project managers are able to oversee a larger portfolio of work and focus less on managing administrative staff. New managers will ramp-up quicker with the help of templatized project structures and automated reporting tools. Billable resources spend less time trying to satisfy antiquated reporting requirements, searching for their schedules, and communicating progress to the project team. Added together, these advantages translate into higher resource utilization levels, more productive teams, and stronger revenue efficiencies.
Maintaining healthy utilization levels is important, however, without an efficient back-office, any top-line gains might not make their way down to a bottom-line profit. Professional services software helps ensure that back-office operations are scalable, efficient and an enabler of growth. From automating mundane processes like re-keying financial data to templatizing administrative tasks, professional service automation solutions help services firms decrease the non-billable staff needed to support their operations.
Many times when organizations first start using PSA software, they are coming from an environment that has been cobbled together with disparate systems—a tool to track time, a maze of spreadsheets to generate bills, and a well-loved white board to keep schedules straight. Although able to get by, many hours of valuable time are lost trying to make sense of it all. This is where professional services automation tools excel. Acting as the single system-of-record for the delivery operations of service firms, an organization’s PSA software consolidates the complex web of tracking tools, spreadsheets and reporting processes into a single version of the truth.
This unified vision of an organization can have dramatic effects on operational efficiency, and ultimately the bottom line. It allows for the automation of crucial workflows. It provides a consistent view into project health, staffing, budgeting and billing. It takes the heavy-lifting out of generating operational reports and promotes repeatable processes for analyzing data. And most importantly, it gives organizations the real-time visibility into their business that they need to navigate projects smoothly, stay focused on delivering value, and avoid the costly disconnect between back-office operations and the delivery team.
Work Smarter, not Harder
As tired and worn out business buzzwords go, “work smarter, not harder” probably takes the cake for most overused. For services organizations though, it is the key to achieving strong revenue efficiencies and robust project margins. Service firms that use PSA software solutions are able to increase their delivery effectiveness, while automating key back-office processes, to ensure that each hour they work has the greatest impact possible. By maintaining healthy utilization levels, templatizing repeatable processes, and automating back-office tasks, professional service automation solutions help services firms increase their revenue per employee, decrease their non-billable support effort, and acts as a scalable platform to help the business work smarter—not harder.