How Professional Services Organizations Can Increase Revenues

By Dave Hofferberth

The role of marketing and sales in an organization’s success
Cultivating new and repeat clients is the lifeblood of the services industry. Professional services organizations (PSOs) are in business to provide knowledge, expertise and guidance. Their sales and marketing organizations must define target markets and clients by understanding their key challenges. They are responsible for generating awareness and identifying and closing opportunities. The intangibility of services makes it more difficult to create concrete proof of the firm’s knowledge, experience and differentiation.    CRM

The effectiveness of the PSO’s sales and marketing efforts determines the quality and size of the pipeline, bid-to-win ratios, discounts, client satisfaction and the length of the sales cycle. Effective sales and marketing organizations consistently uncover new opportunities while ensuring existing customers continue to buy and refer. Today’s successful PSO, whether embedded or independent, is increasingly taking charge of its own destiny by investing in sales, marketing and services packaging.

Professional services executives know that, in good times or bad, they must optimize marketing and sales to improve financial performance. They use different marketing and sales approaches to increase revenue while holding down costs. A look at the results of the 2015 Professional Services Maturity Benchmark shows how PS executives can develop strategies to align sales and marketing to achieve superior results.

Develop strategies to optimize growth and margins
With visibility into the right information, PSO executives can develop strategies and tactics that will help their organizations grow profitably. Understanding the needs of their current client base provides insight into additional services that could be initiated and offered.
Services portfolio expansion helps the PSO maintain a consistent presence within its clients’ organizations. It also minimizes the potential for competing PSOs to come in and take business away. This understanding helps the PSO more effectively price services to existing clients, where it has a more intimate understanding of risk, requirements and acceptable price levels.

Focus on adding new clients
The secret to enduring success is to build marquee clients for life while continually adding new clients. This requires adding complementary services for existing customers and new services offerings to drive market expansion while ensuring the PSO remains current with emerging markets and technologies.

Table 1 highlights the impact of new client acquisition. The table shows that nearly 30 percent of the respondents derive between 20 and 30 percent of total revenue from new clients. There is clearly a direct correlation between overall revenue growth and new client penetration.

Firms that derive more than 40 percent of their revenue from new clients grew overall year-over-year revenue more than 14 percent. Smaller organizations tend to show higher growth rates as they are building new client revenue from a much smaller base.

Table 1: Percent of Revenue from New Clients
Table 1
Source: Service Performance Insight, May 2015

Faster growth means more employees. The table shows that organizations with less than 20 percent of their revenue coming from new clients grew the employee base faster than actual revenue. This means the cost structure expanded more rapidly than revenue. It may indicate that the organization is hiring in advance of expected revenue or catching up with current demand.

But in those organizations achieving more than 20 percent of their revenue from new client penetration, employee headcount growth is lower than revenue growth. In this case, the organization is more efficient at resource management, despite the high level of new client growth. The size of the sales pipeline compared to the quarterly bookings forecast increases, leading to more revenue from new clients.

Unfortunately, there is a cost associated with seeking new clients. The slowest-growing organizations reported the highest levels of profitability as they did not incur high costs for recruiting and ramping loads of new clients and consultants. Concentrating too intently on high profit from existing accounts in the short term may signify the organization is foregoing market expansion that would ensure long-term prosperity and success.

Develop a winning pricing strategy
Some PSOs build pricing proposals from costs up by applying approximate cost factors plus risk multipliers. This pricing strategy does not contemplate or take advantage of business impact. Cost plus pricing usually results in low margins as the organization is not able to command a price premium for proprietary tools, techniques and intellectual property, which drive faster, more successful client outcomes.

With the right information, PS executives have the ability to create pricing models that optimize profits along with client benefit. These models balance the probability of winning bids with cost, revenue and expected client benefit as Figure 1 shows. Pricing a proposal too high virtually assures the bid will be rejected.
Figure 1: Pricing Strategy
Figure 1
Source: Service Performance Insight, May 2015

Pricing the proposal too low offers two negative potential consequences: 1) the bid will be accepted but the profit margins will be so low that it will negatively impact overall profits, or 2) the client organization will feel that the PSO does not understand the nature of the work, and therefore, the project will face serious consequences later in its lifecycle.

