Services -> KPO
By: Dana Gardner, Principal Analyst, Interarbor Solutions
Published: 14th May 2010
Copyright Interarbor Solutions © 2010
Increasingly, sellers of IT are finding it harder to win large
software and hardware capital purchases contracts, which
traditionally followed three- to seven-year obsolescence and
refresh cycles. The shifts in technology and business models
accelerated by the
recession are forcing these vendors in particular to adopt
more of a professional
services revenue model.
Buyers of technology, on the other hand, are moving to IT shared services and software-as-a-service (SaaS) models to get off of the capital outlays roller coaster. They want smoother and more predictable operating and charging models, beginning with long-term professional services and outsourcing engagements.
Both the buyer and seller of services therefore need to focus on the implementation and integration of solutions, placing a complex burden on the services delivery personnel themselves, as well as those who managing the services providers.
We’re here to find out some new, best ways of managing and automating these intellectual resources that support the professional services lifecycle. We’ll see how recent research shows that more of a just-in-time (JIT) methodology is required to keep the skills in balance with myriad project requirements and obligations.
To learn more about resource utilization and management in the global services economy, we're joined by Lori Ellsworth, Vice President of Changepoint Solutions at Compuware, the sponsor of this podcast, and by Mark Sloan, Chief Operating Officer of RTM Consulting. The discussion is moderated by BriefingsDirect's Dana Gardner, principal analyst at Interarbor Solutions.
Here are some excerpts:
Ellsworth: The change and the focus on professional services is moving from something that was nice to have, to something that is necessary to have to be successful.
Software companies are a great example. Historically, companies in that sector may have done mostly product business and less service. Services are now necessary to deliver success, and the services business is a very healthy part of the software business and is contributing significantly to the bottom-line.
Now, organizations have to understand how to get a handle on the people they have working for them, how best utilize them, and how to make sure that your employees, those assets, are challenged and happy, but that you are delivering that service to provide value to your customers.
There needs to be more discipline, more information, and a better process for decision-making and forward planning, so that the organization can scale and scale in a financially successful way.
So, the stakes are higher, in terms of the discipline and the approach that we need to take to manage that professional services part of the business.
Sloan: At RTM Consulting, one of our core areas of focus is in this area of resource management. How can you get the right person in the right place at the right time and drive up utilization, but at the same time, make sure that you're delivering value to your end customers and leaving them satisfied and coming back for more?
When a software company shows up with its professional services arm, the client is expecting that each and every one of the people who show up is an expert in the software, the technology, and the implementation process. The days of people learning on the job and coming up to speed are long gone.
The challenge today is for companies to get visibility into the type of work that’s coming down the pike, so that they can proactively train their internal resources and be prepared for that work, so that when they do show up, they are the experts.
We’ve actually taken the principles of JIT manufacturing and directed them to the professional services organization [via in new service definitions of JIT.]
Just as 30 years ago, any manufacturing company had big inventories of supplies, finished products, sitting in their warehouse. Ten or 15 years ago, the big services organizations were able to have excess resources on the bench, in the office, waiting for that next project to arrive.
What we’ve done is taken those same principles -- forecasting what the future scenarios look like, what the demands look like, and then translating that back into how many resources you are going to need, the types of resources, the skills those resources need to have.
You can, at that right moment, bring on a new employee, go to a third-party contractor to fulfill that demand, or give yourself enough advanced notice to cross-train your existing resources on new technologies, new products, so that they can work across your portfolio and not just focus on one particular area.
Getting to the solution
Ellsworth: There are four critical success factors, but also the building-block approach. In other words, you need to start with the fundamental. You need to understand your people and their skills and get that view of your business. Then, you can start to add levels of maturity, look at forecasting, look at different models for resource allocation, and bring in project management.
As organizations start to put the buildings blocks in place, and adopt the disciplines and build the processes that work in their business, [they can have trouble] scaling that.
You can make that work within a small team or across a couple of small teams, but ... you need visibility ... to scale that to your entire services organization, including management. [But] you can't scale and reinforce that discipline without automation.
The two really have to go together. One won’t be successful without the other in a large professional services organization. Automation brings the scale factor.
The ability to measure and monitoring is something that Mark also highlights as critical success factors. Again, you’ve got a large group of people with a lot of activity going on. There's lots of data, but you have to roll that up to the management level to make it valuable to help drive decisions in the business.
... Our focus has been on driving that view as a professional services organization, but importantly driving that view inside the context of the broader company.
