Why Implement Professional Services Software: Improving Business Results

Professional Services Automation (PSA) software is a comprehensive solution designed to streamline and optimize the operations of professional services firms. These organizations, which include management consulting firms, digital marketing agencies, technology implementers, and other services-based businesses, rely on PSA software to enhance project management, resource allocation, time tracking, and overall business efficiency.

Understanding PSA Software:

Core Functionality:

At its core, PSA software integrates various systems and tools that are traditionally managed separately. These tools include time tracking, project management, resource management, invoice processing, and business intelligence. By combining these functionalities into a unified platform, PSA software aims to provide a seamless and centralized solution for professional services organizations.

Holistic View:

One of the key advantages of PSA software is its ability to offer a holistic view of the organization’s health. From individual projects to entire business units, PSA software ensures that everyone within the firm has a consistent, accurate, and up-to-date perspective. This comprehensive view is crucial for making informed decisions and managing the complexities of multiple projects.

Naming Conventions:

PSA software goes by various names, reflecting its versatile nature. Some of the terms used interchangeably include PSA platform, PSA system, PSA tool, PSA application, and PSA solution. Additionally, it may be referred to as Professional PSA, Enterprise PSA, Service Operations Automation, Project Portfolio Management for Professional Services (PPM for PS), Services Resource Planning (SRP), Project-Based Enterprise Resource Planning (ERP Software), Project Service Automation, or Work Management Software.

Origin and Definition:

The term “Professional Services Automation” was first coined in the 1990s by Dave Hofferberth of Service Performance Insight (SPI) Research. In SPI Research’s PSA End User Survey, Hofferberth defines PSA software as “an integrated suite of applications used to increase operational visibility and improve process efficiency in project- and services-driven organizations.”

Key Components and Capabilities

Project Accounting:

PSA software includes robust project accounting capabilities that cover everything from time and expense capture to client invoicing. This ensures accurate financial tracking and billing for services rendered, contributing to improved revenue recognition.

Resource Scheduling:

Resource scheduling functionality is a crucial component that helps organizations efficiently manage their workforce. It assists in pairing up individuals with the right skills and availability to projects, optimizing resource allocation.

Project Management:

PSA software provides project management features that enable organizations to plan and track project phases, ensuring projects stay on schedule and within budget. This functionality is essential for successful project delivery.

Dashboards and Reports:

To facilitate data-driven decision-making, PSA software offers dashboards and reports that provide real-time visibility into various aspects of project and business operations. These analytics help in monitoring project health, utilization trends, and overall financial performance.

How PSA Software Manages Revenue Generation:

Sales and Solution Architects:

Sales teams and solution architects leverage PSA software to plan and scope project phases, laying the foundation for successful project delivery.

Resource Managers:

Resource managers use PSA tools for effective resource scheduling, ensuring that individuals with the required skills are allocated to projects based on their availability and workload.

Project Managers:

Project managers rely on PSA software to track time and expenses expended on projects, ensuring accurate invoicing and monitoring project health to ensure on-time and on-budget delivery.

Finance Teams:

Finance teams use PSA solutions to recognize revenue at the appropriate time, balancing the need to bill clients accurately and at the right intervals.

Executives:

Executives benefit from high-level dashboards that provide insights into portfolio health, utilization trends, hiring needs, revenue projections, and overall profitability. This information supports strategic decision-making.

Components of PSA Tools:

Leading PSA solutions encompass a suite of features that can be used individually or integrated for a comprehensive solution. These often include:

1. Project Accounting: Covers time and expense capture, client invoicing, and financial tracking.
2. Resource Scheduling: Manages workforce allocation to projects efficiently.
3. Project Management: Plans and tracks project phases to ensure timely and on-budget delivery.
4. Dashboards and Reports: Provides real-time visibility into project and business operations.

Benefits and Return on Investment:

Performance Improvement:

PSA software is designed with a singular focus on the professional services industry, providing KPIs, best practices, and tools to enhance operational efficiency. It offers performance improvements in areas such as utilization, profitability, successful project delivery, and more.

Fast Deployment and Low Implementation Cost:

Modern PSA solutions, especially those based on Software as a Service (SaaS), are cost-effective to implement. They require no infrastructure investment and offer fast deployment times. SaaS-based products are configurable, easily integrated with other systems, and user-friendly.

