Announcing the 2014 Best-of-the-Best Professional Service Organizations

What Does It Take for Professional Services to Excel in 2014?

By Jeanne Urich, Managing Director, Service Performance Insight

Learn from the Best-of-the-Best

For the past five years, Service Performance Insight has conducted in-depth analyses of the top 5 percent of PS Maturity™ benchmark participants to uncover the reasons for their superlative performance. After a careful audit of their survey responses and in-depth interviews with lead service executives, the top performing organizations have been named “Best-of-the-Best.” The top 5 percent of firms scored 20 or higher on a scale of 25 on the PS Maturity Model™.


According to “The 2014 Professional Services Maturity Benchmark,” out of 238 participating organizations, 13 firms significantly outperformed the benchmark average by excelling in all five service performance dimensions: leadership, client relationships, human capital alignment, service execution and finance and operations. With much higher profits and more satisfied clients, these firms outperformed their peers and the benchmark average.

Meet the 2014 top performers:

  1. Campus Management provides robust, elegant and cost-effective software solutions for higher education institutions. Campus Management is a four-time winner.
  2. TOP Step Consulting provides consulting, implementation and training for Professional Service operations and software. TOP Step Consulting is a five-time winner.
  3. Logical Design Solutions, Inc is a strategy and business solutions consulting firm that envisions and designs emerging business ecosystems. LDS is a five-time winner.
  4. TopDown Consulting is a leader in designing, implementing, and deploying EPM solutions.
  5. SmartERP provides innovative, cost-effective, and configurable solutions and services to common business problems on the Oracle PeopleSoft platform.  Two-time winner.
  6. e4 Services, LLC is a healthcare information technology consulting firm specializing in clinical, hospital information management and revenue cycle services.
  7. Agencyport Software builds software solutions that the world’s top insurance carriers use to engage with their product distribution channels and technology partners.
  8. Charles River provides an end-to-end solution to automate front- and middle-office investment management functions across asset classes on a single platform.
  9. EAC Product Development Solutions  provides tools and services to help companies get products to market faster.
  10. Varrow provides technology solutions for virtualization, storage, managed services and disaster recovery through advanced consulting and design services.
  11. The New Office is a leading NetSuite solution provider specializing in helping businesses improve processes and collaboration.
  12. Informatica Corporation is a leading independent provider of data integration, data quality, and big data software and solutions.  Two-time winner.
  13. Trimble creates unique products and solutions incorporating positioning technologies that help customers streamline workflows and analyze complex information.


The table compares the 13 Best-of-the-Best performing professional services organizations to the other 225 in this year’s survey. The size of the Best-of-the-Best organizations is much smaller than the average firm in the benchmark. Six are embedded PS organizations within software or software as a service companies, five are IT consultancies and two are management consultancies. Several of the IT consultancies derive a substantial portion of revenue from the resale of hardware and software products in addition to high value consulting.

Unlike previous years, only three of the top firms grew PS revenue more than 25 percent in 2013. One surprising finding is that three top performers grew annual revenue less than five percent and two actually experienced a decline in PS revenue. Yet all of the best delivered high levels of profit and client satisfaction. It is interesting to note that not a single winner this year came from an embedded SaaS PSO. Times sure have changed as in past years embedded SaaS PSOs tended to garner top honors. Not this year. This is because SaaS software firms have shifted the charter of their professional service organizations to focus on client adoption regardless of the impact on PS profit.

While the latest Best-of-the-Best were smaller in size, they grew their workforces at a much higher rate than the others. They also had a higher percentage of billable employees, and depended much less on third party resources. These companies prefer to recruit and deploy talented staff without relying on subcontractors. This translated to higher levels of employee and client satisfaction.

One of the more exciting discoveries is that female leaders are at the helm of four of the top performing companies. Female CEOs are disproportionately represented in the Best-of-the-Best compared to the PS industry. Although there are few female PS executives across the industry, they’ve proven they’re capable of turning their companies into high performers.

