Can PSA applications really tidy up the management of business
processes for PSOs or will they follow the trend of CRM?
To date, professional services automation (PSA) has been confined
to IT services organisations, management consultants and a small
number of early adopters in the legal profession. The vast majority
of lawyers, engineers, architects and tax advisors still rely on
Microsoft Word, filing cabinets and calculators. But a new breed of
PSA vendor is emerging and some established players are rebranding
themselves to attack the market for the automation of professional
services organisations (PSOs). But is there a cohesive market to
attack - and who is best positioned to grab the lion's share?
What is PSA?
A PSO is a catch-all term for any
service-based organisation. IT service providers, management
consultants, engineers, architects, lawyers, accountants and tax
advisors are all examples of PSOs - there is no homogeneous PSO
market. Each of the business areas is different. They even use
different terminology (a lawyer works on 'cases', an accountant
with 'files'). However, a PSO's business typically comprises a
large number of deadline, pattern or project-based activities with
myriad associated communications, not only internally, but also
with sub-contractors and clients.
Traditionally, service organisations have relied on manual
approaches and fragmented office applications to manage their
business processes. Many still do so today. They fill in timesheets
and expense claim forms by hand and use spreadsheets to calculate
time and expenses for each project. They send bills out by fax, or
even by mail.
"Unfortunately, traditional paper-based processes are costly and
time-consuming," comments Henk Nieuwenhuis, director of enterprise
service automation at PeopleSoft. "For example, it may take days to
collect information from every part of the company to summarise the
current status of a project. With increasing competition squeezing
service companies' profit margins, there is an urgent need to make
savings by automating processes and eliminating paper as much as
possible."
PSA applications attempt to deliver business benefits to a PSO by
automating the core business processes they perform, including some
or all of the following:
* Business development - the activities involved in acquiring
business, such as customer information, sales activities, proposals
and contracts;
* Resource management - processes associated with staffing
planning, allocation and assessment;
* Engagement management - processes associated with client
communications and project management;
* Practice management - processes that provide strategic insight on
practice operations and planning;
* Practice development - utilising existing work and new
innovations to convert project accomplishments into new
products;
* Time and expense management - processes to expedite invoicing and
billing to the client.
Skills in demand
In addition to some common business
processes, PSOs share a common problem. The worldwide skills
shortage is having a marked effect in the sectors leading the
charge to install PSA systems, with the IT consulting/services
sector already experiencing numerous mergers and acquisitions as
the skills shortage constricts organic growth. Other market sectors
are close behind, with skills shortages becoming a problem for
senior management in fields as diverse as architecture, the
National Health Service and other governmental sectors.
"The emergence of a global skills shortage means the most valuable
employees - those with in-demand skills - are driving the agenda
and are increasingly expressing a range of issues by voting with
their feet," comments Steven Armstrong, marketing director with PSA
vendor Memba. "Issues such as the corporate culture and working
environment, increasing resistance to excessive/difficult travel,
the desire for a better work/life balance and spiralling salaries
are placing increased pressure on margins. Organisations are also
finding the cost of higher salaries and other benefits cannot
necessarily be passed on to clients. The only answer, albeit a
harder proposition than just paying more and charging clients more,
is to become more efficient in the service supply chain."
The PSA market potential is $4.8bn (£3.2bn) and is set to grow at
an annual rate of 75 per cent over the next four years, according
to the latest Aberdeen Group report, though much of that is
currently attributable to IT services companies and management
consultancies. Such companies are typically highly IT aware in
marked contrast to the far more conservative organisations that
make up the bulk of PSOs.
Chequered history
The automation of core business
processes has a long and chequered past. The last mass migration to
an application which automated business processes occurred when
large corporates implemented enterprise resource planning (ERP)
systems. There were mixed results, with many claiming the systems
were overly complex and expensive to deploy and maintain. Companies
targeted by ERP vendors were a fairly homogeneous group with
similar requirements from their manufacturing and supply chain
systems. In marked contrast, PSOs differ widely, as do their views
of the benefits of automation.
"There is increasing use of IT systems by professionals such as
lawyers, accountants and others," comments Alistair Maughan, a
partner with technology lawyers Shaw Pittman. "For example, a
number of firms offer a computerised debt collection service, or
conveyancing services which are heavily reliant on IT packages and,
similarly, standard will-writing packages. Some volume litigation
services are also heavily reliant on IT.
Maughan claims IT is "ideal for dealing with the 'drudgery' -
filling in forms and so on". He says in many cases it allows work
to be done by unqualified staff, thereby increasing turnover and
volume. But it will not remove the real value of lawyers,
accountants and other professionals, which is in providing 'added
value' to clients, he adds.
"Lawyers like to feel they are in the business of 'selling
brain-power', thinking laterally around problems and coming up with
solutions to client-specific, non-standard problems. That is where
the big law firms make most of their money. Standard IT packages
may well be a threat to the smaller, high street end of the market,
but they will not make a significant impact on the high-value end
of the market," says Maughan.