It starts with those building blocks around who are your resources, what are their capabilities, and where are they being utilized. It brings you to the next level of maturity in terms of being able to look at forecasts and do some demand and capacity planning.
And then it goes even further from a resource perspective to that professional development side. Let's look at the gaps in the next six to nine months. Where can we identify resources and put them on a development plan to fill those gaps?
We're managing the day-to-day business of a professional services organization and going beyond that to deal with project management, engagement management, and right through to billing for a professional services organization and for technology companies that also have a strong product side of a business.
The paybacks can be, and are, significant. First and foremost, is really speed to revenue and cash flow.
The Changepoint solution has been active and working with customers in their professional services organization for many years, going back to the late 1990’s. We also deliver a project portfolio management capability to allow them to manage products and manage delivery of those product applications.
Sloan: The paybacks can be, and are, significant. First and foremost, is really speed to revenue and cash flow. Lori mentioned that doing this in a large services organization is critical and an enabling technology is required to make that happen.
I’d argue the same for small professional services organizations. Having the information that tools like Changepoint can put at your fingertips, you can quickly identify people in your organization that have the right skills, that off the top of your head you might not think of, and staff projects quickly with the appropriate resources, ultimately enabling you to get that revenue.
Secondly, you start to see a significant lift in overall billable utilization. This is for the professional services organization. Again, by getting better visibility into the skills that different resources have, you realize you have many more people in the organization that can do work than you think of.
For more information on resource utilization, read RTM's whitepaper "The ROI of Resource Utilization -- Measuring and Capturing the Real Business Value of Your People."Other research points to the fact that companies who do this development of staff and get projects started on time are significantly more likely to finish their projects on budget and on time and drive significantly positive customer satisfaction.
Learn more about Compuware Changepoint.
Companies that aren’t able to do this -- take an extra five, 10, or 15 days to fill some of the slots on a project -- tend to go over-budget, don’t get it done on time, and, as a result, have poor customer satisfaction. If you think about it, it's back to that mantra, "Do it right the first time." This process helps you do that.
Ellsworth: As you're adding discipline and increasing maturity, there is participation from the practitioner, if you can position the value to them in terms of increased opportunity or an ability for them to better manage their schedule and not be burnt out. They have access to different opportunities. It's very valuable and can help them actively participate in moving the business forward and not kind of fight against it.
A broader pool of resources comes there to help you respond to customers which just increases the need to understand who those resources are and what they can bring to the table to support these services.
Customers of mine, in Europe for example, are quoting that on a year-over-year basis, they are able to reduce non-productive time -- and therefore the cost of that non-productive time -- by 16 percent.
Other customers will articulate the value of this entire solution in terms of revenue increase, the focus of getting control over their resources, who they have and how they can most effectively deploy them. Another customer of mine in Europe talks about a 30 percent increase in revenue, linked directly to implementing some of these practices in getting that control over their resources.
Sloan: The same lessons apply to shared services organizations, such as internal, large IT departments managing multiple projects per year to deploy technology.
They can leverage the technology that Changepoint offers to keep track of the people, where they are deployed, what skills they have, what new projects are coming in, and achieve a similar increase in productive utilization of those resources. But to your point, in terms of creative organizations, this would apply to any organization that is focused on moving people with particular skill sets to a unique project.
When we architect a solution for clients, it’s a unique solution taking into account the various constraints and the environment of that client.
That includes engineering services organizations, creative agencies that are moving talent from one project to the next -- anyone who relies on definite skills and knowledge that aren’t just easily interchangeable. This helps forecast where you can get the biggest bang for the buck with those people.
In terms of getting started, when we typically work with clients, we come in and do a quick assess and architect phase where we’ll take a look at how resource management is being done today, compare that to the best practices that we’ve defined for JIT Resourcing, and identify areas where you are strong and areas where there is an opportunity for change and improvement. When we architect a solution for clients, it’s a unique solution taking into account the various constraints and the environment of that client.
JIT Resourcing is a defined approach. We have recognized that there are unique aspects to every business, and can tailor the solution to fit there.
By deploying these processes now, you can start to learn the continuous improvement that’s needed, but be enabled as more and more of your clients go to SaaS, but you’ve got to have to deploy people with the moment’s notice.
You're going to get much better at predicting and forecasting what your future needs are, enabling you to align your resources and capabilities accordingly. You want to achieve the benefits we talked about -- speed to revenue, speed to cash-flow, and zero idle resources.
For more information on resource utilization, read RTM's whitepaper "The
ROI of Resource Utilization -- Measuring and Capturing the Real
Business Value of Your People."
Learn more about Compuware Changepoint.
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