At TSIA, we are in constant communication with our members through surveys, conferences, and frequent one-on-one conversations. In my talks with our professional services members, there have been four frequently asked questions that continue to come up. I’d like to take this opportunity to answer some of the top questions I receive about project performance, pricing, sales models, and the technology and tools you should be using in your professional services organization.
Question #1: Is there a sure-fire way to improve project performance?
Yes, there is! Every other year, we ask TSIA members to provide us with information about their projects. Using a very structured framework, we are able to collect actual project data across over 1,000 projects measuring at least 80 different parameters. Once we’ve collected their responses, we also ask follow up questions about whether or not they have a project management office (PMO) or a project manager (PM) in place. We’ve found that companies that have invested in a project manager or a project management office have been able to drastically improve their project performance. (Tweet this!)
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Project managers can help significantly decrease project delays.
You can see from this data that if you do have a PM or a PMO involved in project start up or project support, your projects are more likely to be successful. As long as professional services is about delivering projects around your products, project management excellence will absolutely be what sets your business apart from your competition.
Question #2: Is there a simple way to improve PS price performance?
The TSIA Market Rates Study is a massive global market rates survey that we conduct every year. One of the most common questions we receive from members participating in this survey is whether it is better to go to market with a blended rate card or a tiered rate card. The main differences between the two types are as follows:
Blended Rate Card – A single price regardless of skill set, solution type, or delivery type.
Tiered Rate Card – Based on the level of capability of the service that you’re building into the project.
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Of the PSOs we surveyed, those that used a teired rate card had the most success in improving their rates.
When we measure price performance for companies that go to market with a blended rate card versus those that go to market with a tiered rate card, the most successful pricing approach is the one that’s sensitive to the fact that different levels of skill have different levels of labor costs attached to them. What happens with a blended rate card is it needlessly compresses prices and doesn’t offer the firm the ability to capture those higher rates to compensate for higher cost resources and higher value services. Opting for the more sophisticated rate card is a good way to improve your rates.
Question #3: Is there a clear “best” PS selling model?
This is a big pain point for many PS organizations because the majority of them must rely on a single product-focused sales force that sells everything including services, but is primarily motivated to sell products. However, by investing in direct overlay professional services selling, companies will not only increase their PS revenue growth dramatically, but they’ll also be able to reduce their selling cost. (Tweet this!)
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With an overlay model, your organization has the potential to reduce selling costs while increasing revenue.
Though it may seem counterintuitive, these reduced selling costs are achieved because a dedicated PS sales force has a higher services IQ than a product-based sales force, and both groups can focus their time and energy toward selling what they know best, increasing revenues in both streams simultaneously. In fact, having a dedicated services-based sales force can also help increase the services knowledge of your product sales team, so it’s beneficial in more ways than one.
A Word of Caution
I should note that while this model can and does work, it is a minority approach for an embedded PSO to have dedicated selling. Most companies don’t have that, and while I could definitely help you build a business case for hiring a new professional services sales force, many of you won’t be able to do that because you don’t own the selling motion. Also, not every PSO values revenues growth equally. While this is a clear way to increase PS revenue growth, you must first determine whether or not that is valuable to your company.
Question #4: Is there a clear business case for investing in a PSA?
Having professional services automation (PSA) in place helps organize and automate the entire project management process from start to finish. It is becoming increasingly common for companies to implement a best-of-breed PSA system that is dedicated to project tracking, utilization tracking, time entry, and other metrics.
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There is a clear business case for investing in a PSA when you consider how much it will improve staff productivity, decrease project delays, and boost overall efficiency.
There’s absolutely no doubt that companies that make the investment in tools and technologies that will help them manage projects, understand skills availability, and watch resource utilization in real-time, their project delivery efficiency will be higher, which leads to better margins. So, in short, there is definitely a business case for implementing a PSA. At TSIA, we have virtually endless data to support this, far more than we could ever hope to cover in a single blog post. If you ever have any questions on how to make a business case for implementing a PSA, please feel free to contact either myself or John Ragsdale, the VP of services technology research here at TSIA, who has a wealth of knowledge about project management tools, technology, and best practices. We can absolutely help you.
If you would like to hear more about any of the above concepts, be sure to watch my on-demand webinar titled “The State of Professional Services: Major Trends in 2015”, where I also share my thoughts on what I predict 2015 will have in store for professional services.
About the Author
Bo Di Muccio is vice president of professional services research for TSIA. He is also the chairperson of the TSIA Professional Services Advisory Board. Previously he served as the senior director of research and advisory services for TPSA.Keep the conversation going with Bo. He may be reached at firstname.lastname@example.org.