Real-time Visibility is the Secret Sauce for Professional Service organizations

Data proves real-time visibility works
by David Hofferberth, Service Performance Insight

For decades, information technology providers have touted the benefits of how their solutions improve real-time visibility. They say their solutions access data faster to improve decision-making. But talk is cheap. While few would argue with this construct, the question is, “How much more efficiency does real-time visibility provide?” We’ve explored this question for the past seven years in our annual Professional Services Maturity Benchmark. Now we can quantify the advantages of real-time visibility.

Cover_2014PSMB_smIn the latest benchmark, 238 professional services executives shared the level of information visibility they had across their organization. The figure shows that approximately 10 percent said they had complete information visibility for making decisions in real time. Still, what does this do to improve the bottom line in professional services?  Level of visibilityWe decided to consider only those 10 percent of the organizations (about 30 firms) who said they had complete information visibility and compare them to the rest. Table 1 highlights a few differences.

The data shows that organizations with high levels of visibility grew and expanded their client base much faster. They accomplished this feat by having a better win-to-bid ratio. This means that for every 10 bids they submitted, they won about one more bid because of a more efficient and effective bidding process.

Real-time visibility comparisonWhen an organization grows and expands the client base faster, it also improves in other aspects. Employees want to work for fast-growing organizations because they feel secure in their jobs, and they should be able to take on more responsibility, learn more and get paid more as they move up within a growing organization. Because these organizations expand faster, there’s less time for administrative overhead. As a result, the percentage of billable time increases significantly. This leads to a much higher revenue yield per employee of over $25K annually. Higher per person revenue helps the organization expand and grow profitably. No one wants to work for an organization that faces financial challenges or loses market share.

The table also shows professional services organizations (PSOs) with high levels of visibility wasted less money on overhead because they stayed aligned and focused. Employee attrition went down significantly for these organizations. And we all know that knowledge workers are the true assets of a PSO. The net effect is a much more efficient organization, resulting in fewer cost overruns and 3 to 5 percent more in net earnings.

How to improve real-time information visibility

What is the potential for information visibility within professional services? Most departments have their own solutions which offer real-time visibility for particular tasks. For instance, sales and marketing personnel use client relationship management (CRM) solutions to manage the pipeline and better understand the services being sold and the price.

Likewise, those responsible for delivering services use professional services automation (PSA) solutions in order to better manage resources and service delivery. It ensures they meet timelines and project profit margins.

The problem is that PSOs only operate at maximum efficiency and effectiveness if the information available to one department — such as sales, marketing or services delivery — is also available to others. This helps departments work together to make sure the entire organization realizes more success.

No doubt, the department responsible for services delivery and human resources would prefer to see what deals are in the pipeline and what their potential bid price is. This information helps ensure they have trained resources available at the right cost to deliver the services. If this information isn’t available at a detailed level, the organization can’t efficiently build its bench in order to start work on time.

Likewise, the sales organization must have visibility into the resources available so it can focus sales efforts on selling projects that best match resource capabilities. Therefore, profits go up.

The impact of real-time information on goals

Having real-time information helps PSOs react faster and make the necessary changes to succeed. It also allows them to more accurately plan long-term initiatives based on the latest information. For example, executives typically look back a quarter or two to determine where they have or haven’t been successful and where they should invest.

Many organizations, however, struggle to look at the prior quarters because the information may not be available for several months. Thus, the lack of real-time information hampers the ability to accurately spot marketplace trends that might impact service strategy. Real-time information prevents surprises. Executives can compare information taken from this week, last week and several prior weeks to precisely determine where to focus future efforts.

Take advantage of the information infrastructure

We believe that using an integrated information infrastructure improves organizational visibility across the entire PSO. It becomes more relevant in light of all the new technologies, such as smart phones and tablets, which provide information access from almost anywhere and at any time. Now, executives, project managers and employees who deliver services have immediate access to any project-related data or changes in priority. They can immediately shift their focus to the most critical issues facing the organization.

No longer do employees have to make multiple phone calls to multiple people to get the message out. The results speak for themselves in Table 2. It reveals a few of the benefits of using integrated solutions.

Integration Drives PerformanceNotice that PSOs without a CRM solution have a deal pipeline of approximately 161 percent of the current quarter forecast. This means they have slightly more than 60 percent more work proposed than is expected to be completed in the quarter. Unfortunately, most of the work in the pipeline won’t be won or will have a start date much later than the current quarter. Therefore, PSOs should have a pipeline of at least 200 percent. This is double the amount of work that could be completed in the quarter.

Those organizations with CRM solutions have a pipeline of 216 percent. But if an organization integrates CRM with a core financial management solution such as enterprise resource planning (ERP), this jumps to 230 percent. It gives the organization a greater confidence margin, which allows the team to craft better proposals.

This analysis applies to PSA solutions in terms of how having integrated solutions further improves the benefits as opposed to having a non-integrated solution. Integrated human capital management (HCM) solutions also yield similar results. The outcome is that this increase in broad, real-time visibility across the PSO helps everyone work with the same information and, therefore, align resources to achieve optimal results.

The proof is in the real-time pudding

Few people doubt the importance of real-time visibility, but they want to see theory backed up by fact before pursuing it. We have monitored this key performance indicator for seven years. All the numbers prove real-time visibility improves performance.

PS executives who want to expand the organization rapidly and operate at high levels of both project margin and organizational profitability will want to do everything within their power and budget to provide the needed visibility to collaborate effectively.

To accomplish this feat, PSOs must use their information infrastructure to their fullest advantage. It’s a powerful tool that lets them adapt to current conditions as quickly as possible to reach and exceed their organizations’ goals.