Return on Investment (ROI):

Research indicates that the average cost to implement and run a PSA solution for five years is approximately $183,000. However, the average improvement in bottom-line profitability over those five years is a substantial $23 million. This represents a 125 times return on investment, with 96% of gains attributed to improvements in billable utilization, project margin, and successful project delivery.

Target Users of PSA Software:

Services Organizations:

PSA software was traditionally targeted at professional services firms, including management consulting, technology implementation, digital marketing, and other services-based organizations. These firms primarily manage client projects and deliver high-value, knowledge-based services.

Billable, Project-Based, People-Centric:

PSA software caters to organizations with a business model centered around managing client projects, selling high-value services, and requiring effective resource management. It is especially beneficial for billable, project-based, and people-centric businesses.

Internal IT Organizations:

In recent years, internal IT organizations have also adopted PSA technology as a central delivery tool. Managed services operations and product-centric businesses have found value in the flexibility of PSA tools for their recurring revenue models.

When to Implement PSA Software:

Preparing for Growth:

SPI Research’s Professional Services Benchmark Survey recommends that services firms consider implementing PSA software by the time they reach 20 employees. Implementing PSA software early on, especially during periods of growth, sets the foundation for efficient operations.

Incremental Implementation:

The implementation process is often phased incrementally rather than attempting to integrate all features at once. This phased approach allows organizations to adapt to the new system gradually.

Ongoing Partnership:

PSA software implementation should be viewed as an ongoing partnership with the vendor. Flexibility, continual education, assessment, and evolution are key aspects of the relationship between the organization and the PSA software provider.

Deployment Options: Cloud vs. On-Premise:

Shift Towards Cloud PSA:

While a decade ago, there was a debate about the fundamental delivery model for PSA software, recent trends show a shift towards cloud-based PSA solutions. Studies indicate that 80% of users prefer centrally-hosted, cloud-based PSA solutions due to faster deployment times, continuous updates, lower costs, and easier integrations.

SaaS Considerations:

While cloud-based PSA solutions are preferred by the majority, organizations may have specific needs, such as data privacy or upgrade control requirements. SaaS-based approaches offer flexibility, providing options for centrally-hosted, segregated hosting, or self-hosted deployments.

Selecting and Implementing PSA Software:

Prioritized Goals:

Before diving into specific products, organizations should start with prioritized goals. Whether to build a custom solution or implement a commercial product, choose a deployment model, and decide between best-of-breed or suite/platform-based solutions are key considerations.

Decision-Making Process:

Several questions should guide the decision-making process:

• What are the organization’s business goals?
• Does the organization need a best-of-breed solution or an integrated suite?
• What deployment model best suits the organization’s needs: cloud-based or on-premise?
• How flexible is the PSA software in terms of configuration and scalability?
• What is the total cost of ownership, and does it align with the budget?

Trial Runs:

Before committing to a PSA solution, organizations should explore trial runs to assess usability, feature suitability, and overall fit with their operations. This allows users to experience the software firsthand and understand its impact on their workflows.

Return on Investment (ROI) Calculation:

Organizations should perform a thorough ROI calculation to understand the financial benefits of implementing a PSA solution. Consideration should be given to both the yearly cost per user and the one-time implementation cost per user.

Vendor Relationship:

Selecting the right PSA software is not only about features and costs but also about the ongoing relationship with the vendor. Consider the vendor’s commitment to customer success, the availability of support and training, and the frequency of software updates.

Conclusion:

In conclusion, PSA software is an indispensable tool for professional services firms seeking to optimize project delivery, resource utilization, and overall business performance. It acts as a central hub that connects Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP) systems, providing a cohesive solution for managing the complexities of client projects.

With its roots in the 1990s, PSA software has evolved to meet the dynamic needs of modern professional services organizations. The advantages of PSA software include improved revenue generation, performance optimization, and strategic decision-making. It caters not only to traditional professional services firms but also to internal IT organizations and businesses with recurring revenue models.

When considering PSA software, organizations should approach the selection process with clear business goals, an understanding of deployment options, and a focus on return on investment. The flexibility, scalability, and ease of integration provided by cloud-based PSA solutions have made them the preferred choice for many organizations.

PSA software implementation is not a one-time event but an ongoing partnership between the organization and the software provider. Organizations that prioritize goals, make informed decisions, and invest in ongoing education and assessment are likely to reap the benefits of PSA software, contributing to their long-term success in the professional services industry.