Leading PSOs have pricing down to a science. They understand their clients’ price tolerance, their competitor’s pricing strategy, their own capabilities and the value those capabilities provide to clients. Understanding cost, the competition, risk and client value all go into successful proposals that exceed margin requirements. Premium pricing comes with quality, repetition and reputation.

Discount at your own risk
Research has shown that discounting can create more problems than it is worth. Discounting diminishes value and may cause negative client perception. The client wonders whether the initial price was too high, or the firm is desperate or it doesn’t truly understand the nature and scope of the work. Any of these circumstances may lead to long-term dissatisfaction.

PSOs need to limit discounting, and only use it in the rarest of situations. Minor discounting may be appropriate for significant additional business or to demonstrate the value of the relationship. Unlike products, there are few economies of scale in the services business. An hour of effort is an hour of effort. The cost of an hour of labor is only reduced if less time is needed, less costly consultants can be used, or fewer non-billable hours are spent in developing client requirements or deliverables. The benefit of additional business with the same client primarily shows up in reduced sales cost and reduced risk but not necessarily in delivery cost reductions.

Table 2 shows approximately 75 percent of the organizations discount less than 10 percent. The comparison between those organizations discounting less than 10 percent with those that discount more is significant. Limiting discounting results in larger projects, shorter sales cycles and more wining proposals.

The major difference is in the average revenue per project, which is considerably higher for those organizations that shy away from discounting. Although counterintuitive, the negative impact of discounting shows up in longer sales cycles and fewer winning proposals. The only positive impact of discounting is in larger sales pipelines, but there is no guarantee that more deals will close as the result of a larger pipeline.

Service organizations must be wary of client demands for price concessions because they are an indication that the service is becoming commoditized, sales are not positioned at the right decision-maker level, or the value of service impact has not been quantified. In services, the lowest-priced provider is almost never the highest-quality vendor with the best reputation.
Table 2: Effects of Discounting on Sales
Table 2
Table 3 highlights some of the impacts of discounting on performance. Both project margins and attrition are improved with lower levels of discounting.
Table 3: Effects of Discounting on Organizational Performance
Table 3
Source: Service Performance Insight, May 2015

What PSOs must do to increase their chances of greater success
While delivering excellent services will always be an important objective of PSOs, increasing sales and maintaining a solid, stable revenue stream greatly contribute to organizational success. There has been a growing emphasis on sales and marketing activities that increase both the breadth and depth of relationships, while expanding markets through existing and new services offerings.

To succeed in the marketplace, PSO executives must align marketing and sales activities to increase both revenue and market margin targets. An initial dive into the bid-to-win ratio as well as the PSO’s pricing strategy will go a long way in helping the organization reach its goals.

Profitability analysis across clients, practices, geographies and service offers assures that each PSO is operating at its highest capability. Understanding revenues and costs helps marketing, sales and service delivery collaborate to improve the types, pricing and quality of the services offered. Through this alignment, the PSO will be in much better position to succeed.

What’s Changing the Professional Services Industry in 2014?

You need to know about a new acronym that’s smack dab in the middle of it all
by Jeanne Urich, Service Performance Insight

Get ready for some SMAC! No, it’s not some new designer drug. It’s a new acronym for the technology trends dominating the services landscape in 2014:

  • S: Social media
  • M: Mobility
  • A: Analytics and big data
  • C: Cloud

Mar PSJSMAC and its underlying technologies have caused a seismic shift in technology buying. It moves power and control to consumers and business executives and away from the IT domination of the past. New buying centers mean big business for nimble service providers.

It also means traditional IT product and feature selling has been eclipsed by social media-fueled buying behaviors and perceptions. These new technologies usher in a wave of consumer and line of business buying power, making both the sale and delivery of consulting services more complex.

How SMAC is changing professional services

End users and line of business buyers lack the sophistication of IT buyers, as they tend to be highly influenced by market perception, referrals and references. They want straight talk around business benefits as opposed to technical mumbo jumbo. They need demonstrable proof that the solution will actually be used and provide an immediate, positive business impact.

