How to be a sought after Professional Services firm
Professional Service Organizations are businesses which provide professional services/consulting to their clients. These are infrequent, technical, or unique functions performed by independent contractors or by consultants whose occupation is the rendering of such services. The three largest industry segments are IT services, legal services, and architectural and engineering services, each of which accounts for about 20% of revenue. Consulting, accounting services, and scientific research each generate about 10% of revenue. Other segments include advertising and specialized design services.
General characteristics of the PS market are:
- The sector is characterized by a high knowledge intensity, a professionalized workforce, and low capital intensity, with the firms’ highest priority being billable hours, keeping its workforce productive, and managing the skills/resources to effectively manage the pipeline of projects.
- As much as 80%-90% of professional service costs are people related. PSOs can ill afford resource shortfalls, or high fee earners spending too much time on the bench to be able maximize billable hours per resource. Also, their workforce is mostly working remotely at client locations.
- PSOs are under extreme pressure to monitor and maintain their service margins. While product-based companies have the benefit of economies of scale to grow, for PSOs, growing billable hours means hiring more expensive consultants to perform the work.
- The profitability of individual firms depends on having a regular flow of projects. Earning a new client is more difficult than getting repeat business from an existing one, so most PSOs would prefer to have long term relationships with repeat business from customers.
In a recent blog post by Service Performance Insight on steps to become a professional service organization that is trusted by customers, qualities that consumers of professional services look for when deciding on one for their company are highlighted.
These are shown in the figure below:
This being the case, professional services organizations need to manage their clients, projects, and practices well. Cloud-based professional services management software can help them get to the top of their business chain by providing these capabilities.
- Ability to track the efforts of consultants without errors so that there is no lost time and no revenue leakage. Mobile apps to deal with offsite resources. Overall usability makes adoption easy across the workforce.
- Real-time status of their projects so that they can keep themselves and their client up to date on the time of completion. This makes them a trusted partner to their clients, guaranteeing them of repeat business.
- Quick view into the clients they are working for and status of the projects and billing information to manage the clients in a much more efficient way.
- Visibility into practice metrics so that they can decide which practices are more profitable and which need better consultants and training.
- Complete understanding into each of their consultants so that they are utilized in an optimum way, neither losing out on revenue opportunities nor burning their resources out.
- Real-time analytics and advanced reporting provide up to date information.
- Organizations get better at project bids by looking at metrics and trends based on the historical projects executed, and are in a much better position to provide timelines and pricing, and manage resource needs.
- Subscription based model for the software helps PS firms control the costs better while maintenance, security, and upgrades are guaranteed by the cloud vendor, thereby allowing them to concentrate on their core business.