The key to a healthy and profitable delivery organization begins with effective resource management. With Resource Management as a Service (RMaaS), your organization can put more focus on the core business of client delivery while having more predictable staff utilization and operating costs.
Every professional services and consulting organization understands the need to run its delivery operations effectively and efficiently. Yet the reality is many professional services organizations (PSOs) underachieve in keeping operating costs in line with industry standards. The most common reasons for this include: 1) lack of disciplined practices 2) poor tools and infrastructure 3) underinvestment or 4) some combination of all three.
The largest lever for impacting PSO operating margins (outside of project margins) is utilization of human capital. Setting the right utilization targets and consistently achieving them is paramount to achieving financial success. The math is simple: for a 100 person organization, 5 points of utilization equates to approximately $1 million to the bottom line. Not surprisingly, PSOs that do not consistently achieve target utilization levels are usually plagued by the reasons listed above. Regarding project margins, our own research and other industry studies also indicate that resource management leading to getting the right person in the right place at the right time, has a major impact on project performance.
There is a new solution emerging that can provide PSOs with consistent and effective resource management. It is called Resource Management as a Service, or RMaaS.
RMaaS is simply a newer form of business process outsourcing (BPO), targeting what is arguably the most important support process of a consulting or professional services organization – resource management. Resource management is not simply the process of staffing projects (i.e. forecasting, skills development, balancing supply and demand, 3rd party sourcing). Done correctly, resource management extends its impact beyond services operations. The following diagram illustrates the typical scope of a centrally managed resource management function.
Skills Inventory: It starts with knowing what and where the capability and capacity of your delivery team is and keeping this information current and accurate. The skills inventory is ideally enterprise wide, unlocking any potentially silo’d resources.
Centralized Staffing: Staffing is the continuous process of matching available delivery resources for all active and potential projects. This process is in lieu of all too common decentralized approaches which are labor intensive.
Forecasting: What is the resource requirement outlook for the next 30 days? How about in the next three to six months? Lead times for recruiting, hiring, and retraining human capital do not always coincide with project needs. Forecasting is essential to proactively preparing for future business cycles.
Candidate Sourcing & Development: A logical extension of forecasting. Once the resource needs are defined, now the organization can target the right actions to recruit, hire, or contract the right resources. With a detailed centralized view of resource needs over a given time horizon, strategic sourcing analysis and planning can occur to gain control over longer term labor costs.
IT/PSA Infrastructure: For organizations larger than 50 - 75 resources and distributed across multiple geographies, automation is essential, and can be highly beneficial for organizations under 50 as well.
Governance: Resource management information drives strategic planning and management decisions, and tactical project performance and financial results. Like any other mission critical business process, the establishment of metrics, dashboards, corrective action and continuous improvement processes are necessary to achieve consistent and predictable results.
RMaaS is the outsourcing of the resource management function and associated business processes. RMaaS takes the more traditional BPO model and adds the “as a Service” structure to it. Resource management, by its nature, lends itself to be delivered “as a Service.” First, it requires a highly specialized skill based on a repeatable methodology and is inherently usage-based, the common unit being the number of delivery resources. Second, it needs to scale or contract rapidly to adapt to the business cycles. Finally, it is a highly virtualized function, not requiring people or systems to be in any one location.
In addition to day-to-day support and interactive support for the delivery team, the RMaaS vendor should be providing management with reporting and analysis of resource activity and future needs to support future planning in the areas of capacity growth/contraction, skills development needs and financial forecast inputs.
The Value Proposition
When considering the question of outsourcing your resource management process to an RMaaS model, you should ask yourself two questions:
- Am I consistently achieving the right levels of utilization and project performance throughout the organization?
- If not, do I have the resources, time and expertise to address the problem in the next 1-2 business quarters?
Any hesitation in answering both questions positively would suggest that there is considerable benefit and value to be gained by getting things corrected immediately.
Let’s first look at the benefits of resource management. The primary driver of benefit is closely managing utilization targets. Unplanned bench time for your resources is revenue not being earned and cost being burned. Refer to the following table to see how it impacts your organization.
The impact of poor or inconsistent utilization performance cannot be overstated enough. There are additional benefits to consider as well:
- Agreement to Project Start Interval: Each week a project is delayed due to not having the right resources available is lost revenue. Pacesetters can start projects usually one, occasionally two weeks from the agreement. Each week of delay pushes out revenue capture and substantially increases the risk of project budget and schedule overruns.
- Lower Turnover: Delivery staff is more satisfied. Good planning allows them to perform the roles they want, and are typically not stretched as thin. This results in lower hiring and development costs, and stronger knowledge depth of the organization.
- Management Time: Senior delivery managers often spend too much time in staffing meetings and making staffing decisions. This is a significant opportunity cost to the business. This time can be largely reallocated to business and practice development activities.
So now that you understand the value of addressing your resource management process, what is the benefit to outsourcing it via an RMaaS model? The short answer is speed, expertise and flexibility.
In my experience, implementing or improving service operations processes internally take time, especially when automation is involved. These projects span a minimum of three to four business quarters, and tend to be incremental in nature. In an RMaaS model, you can expect to have the majority of the capability deployed in two quarters. Using the same 100 resource organization, the speed to value of two quarters is worth $500,000 to the bottom line.
There are a number of vendors in the market place promoting leading practices and capability in many aspects of delivery operations. Too often, firms do not take advantage of this and try to develop their own approach and solutions. Often these solutions are not scalable and incomplete. Outsourcing allows you to take advantage of best in class processes and technology in the marketplace. And vendors are continually improving upon these areas as the industry evolves. Resource Management is a very specialized discipline, and an outsourcing entity has the advantage of being able to train, retain and focus on career development for resource management professionals.
A delivery organization is never static. There are continual periods of growth and contraction. The service operations functions should adapt to these changes in operational scale in order to maintain operating margins. An RMaaS model allows you to increase or decrease your coverage needs based on the current state of your business and maintain the right cost structure for the core business.
The key to a healthy and profitable delivery organization begins with effective resource management. Too often, organizations are underperforming in this area, significantly hurting operating margins. Resource Management as a Service provides a fast, flexible, and highly functional turnkey solution for PSOs. With RMaaS, your organization can put more focus on the core business of client delivery while having more predictable staff utilization and operating costs.
About the Author...
Marc Lacroix is a Managing Partner of RTM Consulting, with a proven track record in achieving Professional Services organizational growth and operations improvements in a variety of companies. Marc has specific expertise in delivery methodology development, resource management and balanced scorecards.
Prior to joining RTM Consulting, he was Vice President of Consulting and Professional Services for Convergys Corporation. Prior to Convergys, he was Senior Director of Customer and Professional Services for Cygent, Inc., a telecommunications-centric customer care and order management software company. His professional experience also includes management consulting at Ernst & Young (now Cap Gemini), where Marc managed a variety of process improvement and IT implementation projects for top tier financial services and telecommunications clients.
Don’t miss Marc’s speaking engagements next week at Technology Services World (TSW) Best Practices, taking place May 5-7 at the Hyatt Regency Santa Clara. Mark is presenting in three sessions at TSW:
- Best Practices and Best Tools for Resource Management (RM) Automation
- The “And” in Services 2.0: Enabling a Successful Transition to a B4B Business Model
- Accelerating Operational Success by Leveraging Resource Management as a Service
You can see the full TSW schedule here. Marc may be reached at [email protected].
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