Summary of PS Maturity™ benchmark results

Unlike prior years, this year’s best had fewer employees than most firms. Despite their size, they’ve become leaders in specialized markets. Because of their market dominance, they spend less on sales and marketing, and invest more in employees and clients. Their reputations for delivering high quality results manifest in repeat business and referrals.

One-quarter of this year’s best have female executives, a trend that should continue with more women joining the professional services ranks. Their people-centered leadership styles work well in the PS sector.

As these organizations grow, it will become more difficult to maintain their collaborative and innovative cultures. Focused organizations with solid leadership, engaged employees and a strong information infrastructure can overcome stiffer market competition and most hurdles they face. Congratulations to the 2014 Best-of-the-Best on delivering outstanding performance in 2013!

How does your organization measure up? Get your copy of the 2014 Professional Services Maturity Benchmark now. Cover_2014PSMB_sm

SaaS Professional Services Come of Age

SaaS Professional Services finally finds its footing
by David Hofferberth and Jeanne Urich, SPI Research

0511 1

The year 2010 will go down in history as the one that Software-as-a-Service (SaaS) professional service organizations (PSOs) trumped enterprise software PSOs. One of the most significant changes in 2010 has been the dramatic shift of embedded SaaS PSOs from cost centers to profit centers.

Based on changes in accounting policies for multi-element contracts, SaaS software providers were forced to unbundle PS revenue from license subscription revenue. This significant change resulted in most SaaS PS organizations transitioning to become profit centers.

Remarkably, the 19 SaaS PS organizations that participated in SPI Research’s 2011 benchmark survey delivered the highest net profit of all PS sub-verticals at 23.1 percent, compared to eight other industry segments (software, hardware and networking, IT consulting, management consulting, accounting, marketing and advertising, architects and engineers, and other PS) with an average net profit of a measly 6.4 percent.

According to Software Equity Group’s Q3 2010 Software Industry Equity Report, “By the close of the third quarter, the annual median trailing 12 month revenue growth rate of public SaaS companies had plummeted to 13 percent from 23 percent a year earlier and 46.5 percent two years earlier.”

Two of the fastest growing SaaS firms, and Citrix, both grew past the billion-dollar mark. Based on their now considerable size, it is unlikely they will continue to post their early-stage meteoric growth rates. As the SaaS market matures, SaaS providers are making trade-offs between torrid revenue growth and profitability.

The significance of a maturing SaaS market means these firms are starting to focus on running PS more efficiently and profitably. As SPI Research predicted, the shift to running PS as a profit center within SaaS organizations is well under way. It is only a matter of time before all SaaS PS organizations shift to a profit focus.

Turnabout is fair play

In the 2010 benchmark, independent firms significantly outperformed captive (embedded) service organizations, but embedded service organizations came roaring back in the 2011 benchmark! A big change this year is that the best-performing embedded PSO is Workday, a fast-growing SaaS provider of human resource management solutions.

In the past, the best-performing embedded PSOs were always within enterprise software companies, not within SaaS companies that, up until now, had positioned PS as merely a channel to rapidly implement clients so they could secure lucrative multi-year subscription revenue.

The cloud flies high

One of the most interesting trends is the service sector movement towards deploying cloud-based solutions. Both large and small PSOs demonstrate a strong preference for SaaS-based solutions with 39 percent of the organizations expressing a preference for SaaS as compared to 29 percent preferring on-premise applications. The remaining 32 percent had no preference.

For firms planning to move their applications to the cloud, SPI Research found the average timeframe for the planned move was less than two years. This trend is gaining momentum, and SaaS will become the primary method of PS application consumption within five years.

SaaS PSOs take advantage of remote service delivery

One of the primary reasons for the surge in SaaS PS profitability is the fact that these organizations are able to deliver the majority of their projects remotely. This means they can take advantage of lower-cost home-based and offshore resources. Additionally, remote service delivery allows these organizations to achieve much higher billable utilization without the burden of non-billable travel. SaaS consultants and project managers alike are adept at multitasking which means they can handle multiple clients per day.