No more multi-year projects, no more extensive customization. These new buyers want proven out-of-the-box functionality, effortless integration with legacy applications and an easy-to-use, intuitive user interface with robust, graphical reporting. Applications must — with minimal modification — work on any device with a focus on mobility.

Social media’s impact

The focus on social has a much greater impact than massive IPOs and market caps for Google, Facebook and Twitter. Buyers expect applications to be socially aware, with Facebook-like functionality for crowdsourcing, instant messaging and telling a friend. Built-in connection and integration with the major social channels is mandatory. This means service providers must expand the social media knowledge and skills of their consulting workforce to ensure new applications provide social connections.

User adoption is of paramount importance. What user group wants a new application if no one else uses it or contributes to it? This means service providers can no longer sell, install and run. They need to provide training and incentives for users to quickly adopt and embrace new applications. Projects must now include early adopters in pilots with a greater emphasis on effective rollout campaigns designed to secure the hearts, minds and loyalty of new user groups. Another trend is gamification, which compels applications to create scores and offer prizes to get and keep users engaged.

Social has made a major impact on buyer behavior and knowledge. Buyers have a wealth of information available at their fingertips, empowering them to research and select services providers based on clarity of messaging and proven reputation. Referrals remain important, but prospective buyers can easily circumvent the vendor’s sales and marketing teams to find out whether past clients are satisfied.

Clear, compelling services provider websites must provide all the needed information for prospective buyers to research and compare capabilities and competencies. The days of in-person, local or regional selling and service aren’t dead. Rather, they’re under increasing siege from global competitors that offer a greater breadth of capabilities at competitive rates based on lower labor costs.

The move away from legacy apps to mobile

Because mobile technologies have eclipsed the use of applications, providing access to apps from a variety of mobile devices is no longer a “nice to have,” but a “gotta have.” This means consultants need knowledge and experience with all major iOS and Android devices while keeping up with emerging standards.

It also means the amount of real estate for user apps and the number of clicks must be minimal. This trend is a major force in streamlining overweight legacy applications with a premium on ease of use and compelling graphics. Mobile skills are in short supply. To recruit and retain mobile experts, services providers must invest in training and knowledge transfer.

Making sense of analytics and big data

Much has been said and written about big data, especially as a means for legacy enterprise application providers to remain relevant. The answer lies not only in access to massive, virtual storage, but also in developing a workforce that can understand and use statistics to power business decisions. Analytic engines and technology often surpass the analytic skills and competencies of business users who have to make sense of it all.

Nonetheless, whenever there’s smoke, there’s fire. The critical shortage of analytic skills represents a significant opportunity for service providers, whose consultants combine technical knowledge with vertical industry acumen, to create the reports and data access corporations need. Stay tuned for an ongoing database and analytics war as SAP uses Hana to wean its users from Oracle.

The cloud overtakes legacy applications

Last, but not least. The cloud has created a whole new oligarchy of monster application providers such as Salesforce, NetSuite and Workday. It seems like these companies have grown overnight in producing multibillion dollar revenue streams by stealing enterprise clients from IBM, SAP and Oracle. Continued advances in software-as-a-service (SaaS), business-process-as-a-service (BPaaS) and infrastructure-as-a-service (IaaS) have created a shift towards configurable, cloud-based delivery models where services are enacted directly within technology platforms.

These standardized platform-based services will gradually replace traditional labor-intensive transactional models and expensive, waterfall projects. Legacy application service providers have been slow to react and jump on the cloud bandwagon. However, cloud applications will increasingly dominate and overtake enterprise legacy applications because they offer accelerated time-to-value and superior return on investment.

The transformation of businesses

Next-generation service providers will focus on transforming businesses and business processes through technologies like cloud, social media and mobility, and applying analytics across the end-to-end services platform to deliver insights and create new value. Power has shifted away from IT to consumers and business executives, allowing operating executives to reach their clients and employees in new and exciting ways.

Social media has created a new services vision — in which buyers and service providers seamlessly interact by building shared learning communities centered on business process improvement and streamlined business interactions. This empowers end users to select, buy and implement self-service applications, thus transforming their interactions with their clients. Increasingly, organizations are demanding access to management and reporting capabilities for their outsourced business processes through mobile devices — anytime, anywhere. Because of this, smartphones and tablets make up the new primary mode of application access.

