The Fundamental Business Case for Professional Services Automation Investment: Cost Reduction

In a previous article, we discussed the many ways that investing in a professional services automation (PSA) platform can promote revenue growth. We mentioned in that article that cost reduction was a benefit as well – in fact, it’s an equally important element of the business case. As the business case for purchasing a PSA is prepared, it is essential to highlight the various ways in which a PSA can help the business reduce costs.

There is significant value to investing in a cloud-based PSA. The most obvious area of savings is operational costs, since there is minimal IT overhead associated with the system. There is no need to purchase or manage the infrastructure to support it or spend resources to support the upgrade path to remain on the current version. In this way, the PSA solution becomes a purely business tool, not an IT one.

Beyond that, though, making the argument for a PSA leveraging a cost reduction message means starting with an understanding of the current state. What are the costs now? What are the activities currently underway to minimize unnecessary costs? What is contributing to costs, and how is that information captured?

The answers to the above questions may not be readily available, so it may be helpful to consider these issues at a more granular level: Are projects profitable? Is estimating being performed correctly? Are resources being utilized efficiently? Does the organization have the right visibility and metrics?

It’s likely that no matter the answers, a PSA can help lower costs in many, if not all, of these areas. Let’s take a closer look at how an automation tool can help.

Project Cost Reduction

When project costs run over, it can decrease margins and even turn unprofitable. A PSA can help uncover and create opportunities for cost savings to minimize the probability of that happening.

Estimating Process

The tools and reporting available within a PSA make it easier to improve the estimation process. Templates, which are a standard feature of an advanced PSA, provide consistency in estimating projects, and they should be used as much as possible. They not only save time in project planning and creation, but also provide a consistent baseline that can be used for measurement and adjustments of project hours and days.

Combining templated project estimates with historical data can paint a clear and detailed picture of estimate accuracy, but a high-level view of estimated hours versus actuals may not provide enough detail to understand the source of estimate inaccuracy. If the hours for a certain discipline, such as integration, are consistently underestimated, but testing is consistently over-estimated, only a breakout of hours by role or group will reveal the problem. This problem is likely to reduce the margin for projects. Once the issue is uncovered, a change to the template will help set future estimates correctly.

Actual vs. Planned

Understanding challenges with time management while the project is underway will allow for adjustments to mitigate costly risks. Because a PSA provides real-time views into time management, it’s easier to see if a project’s burn rate is too high based on estimates.

Such visibility makes identifying risks with dates and milestones easier to identify. In a professional services organization, missing dates have a ripple effect not just on the project underway but also on all downstream projects. Real-time project visibility can provide clarity so that issues regarding how resources, or lack thereof, are impacting a project can be addressed more quickly.

Management and Administrative Activities

The more time and effort project managers and leaders spend on management and administrative tasks, the less time they spend on value-added tasks. A PSA empowers teams with self-service tools, reporting, and data that minimizes time spent on administrative tasks, and allows managers and leaders to see problems ahead of time.

A spreadsheet system, while administratively burdensome, is also a challenging system from which to gain useful insights, and it is therefore unlikely that a project manager will see an issue beforehand. With a PSA, the real-time visibility and reporting provide transparency and insights that are difficult to gain from a spreadsheet system. Resource, budget, and timing issues can be surfaced well ahead of their impacts and can be proactively addressed.

Automation of Core Processes

Administrative processes such as time management take away from active projects but are necessary. Configurable PSA workflows, such as timesheet approval, allow project managers to proactively review and approve all resource hours. This automation streamlines invoicing and reduces the chances of a customer dispute regarding inaccurate billings, which reduces the costs associated with re-evaluation, analysis, and dispute resolution.

Resource Management

Resource management tends to be spreadsheet driven in organizations that have not yet migrated to a PSA. It is challenging to find cost reduction opportunities when the data analyzed is stale, hasn’t been updated, or is outright inaccurate. But resource optimization can be an attractive area for reducing costs if visibility into real-time resource usage and management is readily available.

Scheduling

Effective scheduling of resources against projects is a cornerstone of successful professional services. Without accurate data on resource allocations and availability, it’s challenging to get resources onto the projects where they are needed and prevent unnecessary bench time.

The visibility that a PSA affords resource and project managers ensure that team members can meet billable expectations and correct hiring decisions are made on a timely basis. Without that visibility, resources may not get scheduled for a project on time, and resources will not know where they are needed. With real-time resource data, managers can schedule more proactively and better anticipate where resources can and should be utilized.

Skill Tracking and Training

Putting the right resource, at the right level, with the right expertise, on the right project is as important as scheduling. Skill profiles can be customized within a PSA to show the attributes and experience most important in selecting a resource for a project, making optimization of project teams easier.

This richness in skill tracking allows for informed trade-offs when needed. For example, a project may have called for a junior developer for three weeks, but only a senior developer may be available. While the senior developer is a more expensive resource, he or she will be able to complete the project tasks more quickly, thereby performing an effective trade-off.

In the opposite case, where a less experienced developer is used instead of a more senior resource could result in rework and an unhappy client. Allocating the right resource with the assistance of a PSA protects delivery quality, customer satisfaction, and project margin.

Utilization

Even a small increase in utilization can make an immediate and significant impact on profitability. To be able to optimize this metric, however, accurate, real-time visibility into utilization and at multiple levels is necessary, which a PSA can provide.

Visibility into the utilization requirements to meet the business goals allows leaders to see the challenges and analyze what can be done at the organization, department, and individual level. The PSA improves detailed visibility in areas including available capacity, underutilization, and overscheduling. This minimizes bench time and burn out, both of which can result in unhappy staff and undesirable turn over.

Utilization data from the PSA will provide more accurate and precise predictions regarding hiring needs and resource acquisition, which offers additional benefits resulting in cost savings. Over hiring or over scheduling to compensate is a common reaction to utilizations challenges, both of which will cost money in the long run.

A PSA, like OpenAir, helps answer both profitability questions. Will a system help bring in more revenue?  Will it save money? If your organization would like a better understanding of how implementing a PSA can help your bottom line, Top Step would be happy to discuss this with you.