The trend towards more off-site work has been facilitated by cloud solutions, lower cost offshore and near-shore consultants, client and service provider desire to reduce travel and facility costs, and by the power and ease of use of remote service delivery tools.

SaaS PSOs have a unique advantage in delivering the majority of their services remotely:

  • SaaS PSOs billed the least hours on-site (23 percent) while hardware PSOs billed the most (56 percent).
  • SaaS PSOs reported the highest number of billable hours per consultant (1,399) while hardware PSOs reported the least (1,251).
  • Hardware PSOs spent the most hours per consultant in administration and non-billable project hours (616) while SaaS PSOs spent the least (458).
  • SaaS project managers were able to concurrently manage the most projects (6.8) while management consultancies managed the least (2.7).

Where’s Waldo?

A comparison of workforce location provides insight into the future world of work in the PS industry. SaaS PSOs are a harbinger of the new world of IT services. Although most have headquarters in North America, 30 percent of their PS workforce is located offshore. Most SaaS companies co-locate offshore PS and engineering staff to take advantage of lower cost and the availability of technical skills. The following chart shows hardware PS providers take the least advantage of home-based and offshore consultants (only 13.8 percent of their workforce) while SaaS PS providers take the best advantage of home-based and offshore consultants (45.3 percent).

For SaaS companies, the ability to co-locate PS, engineering and support groups provides unique advantages in assuring new client requirements and customizations are incorporated and supported within a single multi-tenant architecture.  For SaaS companies, co-location of PS, engineering and support improves collaboration and career advancement opportunities.

The dark side of SaaS PS

Unless Saas providers find a better way to capture client requirements and model business process change, the downside of SaaS PSO dependence on remote service delivery shows up in the lowest percentage of on-time project delivery, at 68.2 percent, along with the highest frequency of project overruns in our survey at 23.8 percent. This is significantly higher than the project overruns shown in management consultancies where only 7.3 percent of their projects experience overruns.

Despite the hype, SaaS projects take almost as long (4.6 months with three consultants), compared to enterprise software projects (five months with four consultants) and because SaaS providers generally charge higher bill rates, their projects cost more ($184K on average) compared to enterprise software projects ($154K). SPI Research also found PSOs within SaaS companies reported the highest percentage of billable work that had to be written off in the survey (5.4 percent), while those within hardware and networking companies reported the lowest (1.6 percent).

SaaS providers still have a way to go

Given the “youthfulness” of the SaaS market, as these organizations mature, particularly in estimating, project management, quality and on-boarding,  this improvement should positively impact revenue and profits in the near future. For instance, SPI Research found that because the market is still relatively new, the sales cycle for SaaS providers is significantly higher (110 days) than the survey average (98 days).

Fortunately, many SaaS providers have learned from years of experience in other software markets and have constructed their organizations to succeed in the long run. For instance, SaaS providers showed the highest percentage use of a standardized delivery methodology at 67.5 percent, when compared to the survey average of 57.7 percent. They also demand higher sales productivity, with service sales reps averaging slightly under $1.5 million per year in service quota.

And finally, because the market is relatively new, SaaS providers are expanding their new client base at a much higher rate (50 percent compared to the survey average of 37 percent) than their competition in other markets. This expansion will enable them to continue to grow faster than most of the firms in the survey, who primarily rely on add-on sales to existing clients.

Expect the young Saas to last

Software as a service is no longer a fad. As every industry has begun to rein in runaway technology deployment costs, SaaS appears to be the magic bullet. This movement does not assure all SaaS providers of long-term success because eventually their markets will become commoditized and growth will slow.  But in the near future, they represent one of the hottest sectors of the PS market and are proving SaaS clients are willing to pay high rates for rapid deployment.

SPI Research believes this market has just moved into the hyper-growth phase. If SaaS PS providers can efficiently deliver high-quality services, there is no reason this market will go anywhere but up.