Never has the promise of technology as a powerful force for business transformation been so close to reality. But the real power lies within service providers that can apply this tsunami of technology to solve real-world business problems. Expect the services industry to grow in 2014, exceeding overall IT spending growth as it has for the past 10 years. However, look for winning services organizations to be those that focus on specific vertical industry business problems yet are savvy enough to build horizontal skills in social, mobile, analytics and cloud. They’ll apply technology and industry knowledge to streamline and transform the way the world does business.

An opportunity for independent services providers

The good news for independent services providers is that the venture capital community and Wall Street are forcing technology companies to outsource professional services to independent service providers. As a result, multibillion dollar service provider channels have been created overnight. Witness more than 1,400 Salesforce.com service providers and a vibrant developer community based on the Force.com platform.

All the major enterprise cloud software companies, such as Workday, SuccessFactors (SAP), NetSuite and Oracle, lead with partner-centric service strategies. During a recent earnings call, Workday co-CEO Aneel Bhusri said, “I do think that what we need is to find local service partners, much like we have — we’ve got the big companies like Accenture and Deloitte and IBM working with us on a global basis. So we also have companies like a DayNine, Collaborative and OmniPoint that are more, I would guess, home boutiques. We need to find those same boutiques in Europe and in Asia. And that’s pretty much what we are doing.”

2014 is the year of SMAC, powered by independent service providers that harness social, mobile, analytics and the cloud to deliver real-world business value.

The Truth About Services Selling

How to pick the right ones out of hundreds of possibilities
by Jeanne Urich, Service Performance Insight

The race is on to outsell, outmarket and outpackage the competition with profitable growth as the prize. The professional services industry has switched from “controlling costs” to “growth” due to the economic recovery. Around the globe, services providers are re-examining their approaches to the market. They’re looking at the most effective sales, marketing and packaging techniques to determine the optimum investment formula with the greatest payback.

Truth Green ArrowsSPI’s 2013 PS Sales and Marketing Maturity Model Benchmark report analyzes professional services industry spending on sales, marketing and packaging. A total of 187 global professional services organizations participated in the study conducted in July 2013.

Prior to starting the research

When we began this research, we knew that most professional services organizations were dissatisfied with their sales effectiveness. For the past eight years, more than 1,500 PS organizations that have completed our benchmark surveys have consistently given their sales efforts failing marks.

The benchmark seeks to answer the following questions:

  • What are professional services organizations spending on sales, marketing and packaging?
  • What results are they achieving?
  • Which investments yield the most benefit?
  • Which investments are not worth the effort?

The benchmark report attempts to answer these questions while providing insights and guidance into the best practices used by the most mature professional services organizations to enhance their sales, marketing and packaging efforts.

The current facts:

  • The discipline of professional services selling is still in its infancy. Very few firms have well-established solution selling methods or trained and dedicated services sales teams.
  • Current expenditures on PS sales are significant. As a percentage of total PS revenue, the average investment in selling is 8.6 percent.
  • The results for the very few firms that have successfully implemented a PS sales discipline are extraordinary, with 47 percent of all services sold as packaged solutions, 29 percent net profit and $255,000 annual revenue yield per consultant.
  • The majority of firms have a dedicated solution selling team with an average annual PS sales quota of $1.6 million per person. Only 67 percent of PS sales representatives achieve their annual quota — yet this figure improves to 75 percent for the best organizations that significantly invest in sales training, systems and tools.

Market challenges

Based on the survey, the results revealed that the pressures facing PS executives primarily revolve around accentuating services differentiation and improving sales effectiveness. Accelerating client project time to value is also a principal concern. We looked at the differences between embedded services organizations and independent services organizations. ESOs are services organizations within product companies, and INDs are firms whose primary charter is to provide profitable consulting services.

Table 1 compares the survey responses of ESOs and INDs on a scale of 1 to 5, with 5 being the most challenging.

Novt1

With the return to a healthy economy, firms have started to focus on new market penetration and expansion of their services portfolios. Fewer firms fear commoditization of their services. PS organizations make investments in sales and marketing as they face increased global competition, strategic sourcing adoption, technological complexity and pressure to accelerate time to value.

