Posted by Tony Kontzer, Guest Blogger
For anyone who doubts the impact that cloud-based services resource planning (SRP) products can have on a professional services organization, Jeanne Urich, managing director of Service Performance Insight Research, offered some compelling evidence during her talk earlier this month at NetSuite's SuiteWorld conference in San Jose, Calif.
In particular, Urich cited a top UK consulting firm that, thanks to running NetSuite SRP, was able to grow from 300 consultants to about 700 without adding a single employee to its 65-person operations team.
Getting such elasticity from technology has become critical for a $4 trillion industry that, even though it's the fastest growing part of the U.S. economy, can no longer simply raise rates to boost profit margins.
"Despite the enormous demand in the consulting world, year on year, we're not seeing consulting bill rates go up," said Urich, who added that SPI’s data shows that consulting rates have barely changed since 2000 (certainly something journalists can relate to).
SPI is the creator and author of the Professional Services Maturity Benchmark, an annual study that takes stock of what's working in the professional services industry, thus allowing SPI to provide concrete advice to its clients that's based on hard data. What the benchmark has clearly demonstrated over its eight years is that, in order to sustain a recipe for success, professional services firms have to constantly be evaluating and tweaking everything from billing rates and what percentage of consultants' hours are billable (known as "billable utilization") to the percentage of billable employees and the revenue per billable consultant.
"There are an amazing amount of levers you can pull in the services industry," Urich said.
Going the extra mile to achieve the right mix is critical in a highly competitive market that rewards the firms that do it best, and those that do are taking full advantage of cloud-based systems like NetSuite's.
Specifically, professional services firms are trying to tap technology to work smarter. SPI's benchmark indicates that while the revenue per billable consultant has risen minimally over the past five years, from $186,000 in 2010 to $197,000 last year, consultants saw their working hours increase by nearly 100 hours per year over the same period.
As it turns out, one of the surest ways professional services firms can improve these bottom line indicators is to effectively integrate their professional services automation and ERP systems via an SRP implementation. According to SPI's data, firms that do this bring in 9 percent more revenue per consultant, achieve billable utilization rates that are 3 percent higher, and post net income that's 14 percent higher than firms that lack this integration.
Such findings should send a clear message to professional services firms about the value of making strategic IT investments, especially for those that are lagging behind.
"Every single component of business is being out-tasked to experts," said Urich. "But you've always got to be sharpening your own tool kit."