Professional Services Automation Software
The services space in this economy - Major research findings
Dave Hofferberth at SPI Research is a good friend and colleague. He covered the services marketplace forever at Aberdeen and is doing even cooler things at SPI Research.
Dave was super nice to shoot me over a copy of their latest mega-opus research report: 2010 Professional Services Maturity Model Benchmark. I’ve read prior year’s reports and noticed a lot of different material and conclusions in this year’s report.
I got Dave on the phone last week. We had a great conversation and I got a chance to hit him with these questions. As interviews go, this recap’s pretty good as there’s lots of content below:
“Dave, I just read your 2010 Professional Services Maturity Model Benchmark. It’s quite a comprehensive compendium of stats and facts re: service organizations. I noticed you’ve added sections on culture and other areas. What were some of the newest additions to your benchmark?”
We’ve added several interesting chapters on “What the Leaders Do” profiling the Top 15 best-of-the-best PS organizations; a chapter on “Going Global from the Get Go” showing the growing trend for PS organizations of all types and sizes to use a global workforce from inception and a chapter on “Service Transformation” showcasing our experience in helping service and project-oriented organizations build and execute business improvement initiatives. We’ve also augmented our coverage of software applications and developed detailed profit and loss statements by organization type and size.
“What were some of the bigger surprises you learned this time around?”
We were pleasantly surprised by the extremely high net profit margins leading firms were able to achieve despite lower revenue growth due to the recession. We were also surprised at the frugality, ie extremely low costs for facilities and management overhead posted by the leaders; many top-performing firms are operated “virtually” with almost no brick and mortar facilities and almost all members of the organization are billable. Another big surprise was that almost all the top performers focused intently on specific vertical markets and business process optimization. Biggest losers were broadly oriented horizontal organizations due to skill and price commoditization. Bill rates have been relatively stagnant for almost 10 years so PS organizations are demanding and getting more and more productivity from their employees every year, remote service delivery has been a big catalyst for higher productivity.
“I noticed you started the report with some observations regarding the economy. Can you elaborate on some of the short-term and long-term changes the economy will push onto service organizations?”
We follow the service economy very closely. Now, more than ever, professional services are a critical component to both long-term growth and profitability for both product and service organizations. For embedded PS organizations within product companies, the increase in services as a percentage of revenue has enabled them to weather the recession while becoming more intimate with their customers. The other pretty amazing statistic is that the broader professional service industry including legal, accounting, engineering and business services in addition to IT services produced over $1.2 trillion in revenue in the US alone. A mega-trend is that the global economy has shifted to become a services economy.
“You’ve got a maturity model in your research. How many service firms do you encounter that are really at the highest level of service excellence? Why aren’t there more?”
We built the model to allow only a small percentage of firms to operate at the highest levels. Level four and five firms account for 20% of the survey population. The difficulty in achieving level 4 and 5 performance is intentional to give organizations something to shoot for that is not impossible, but is definitely difficult to attain.
Given the tough economic conditions of 2009, the financial key performance indicators like revenue, margin and backlog actually went down in each of the five levels of our model. This is to be expected during difficult times, however, they will be raised again as overall performance improves. We have many clients who aspire to improve one maturity level annually per performance pillar. That goal is difficult, but attainable.
“There’s been a lot of consolidation lately in the PSA (professional services automation) software market. Is that a good or bad thing from your perspective?”
The PSA software market has been consolidated significantly over the past five years with acquisitions by Oracle, Microsoft, Compuware, Deltek and NetSuite. The PSA firms did not go out of business, but rather were acquired by larger solution providers who realized the importance of improving services and how PSA can do just that. Now, all of the largest players are under the umbrella of enterprise resource planning vendors, who look to integrate PSA capabilities with their financial and CRM solutions. While this could be seen as a bad thing if PS executives prefer to buy individual business solutions, rather than a comprehensive, integrated enterprise solution, overall the market continues to grow. Several new SaaS vendors have also entered the market. In general, consolidation has been a good thing because more money is being invested in enhancing PSA as part of a suite and capabilities to support a multi-lingual, global workforce are being added.
Thanks for the time Dave - If you haven’t seen one Dave’s reports and you’ve got either a captive or customer facing service organization, find a way to get one.
Severa Corporation, a leading provider of online professional services automation, has attracted media attention by winning several awards and generating over 1,800 new registrations with its new product Severa 3, designed to manage projects, sales and invoices. Severa has been mentioned in television current affairs programs as well as in print and online social media.Despite the global recession, Severa`s business is on the fast track, reaching revenue growth of 1,304 percent in the last four operating years. Its business achievements have been widely acknowledged by the Red Herring Global Award 2008 and by receiving Finland's Young Entrepreneur Award, presented to Severa's founding members.
Severa's first television profile appeared April 1st during a broadcast of a series called "The Day`s Work" on Finnish television channel MTV3. This television serial launched several media spinoffs nationwide and soon Severa started to appear in media on a regular basis. On May 12th, Severa appeared on channel four news Nelosen Uutiset that covered Severa's success in the challenging economic environment. This particular TV spot soared website traffic three fold to unprecedented levels resulting in high customer signups.
"Our TV appearance on Nelonen was an amazing success for us. As soon as the program aired, our website stats were off the charts. Most of the visitors were Finnish viewers who found us through search engines while still watching the show," said Zaki Usman, Marketing Director at Severa. "The high website activity combined with our free user license offer resulted in a substantial boost in customer signups for that day. This trend highlights how different mediums can be used together to solidify the Severa brand and message of a simplified business solution."
Within the last few months Severa has also starred in YLE Kaakkois-Suomen Uutiset, Kauppalehti, Etelä-Saimaa and Rakennuslehti as a leading high-tech company that is breaking new ground. The positive buzz around Severa is a result of the company's persistent work at simplifying business tools for over 7,500 users. It has elevated Severa to a position of leadership in the professional services automation (PSA) industry. Impressive revenue growth numbers combined with several prestigious awards and rapid international adoption of Severa 3 all support the claim.
About Severa
Severa Corporation is a leading provider of SaaS-based professional services automation designed to take the pain out of project management for small- to medium-sized businesses. Severa 3 is offered as an online application for verticals such as advertising agencies, IT consulting, law firms, engineering houses and architecture firms. Severa enables its customers to manage customers, projects, work time and billing more easily and efficiently with one system. Severa's transparency into project data helps communicate business objectives, optimize resource allocation and reduce revenue leakage. Severa has received the Red Herring Global 2008 Winner Award. For more information on Severa Corporation visit www.severa.com.
Press Contact:
Victor Cruz, Principal, MediaPR.net / vcruz(at)mediapr.net / Tel: +1 (401) 349-3369
Author Information
Marketing Severa
Severa Corp.