Firms adopting a well-coordinated plan to amplify their sales and marketing investments are reaping significant rewards. This report shows that although there is wide disparity in the amounts spent on sales and marketing, these investments pay for themselves in larger sales pipelines and better bid-to-win ratios. Ultimately, this translates into achievement of PS revenue and margin targets and higher levels of net profit.

PS sales effectiveness

In “The New Solution Selling,” Keith M. Eades provides the definition of a solution: “So what is the definition of the word solution? The typical response is, ‘An answer to a problem.’ I agree with this response but feel it’s important to expand the definition. Not only does the problem need to be acknowledged by the buyer, but both the buyer and salesperson must also agree on the answer.

So a solution is a mutually agreed-upon answer to a recognized problem. In addition, a solution must also provide some measurable improvement. By measurable improvement, I mean there is a before and might be an after. Now we have a more complete definition of a solution; it is a mutually shared answer to a recognized problem, and the answer provides measurable improvement.”

Common signs of services selling failure:

  • Client “pain” is not adequately identified or pervasive. The services portfolio does not resonate with the sales force or prospective clients, resulting in a weak sales pipeline and limited market penetration.
  • Wrong assumptions about product to services mix. Product companies want to increase product revenues and reduce services revenues, which mean they want to move solutions to partners to reduce the cost of services delivery. Without proper planning and solution testing, partners are ill-equipped to deliver new solutions.
  • Unreliable sales forecasts. Consistent misses in sales forecasting accuracy ripple through the PS organization, showing up in consultant over- or underutilization or poor resource scheduling and planning combined with the inability to achieve planned revenue and margin targets.
  • Poor sales effectiveness. Inability to generate enough interest and qualified leads to fill the sales pipeline. Poorly articulated services value proposition resulting in not enough qualified opportunities to support the sales forecast, along with poor win-to-bid ratios.
  • Lackluster sales results. Fewer than 60 percent of the services sales representatives surveyed achieve quota, resulting in failure to achieve revenue and profit objectives.
  • Poor estimating. Underscoping and underbudgeting projects results in project delays, overruns, poor project margins and dissatisfied clients.
  • Few reference clients. The PS organization is unable to convert clients into references and evangelists, resulting in lackluster repeat sales and referrals.

PS sales effectiveness metrics

Many firms want to know how to define sales effectiveness and what metrics they should use to measure the effectiveness of the services sales force.

The benchmark focuses on the following sales effectiveness areas:

Services sales quotas.

  •  Services sales quotas by person, by PS vertical market and by size of organization.
  • Percentage of services salespeople who achieve quota.

Spending on services sales.

  •  Total cost of the services sales organization as a percentage of total services revenue.
  •  Total number of services salespeople.

Sales effectiveness.

  • The size of the sales pipeline as compared to the quarterly sales booking forecast.
  • Win-to-bid ratio.
  • Average closed deal size.
  • Average services revenue by account.
  • Percentage of revenue from new clients.
  • Sales forecasting accuracy.
  • Services pricing accuracy — proposed price compared to actual delivery cost.
  • Length of the sales cycle from qualified lead to contract signing.
  • The number of qualified leads that are closed.
  • Percentage of reference clients.
  • Percentage of annual services revenue target achieved.
  • Percentage of annual services margin target achieved.

Sales enablement.

  • Sales methodology followed.
  • Days of sales training taken per rep per year.
  • Percentage spent on sales enablement, training and support.
  • Marketing mix and expenditure on supporting the sales effort.

Sales organization structure.

  • Charter of the services organization.
  • Sales reporting structure.
  • Sales focus: geography, industry, major accounts or competency.

Table 2 provides an overview of sales effectiveness metrics and shows the differences between embedded services organizations and independent services organizations. Embedded PS organizations reported lower sales quotas but a higher percentage of salespeople who achieve them. ESOs reported better forecasting and pricing accuracy than their independent counterparts.

