PSA Boosts the Bottom Line for Professional Services Firms, Research Finds

Professional services organizations seeking to boost profits can look to one almost surefire strategy, according to recent research – software.

Service Performance Insight, a global research and consulting company for professional services organizations found that professional services automation (PSA) software provides significant return on investment (ROI) in the form of increased revenues, higher gross margins, and better deal closing rates.

The report, the 2013 Professional Services Sales and Marketing Maturity™ Benchmark, surveyed 187 professional services organizations with an average of $69 million in professional services revenues. Those that had implemented PSA had higher levels of performance in sales, marketing, project management and workforce optimization. For example, firms leveraging PSA had:

• 23% more potential deals in the pipeline than they have in committed deals expected to close in the current quarter, meaning the sales staff is consistently increasing its sales pipeline for future quarters.
• 19% greater gross margin from non-packaged services (custom services projects, not marketed as standard services packages to a wider audience).
• 15% more sales people who achieved their annual quotas.

These sorts of advantages extend to project portfolio management (PPM) as well, a common component of PSA solutions that provides functions such as management of project budgets and deadlines, tracking costs, estimating project profitability, and recording project issues and resolutions. Use of PPM increased revenues from packaged services by 40% and PPM users also had a 31% larger sales pipeline. Companies using PPM had a 218% average pipeline to bookings ratio, compared to firms with no PPM, which had an average 167% pipeline to bookings ratio.

Likewise, the integration of PSA with CRM systems―such as through integrated platform products like NetSuite's OneWorld CRM and OpenAir PSA―boosted performance, according to the research. PSA combined with CRM enhanced their analysis of the services they sold and the resources required, as well as improving time management and the effectiveness of their recruiting efforts to meet future demand.

Overall, the biggest benefit of a PSA system is in improving the billable utilization rate of services employees. Given that employees are both the biggest expense and the primary revenue generator of services firms, achieving maximum employee productivity is likely to have the biggest ROI benefit for a professional services organization.