A few weeks ago, amid a crowd of professional services executives, practitioners and leaders at a Silicon Valley event, I was reminded of how dramatically the professional services industry has changed in recent years.
Once upon a time, professional services was based on simplistic business models of sell, sign a contract and deliver services. Now the model is exponentially more complex and challenging. What I saw and heard from attendees at the event, “Chart Your Course to Professional Services Excellence,” made that abundantly clear.
Hosted by NetSuite, the event brought together leaders to explore how professional services firms and embedded PS teams can meet new challenges and capitalize on opportunities. Leading organizations have adapted well but laggards have not, as reflected in data shared by Jeanne Urich, managing director of Service Performance Insight (SPI), the leading professional services research consultancy.
As Jeanne noted, a 2016 SPI survey of 549 PS firms revealed that the top 20 organizations produce on average 23 percent net profit — compared to just 2 percent net profit for the bottom 300. The profitability gap is the largest in the nine years that SPI has run its annual survey.
SPI’s survey also found that services organizations using professional services automation (PSA) software improve their efficiency and visibility, critical to driving profitability. That’s the case for two companies that shared experiences at the event, Cloudera, a leading provider of Hadoop-based big data management and analytics platform, and Imperva, a top data security solutions vendor.
Each using the NetSuite OpenAir PSA solution, Cloudera and Imperva both shared how they were better able to manage projects and resources, streamline bid-to-bill cycles and monitor per-project financials in real time. Equally important, they have new insights and agility to navigate what I see as five trends that present both challenge and opportunity to professional services:
Hybrid business models. Especially for PS teams embedded within larger companies, products are increasingly bundled with supporting services, including both hard goods, such as equipment, but also software implementation and maintenance services. Hybrid models also include non-conventional extended service offerings on top of services, such as business process modeling or branding a client’s new software deployment to help drive ownership and adoption.
Globalization. PS organizations are enhancing speed and cost-efficiency by outsourcing to capable resources in highly educated and experienced centers in Europe, Asia and elsewhere, or “re-sourcing” work by engaging a local, specialized third party to deliver services as part of the total integrated delivery to the customer.
Multiple subsidiaries. Creating semi-autonomous divisions or subsidiaries by functions or geographies can accelerate growth and establish specialization. By centralizing resources and best practices for multiple units, either internally or through partners, PS firms gain efficiency and economies of scale earlier in their lifecycle.
Services complexity. Successful PS organizations can flexibly accommodate complex, one-off billing models that some clients demand — extremely difficult with disconnected financial, project management and CRM applications. They also have flexibility to handle complexity in resource allocations, service level agreements (SLA), regulatory requirements and more.
Multiple revenue streams. Firms are diversifying revenue, but they need automation to handle income from subscription licenses, implementation services, enhanced support packages, education and training, business processing outsourcing, creative branding and more.
These changes are still unfolding, raising the competitive stakes in professional services. With continued disruption likely, PS organizations with the agility to adapt, innovate and maximize profitability will further widen the gap between top performers and the also-rans.
To learn how NetSuite PSA can help you achieve these goals and chart your course to services excellence, contact us for a complimentary services value assessment.