ESOs have shorter sales cycles, but their average closed services deals and revenue by account are significantly lower than for independents. ESOs generate more business from new accounts and have higher win-to-bid ratios than independents, yet they posted lower sales effectiveness scores and have significantly fewer referenceable clients.

novt2

The nonexistent sales and marketing silver bullet

Almost every PSO surveyed or interviewed in the past seven years has committed to the importance of the sales and marketing of professional services. However, the role of professional services within each company is different. Services can be used for profit, product enrichment, client intimacy or some combination of each.

Regardless, very few sophisticated product organizations can survive without a strong emphasis on professional services. For independent firms, PS sales and marketing are the lifeblood of the firm, for without them, new business cannot be developed nor can the firm expand its presence within its existing client base.

Unfortunately, both embedded and independent PS organizations often think of effective sales and marketing as a magic bullet. They believe all their problems will be solved if they can just find an amazing rainmaker. Not so! Finding rainmakers is not easy. Even if it were, business development efforts would fail without a compelling services go-to-market strategy and clear differentiation.

A couple of surprises

Our study focuses on PS sales, marketing and packaging to gain insights into the best practices and realities of how PS organizations are approaching the market. The biggest surprise was how many organizations are not adequately investing in sales and marketing. Many don’t have a cogent plan or dedicated resources or funding to support business development. Without an effective front office — no matter how compelling an organization’s services delivery and experience are — the firm simply cannot properly address the market and will be doomed over the long term to lackluster growth and ultimately failure.

The other surprise is the poor levels of services sales quota achievement. Classically, fewer than 60 percent of salespeople achieve quota. The figure is a bit better in services industries, with 67 percent average quota attainment. However, underlying this figure, the reality is stark.

Fully 25 percent of the organizations surveyed reported fewer than 50 percent of their services salespeople achieve quota, while fewer than 20 percent of services salespeople attain more than 90 percent of their annual quota. The other surprising fact is that 30 percent of the firms surveyed offer no formal sales training. The fallout from inadequate sales enablement shows in their poor results!

A final word about effective services selling

According to the 2013 PS Sales and Marketing Maturity Model Benchmark report, effective services selling is very difficult to achieve. Few traditional product salespeople successfully transition to solution selling without significant consulting and domain-specific background and experience. However, investments in building charter clarity, differentiation, marketing and packaging pay off handsomely in terms of sales effectiveness. Sales enablement activities are well worth the effort and provide measurable impact.

Bottom line, the services market is in a major growth phase. Revenues and juicy margins are there for the taking. However, they require a consistent, well-organized approach to the market and emphasis on improving all aspects of sales effectiveness.

Sales and Services Alignment

How to eliminate gulfs and fix dysfunctions
by Carey Bettencourt, Jeanne Urich and Dave Hofferberth, Service Performance Insight

In a highly competitive environment, a company must successfully differentiate itself and effectively orchestrate the sales cycle. Unfortunately, many times schisms between the sales and services delivery organizations surface during the sales process. This results in deal closure delays or, worse yet, losing the deal.

qualityThe winning formula for sales and services delivery collaboration is based on a combination of aligned business processes and measurements reinforced by a supporting technology platform like customer relationship management and professional services automation. This article examines the root causes underlying dysfunctional sales and services delivery relationships and identifies common business process breakdowns, as well as the path to alignment.

Background

Most organizations struggle with a lack of cooperation between the sales and services delivery functions. Based on six years of professional services industry benchmarking with responses from more than 1,500 professional services organizations, we have discovered that few professional services organizations are satisfied with the relationship between sales and services delivery. According to the 2013 PS Maturity Model Benchmark report, sales effectiveness received a poor score of 6.4 out of 10; marketing effectiveness was worse at 5.2 out of 10.

A lack of alignment and trust between sales and services delivery leads to lost opportunities, miss-set client expectations, underscoped projects and poor resource utilization. Best-in-class organizations have found a way to bridge the sales and services divide to reap rewards in terms of larger pipelines, higher win-to-bid ratios, higher levels of consultant utilization and more satisfied clients.

The complexities of identifying professional services opportunities and developing them into successful client engagements demand a more structured approach to business development and a seamless information flow between sales and services delivery. This ensures opportunities are properly prioritized, scoped and staffed.

