Results of SPI Research’s 2014 Professional Services Maturity Benchmark™ Reveals Capacity Concerns: Find a Cure in Information Infrastructure
With near record growth rates, professional services (PS) executives continue their emphasis on increasing both revenue and profit. In SPI Research’s recent benchmark (the 2014 Professional Services Maturity Benchmark is available for free here) we have seen virtually every financial key performance indicator (KPI) near or at its highest level over the last five years.
|Key Performance Indicator (KPI)||2009 – 2012
|Annual revenue per billable consultant (k)||$198||$205|
|Annual revenue per employee (k)||$167||$180|
|Average revenue per project (k)||$193||$224|
|Project margin for fixed price projects||34.2%||34.5%|
|Project margin for time & materials projects||34.8%||36.5%|
|Quarterly revenue target in backlog||43.9%||47.3%|
|Percent of annual revenue target achieved||90.5%||91.1%|
|Percent of annual margin target achieved||86.6%||88.8%|
Can this level of profitability continue? There is no doubt that demand for professional services is nearing its all-time high, so the primary dilemma for PS executives is if they can meet client demand, and how they can use every tool at their disposal to manage growth, service delivery, and revenue effectively.
Over the past seven years of conducting the annual PS Maturity Benchmark SPI Research has learned that larger PSOs use a number of different business applications to run their business. Needless to say:
- All use Enterprise Resource Planning (ERP) for financial management
- Most (more than 90%) use Client Relationship Management (CRM) systems for managing clients and sales activities
- And now most (more than 70%) of these larger PSOs also use Service Resource Planning (SRP) solutions to manage resources, project management, and other project related costs
What we’ve learned from this technology inventory is that in professional services, the ability to efficiently and effectively execute services goes a long way toward achieving growth and margin goals.
The Correlation Between SRP Tools and Improved Capacity-Related KPIs
In 2014 we are seeing the strongest correlation between organizations using SRP technologies and overall success in resource management, capacity planning, billable utilization, and other key performance indicators. As the table shows, organizations that utilize SRP grow faster, deliver services on time more often with less overrun, have a higher percentage of their workforce utilized and then ultimately drive higher revenue and margin metrics.
|Key Performance Indicator (KPI)||Use SRP||Do not
|Year-over-year change in PS revenue||10.5%||8.8%||19%|
|Year-over-year change in PS headcount||8.4%||4.8%||73%|
|Concurrent projects managed by project mgr.||5.73||4.76||20%|
|Projects delivered on-time||78.8%||75.0%||5%|
|Average project overrun||10.3%||15.2%||32%|
|Annual revenue per billable consultant (k)||$232||$190||22%|
|Annual revenue per employee (k)||$192||$164||17%|
This success can be attributed to greater visibility provided by SRP. SRP gives PS leaders a better view of where they could have resource deficiencies, project delivery bottlenecks, or cost or time overruns. Obviously, with this visibility in real time, PS leaders can make timely decisions to reduce or eliminate service delivery problems. SRP integrated with CRM also enables PS leaders to understand the skills that are required going forward, giving the organization time to either recruit new employees, train current staff, or outsource specific functions.
SPI benchmark indicates that 2014 will be an exciting year in the professional services market. The only negative issue facing it is the need for qualified professionals to sell and deliver services. Every PS executive should have a thorough understanding of their current business as well as where they expect it to go over the next few years. Ensuring they have the right resources on board will make this growth much easier and profitable.
To learn more, there are a number of great resources available in response of the latest study:
- Service Performance Insight (SPI) presents the 7th Annual PS Maturity Benchmark Access your free copy of the report, courtesy the sponsor, Planview.
- The benchmark findings webcast is now available on-demand. Watch and listen as I isolate key takeaways from the recent research.
- As a preview to the formal benchmark research, I worked with Planview to develop this Professional Services “Tackling the Talent Cliff” Infographic on the concerns and solutions presented in the research.