The dramatic expansion of the service industry in the last decade has led many project- and service-oriented organizations (PSORGs) to try applying traditional ERPs, originally developed for the manufacturing and distribution sectors, outside of their conventional homes.
This has sometimes resulted in the enterprise running powerful and expensive ERP systems for the accounting or HR departments, while leaving the revenue-producing parts of the organization – such as professional services – to mechanize themselves in a haphazard manner with spreadsheets and paper, or to attempt such mechanization by building an in-house system.
This can lead to increasing back-office costs while front-line groups (the ones generating the revenue) suffer from an almost complete lack of productivity and mechanization tools. Essentially, these organizations have put themselves in a position in which the back-office functions and systems are driving the front-line, revenue-producing part of the organization – not an optimal situation.
But help has arrived in the form of software applications designed for organizations whose work is project-based and human-resource intensive. Professional Services Automation (PSA) software provides the tools, techniques, and technology that enable PSORGs to manage personnel, resources, projects, and clients.
Unique Requirements of PSORGs
Much like manufacturing or distribution companies, project- and service-oriented organizations have their own unique business processes. If software applications are to be implemented in order to streamline such processes, then the functionality these applications adopt must focus on the project lifecycle.
Some of the unique requirements for PSORGs are dictated by whether their projects are for cost centres (non-billable and based on budgets) or profit centres. Many IT departments are engaged in internal software development, engineering, R&D, and product design, and only serve internal clients. The projects and services implemented for these internal clients are based on corporate budgetary constraints and are non-billable work. Some PSORGs perform work for external clients, and usually perform their billing based on various rating algorithms.
Regardless of whether the work is being done for internal or external clients, the focal point is on implementing the project or service. As such, several questions need to be addressed. How can organizations:
- Manage to deliver projects on time and within budget?Ensure that proper resources are in place to deliver such projects?Effectively report on project information in real time?Ensure that project information is accessible at all times by anyone?Ensure that employees focus on core responsibilities rather than administrative tasks?Efficiently manage the lifecycle of a service or project engagement?Streamline their key service or project processes for greater productivity?
The fact is that very few PSORGs efficiently deliver their services. Due to increased industry complexities and inefficient corporate processes, service workers are not focusing on their key responsibilities. They are instead being bombarded with increasing amounts of administrative tasks, technology issues, unmanaged workloads, and lack of information. Thus there is a great need and an increasing demand for software applications that can render PSORGs more productive and more profitable.
Addressing PSORG Needs
Professional Services Automation describes a set of software solutions that have been designed specifically for PSORGs. These applications streamline business processes, automating and integrating core business processes so that organizations within these industries can increase productivity and profitability.
PSORGs are ridden with inefficient processes and behaviour. Resources are not utilized at their optimal capacities, collaboration is less than ideal, billing cycles are lengthy, project status is based on outdated information, and project costs are not managed or known with certainty – all of which lead to a less-than-productive organization and decreased profitability. PSA applications address these inefficiencies in much the same way that ERP applications address the business processes for more traditional industries.
As an increasing number of organizations operate under project- and service-oriented methods, establishing a streamlined and more productive approach for core business processes is no longer simply nice to have, it is a necessity. (Project-oriented methods often refer to organizing work, budgets, and human resources around the concept of delivering a project as a mission, then disbanding immediately after the project is completed.)
PSA applications and vendors are addressing this need for streamlining
by leveraging, complementing, and enhancing the required or best features of CRM, HR, project management, and accounting or ERP systems in order to deliver an integrated approach to service efficiency.
Benefits of PSA
PSORGs have traditionally been inconsistent in evaluating their performance metrics. Are billing rates used in an optimal way? Can project costs be managed more effectively? Are resources used effectively? Is employee collaboration optimal for improved project results?
Organizations implementing projects and offering services are focusing on corporate and process efficiency more than ever. Both areas are essential because services comprise an enormous portion of many modern businesses, and the pressure for high performance and efficiency is higher than ever. The challenge for PSA applications is to provide, in a quick fashion, functionality that delivers positive, identifiable, and measurable results to these organizations.
The ultimate benefits of PSA applications are increased productivity and profitability within a short period of time. The ability to achieve such benefits is based on the productivity of the company’s resources and the technology used in order to perform projects or services more effectively.
Specific benefits include: increased employee productivity through more focused work; more opportunities due to improved resource management; more effective resource utilization and retention; improved client satisfaction due to quicker and more complete billing and lower project costs; overall operational efficiency; maximization of billable revenues; improved reporting capabilities for more effective decision-making; and quicker measurable results.
All such benefits lead towards greatly improving profitability.
Reaping The Rewards
All organizations can benefit from automating their basic business processes. Internal business processes such as opportunity management, resource management, project management, purchasing, expense reporting, timesheet management, and many others are not fully mechanized in most organizations.
To gain the full benefit of this mechanization, the organization will have to review its processes and structure them so that mechanization is not inhibited.
In evaluating how an organization will benefit from a PSA application, certain key questions should be asked. How will the organization benefit from:
- Increased employee collaboration to deliver projects and service clients?Capturing all project-related costs quickly and accurately?Accurately and quickly generating billable information at a level of detail and format demanded by clients?Streamlining project-related business processes so that clients can be serviced more efficiently?Improved management of project portfolios (e.g., resource allocation and utilization, status, costs, billings)?
One of the key benefits associated with implementing a PSA application is the improvement of billable cycles. Increasing billing efficiencies reduces A/R days and improves financial liquidity, which is a clear benefit to most organizations. The ability to bill faster on a sustained basis will be seen to result in considerable savings to PSORGs providing billable services. Another key benefit is the improved management and utilization of resources. Ensuring that resources are scheduled and utilized on appropriate projects is advantageous to all project- and service-oriented organizations.
Reasons enough to investigate this emerging category of applications.
Rudolf Melik has over ten years experience in software engineering and project management, and was named Quebec’s Technology Entrepreneur of the Year in 2001. He is president and CEO of enterprise automation firm Tenrox, (www.tenrox.com), of Laval, Quebec.
This article is based on an exerpt from the new book “Professional Services Automation: Optimizing Project & Service Oriented Organizations” , published by John Wiley & Sons, Inc., and is published with permission.