While the consulting market currently experiences healthy growth, both up and down markets accentuate breakdowns between sales and services. When fewer deals are available and sales cycles are longer, heightened pressure and a sense of urgency to close deals may exacerbate an already dysfunctional sales and services relationship. On the other hand, when opportunities are plentiful, resource imbalances and heightened risk aversion may also strain sales and services liaisons.

Sources of sales and services dysfunction

Gulfs between sales and services typically emerge in the choppy waters between functions where the overly optimistic sales tide meets the risk-averse services shore. Who, and which function is in charge of piloting client opportunities through these brackish seas?

Typical sales and services breakdowns occur in the following areas:

  • Proposals. PSOs often demonstrate a lack of clarity around which opportunities to pursue, how to create a winning proposal or who is ultimately in charge. Ambiguity can lead to procrastination; excessive bid costs; acceptance of egregious terms; and not enough time, tools or resources to bring all the pieces together into a compelling value-based proposal.
  • Pricing and scoping. In many cases, it’s unclear who has authority for discounting and contract terms. Poorly defined or unknown requirements, weak estimating tools, vague discounting limits, and inadequate or no pricing or contractual reviews contribute to mediocre financial results and unacceptable levels of risk.
  • Forecasting and staffing. Many PSOs are deficient in what it takes to move a suspect to a high-probability deal or how the sales forecast is translated into the resource plan. A lack of alignment and trust are exacerbated by noncongruent sales booking and services margin goals. Unreliable sales forecasts lead to disconnected sales and resource planning processes and insufficient functional interlock regarding opportunities and required staffing. The outcome is the absence of integration between sales, staffing and recruiting, resulting in not enough or too much services delivery capacity.
  • Services execution. Inconsistent communication between services delivery and sales regarding project status often occurs. No project dashboards, improper planning, and poor execution of scope changes and change orders lead to project overruns, nasty surprises and unhappy clients.

Business process requirements for sales and services alignment

A lack of agreement around key business processes that cross organizational or functional boundaries is at the core of dysfunctional sales and services delivery relationships. Issues are typically the result of differing views of the processes, unknown or misused levels of authority, and ambiguity around decision-making and measurements.

The foundation for all high-performing organizations comes from clear business process understanding and ownership tied to congruent goals and measurements. Table 1 illustrates how a simple method of assigning ownership and measurement of cross-functional business processes provides clarity and enhances performance.

t1

The impact of sales and services alignment

Effective sales and services delivery teamwork is at the heart of performance in the services industry. The integration of sales and services delivery business processes and systems is paramount to success.

In our 2013 PS Maturity Model Benchmark report, the “best of the best” embrace sales and services delivery alignment, and their results as shown in Table 2 speak for themselves.

t2

CRM and PSA integration drive performance

As Table 2 shows, integrated customer relationship management and professional services automation applications are key to breaking down the barriers between sales and services by providing accurate client and project information throughout the client life cycle. Running a knowledge and skill-intensive business like professional services with disconnected applications, spreadsheets and email is no longer a competitive option. Efficient execution across core business processes demands visibility, transparency and control.

Ideally, information flow mirrors and illuminates core business processes, beginning with prospecting and extending through the client life cycle. Time, cost, engagement progress and quality are critical elements that must be tracked throughout. Integrated applications provide visibility, alerts and work flow to ensure following of proper steps, securing of approvals and flagging of variances.

Executives and other involved personnel should be able to track information from the initial bid through project completion and invoicing. With this information, both management and consultants can monitor deals to ensure high levels of client satisfaction with acceptable revenue and profit margins.

The integration of PSA and CRM helps the sales organization to better understand the entire client relationship and discover opportunities to sell additional products and services. Sales and services cooperate to decide whether work should be bid, and at what price to win the opportunity and meet margin requirements. Both organizations can share information to be included in the proposal with the appropriate staffing plan and financial forecast as backup.

Accurate information enables the services delivery team to proactively plan and staff projects with the right resources while supporting the sales team in closing opportunities. The executive team is armed with real-time visibility into revenue and costs to support effective decision-making.

The 2013 PS Maturity Model Benchmark report demonstrates the power of CRM and PSA integration as an important foundation for improving sales and services delivery alignment. The benefits of sales and services delivery collaboration speak volumes.