We get a lot of enquiries from professional services and software companies stating the reason they are in the market for a PSA tool is the need to improve their resource management (sometimes referred to as capacity management). Often, this topic also includes revenue forecasting from the PS teams.
This seems to happen when a company’s professional services staff gets to around 30 people, at the point that it’s hard to keep it all in your head.
Now, we agree that understanding what everyone is doing is very important in maintaining a profitable professional services business. However, where we might challenge the thinking is the assumption that the answer to fixing the problem is implementing a PSA solution.
So, let’s break the problem down a little to look at the variables people are trying to manage:
- Let’s say you get a fixed-price job that you estimate at 50 days. The revenue will be whatever the order is worth (without change orders) but the resource profile needs to deal with the work that needs to be done. As the project progresses, the ability to hit that fixed price often diminishes and the profile extends BUT WITH NO EXTRA REVENUE. So, to keep the forecast accurate, the profiles need extending at a rate of zero revenue per day.
- Now you get a time and materials project for 50 days. This one is simple. You extend the profile to the end of the project right? But is it true T&M or is it actually an estimate that can only be exceeded with reference to the customer as most T&M engagements are? Now, you can consider that the customer will approve the work and so include the additional revenue, or extend the forecast as non-billable until you get a change order approved. The latter is the strictly correct way to do it, but depending on circumstance, may not be the most accurate and anyway, often those late change orders only get approved after the fact, more noise in the data…
- How about if you operate a rate-card model (rates established but no estimates agreed)? How do you model that in the forecast and capacity plan?
And those are just a few of the cases dealing with work in hand.
Now we also need to consider new work and the impact of that on the capacity plan. Your pipeline report is probably looking at % probabilities but you can’t get 50% of a proposal (well you can when the scope is cut, but that’s another problem entirely). So, you need to consider the impact of winning a whole job (providing the forecast profile exists on the quote and in meaningful). But what about start date? When will that work start based on the customer signing it off, or you deciding you have the capacity to start the work.
Lots of variables, but only one capacity plan and forecast.
Do not mistake how hard this problem is to get a meaningful answer. Not a right answer, that only happens in arrears, but a meaningful and mostly complete one would already be world-class.
The staff profile needs to:
- Take account of all the work the team are doing, not just the project work but all the demands on their time - tough
- Take account of agreed and expected changes, some of which will be related to orders, some not
- Take account of the likelihood (not the probability) of new work coming in and starting on the date expected
- Take account of skill sets and ability levels. Person A might do that work in 3 days, someone else who doesn’t do it often may take 5 days etc.
Most businesses that have many customer projects running in parallel simply do not operate forecasting processes that are timely and complete enough for meaningful capacity planning to arise naturally from the process. It generally needs to be updated as a specific review by the resource manager, and to be worthwhile, needs to take all these variables into account.
Plus, the system needs to support the concept of a combination of structured (i.e. order driven) data, re-planning exercises and unstructured (i.e. directly edited but over-ridable when orders arrive) data.
The true challenge with resource planning is one of corporate discipline and clarity of progress across the enterprise, not just in pockets of quality amid a sea of bad data. If you have that sorted, you can easily record and report on it. Obviously, having the PSA system help this process would be an advantage, but it is not a precursor or facilitator.
Harmony’s resource management capability is underway now. We have stepped back from the problem and provided the views and controls that will really help you deliver meaningful views. We believe it will be the best on the market when it arrives this year. However, even this solution will not eliminate bad or stale data (and this stuff gets stale very fast).
So, don’t expect it to be automatic, but you can expect it to help a lot.
Want to know more? Contact Harmony to see how we can help your business!
About the Author: Harmony Business Systems Ltd (HBS) is the company behind HarmonyPSA, the most complete cloud PSA software on the market. Developed with functionality to cater for even the most complex needs of MSPs, VARs, ISVs and Professional Services organisations, HarmonyPSA truly is the next generation of PSA systems. HBS is an independent company based in the UK. Follow HarmonyPSA on Twitter or LinkedIn