He states that law firms such as Shaw Pittman make significant use
of technology and it makes them more efficient. "Examples include
voice-recognition technology, document management systems and
transaction 'deal rooms', where we can use an extranet to store all
the documents on a deal and make them available on a
password-protected basis for clients. All these are standard parts
of our operation and although not all firms use them, pretty soon
most will begin to do so."
Defining the market
The market for PSA systems is a
broad one. But according to Jacques-Louis Chereau, CEO at Memba, it
can be segmented. Chereau contends there is a fundamental
difference between project-based PSOs and what he terms 'case' or
'pattern'-based PSOs. "A project-based business can be addressed
using tools such as Microsoft Project combined with billing and
time-keeping. The deployment of a major IT system for a client is a
good example of a project-based business process," he comments.
"Pattern or case-based processes are typically small and the
mechanisms are common knowledge, at least to those experienced in
the company. Contract management in a corporate legal department is
a good example. The work is high-volume and deadline-based. Here
the PSA system takes over to ensure that even new people know how
it works. The client can have access to the system and can monitor
and track. For example, the PSA system frees up a lawyer from
answering follow-up questions, ultimately creating even more
billable hours."
The market for PSA products is beginning to expand beyond IT
services firms and early adopters into other verticals, making it
an increasingly attractive target for companies such as Peoplesoft
and Oracle. Many ERP providers are hurrying to put their PSA
offerings in place. A number of traditional ERP providers, such as
SAP, JD Edwards and Lawson, have seen the need to have PSA software
as part of their offering.
Consulting organisations with capabilities in IT consulting and
best practice have also seen that PSA vendors are receiving
substantial revenue streams from activities and value-added
services associated with PSA, including strategic planning,
business process re-engineering, change management, systems
integration, training and business process outsourcing. Revenue
streams generated by these activities are rising in line with the
PSA market, in contrast with many other areas of IT spending that
remain either flat or in decline.
Will there be a pay day for PSA?
Not everyone is
convinced of a rosy future for PSA vendors. "The PSA hype is
everywhere. And like customer relationship management (CRM) before
it, the term has become almost meaningless," comments Trevor Cole,
business development director for Eclipse Computing. "It can cover
anything from a simple project management tool right up to a
complete services management system. Just as the CRM acronym was
picked up by every opportunist supplier trying to sell contact
management software, so it is with PSA. Suddenly, every piece of
software for time recording and billing or project management is an
integrated PSA system," he argues.
"The big boys in the market, which until recently considered
themselves ERP vendors, now display the PSA label. Not
surprisingly, they are strong when it comes to human resources and
project accounting, but their offerings lack the appropriate
planning tools that so many customers need," Cole adds.
He contends that the scale of the potential opportunity is measured
by Microsoft's entry into the fray. The company has chosen to offer
its Project application in partnership with a former time recording
and billing software supplier. However, Cole believes the current
crop of PSA systems is falling way short of the mark and failing to
deliver the functionality and integration that is required to
improve business productivity levels within a service-based
organisation. "Of course, because there are so many different types
of service organisation in the market, it is ludicrous to believe a
single product can meet everybody's needs. For example, companies
in the property sector will need effective property appraisal
systems. In the construction industry, on the other hand, most
important are high-level project planning tools which can manage
complex, nested projects. The components will be different for
every business - something too many of the companies hyping PSA
products fail to acknowledge."
There are as many views on the future of PSA as there are wannabe
PSA market leaders. To date, no one has been able to successfully
segment, target and dominate the market. And yet changes are
coming. "Professional services are often criticised for billing out
by time and not presenting, sometimes to their own discredit,
justification for the 'invisible work' they put in," comments Len
Palmer, managing director of SharpOWL. "Relaxation of the rules
governing audit in accounting and moves to 'no win, no fee' in the
law profession reflect an overall change to present open and
visible reporting of work done in the professional service sector
as a whole. This can only be by linking together organisations and
their clients on the one system.
"After winning business, professional service companies need to
start thinking about retaining those customers by working together
with them," he continues. "Papers go missing and information is
never conveyed to the client, cutting people out of the loop. In
addition, traditional invoices and generalised billing categories
fail to show what skills, time and expense have gone into a
project. PSA software gives a client a single view of all work by
providing a comprehensive invoice over the Web. This furthers the
relationship by enabling the customer to monitor activity and make
comment."
The trick, for the canny vendor, is to create sufficient value and
functionality in their PSA application that it can be applied to
automating the core business processes of any PSO. The technology
must move from being a vertical market offering to a broad
horizontal approach. At the same time, it has to be achieved
without the application turning into a leviathan ERP-style system.
According to Memba's Chereau, the company's stated aim is to become
'the Sage of PSA'. It won't be an easy journey, especially given
that vendors such as Microsoft and Oracle are showing a marked
interest in automating professional service provision.
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