What is Professional Services Automation Software?
Picture this. You’re a small business owner running a digital advertising and promotion agency with 8 employees.
After a year of trying to make ends meet during the pandemic, the situation is — to say the least — strained.
Everyone is working hard and trying their best to keep the remaining clients happy, but you can’t rid yourself of that nagging suspicion that the effort doesn’t match what you read on the bottom line. Not to mention that the bottom line isn’t updated as frequently as it should be.
The staff has already been trimmed down to the bare essentials, and the IT solutions (Excel counts as an IT solution 😎) supporting your operations are still dimensioned for a bygone era when the firm consisted of you and your partner alone.
Since you can’t afford to hire a consultant, you find yourself spending more and more time managing the solutions.
To make matters even worse, your accountant called and said that they are swapping out their old software for a more up-to-date solution.
And, “by the way,” that they will no longer support the file format you have been using to export your invoices into their system.
After asking around, you’re presented with a quote with five figures. Despite the first digit being a one, it’s still 10x more expensive than you expected.
What would be your next move?
Enter: Professional Services Automation
My recommendation would be to retire the old systems and consider a PSA solution instead.
Professional Services Automation (PSA) software is designed to make life easier for specialists in project-and-service-oriented businesses, such as consultants, architects, accountants, lawyers, and — low and behold — agencies.
While a complete revamp of a company’s IT support might seem like a daunting and expensive task, it can actually be the exact opposite.
PSAs are all-in-one platforms that serve as the central hub for your entire business, improving operational effectiveness, employee value, and performance analysis.
Many PSAs also come with prebuilt integrations for established vendors in a lot of different sectors, like accounting. Others have their own built-in accounting module that might be sufficient for your needs.
From minimum viable operational support solutions to sustainability and scalability
Many professional services providers start out with a small set of applications and tools to run their operations. They add to the mix as they grow, typically ending up with a plethora of point solutions spread across various vendors.
In the early stages, this is often a perfectly viable solution — it’s cheap and gets the job done, allowing them to focus on their core business.
But at some point, many firms typically find themselves in a situation like the one I described above: where they spend more time managing their solutions than growing their business.
Sounds familiar? And while hiring someone to develop custom integrations between your applications could be a potential remedy, it usually carries a significant cost that can be very hard to justify, especially for a smaller business during hard times.
The benefits of using a PSA solution
With a Professional Services Automation application, the different subsystems are already integrated out of the box, with a coherent look and feel.
You also get the added benefit of not having to deal with system updates due to changes in the underlying infrastructure, like operating systems, application frameworks, and new web standards. Those are instead handled by your PSA vendor.
Sure, they would probably command an increase in the subscription price over time, but it would still be a lot cheaper compared to developing the features using in-house IT staff or consultants.
There are many different PSA systems out there, targeting different sizes of businesses and sectors. But most of them share these common capabilities:
- Project management
- Time and expense tracking
- Resource management
- Finance and invoicing
- Business intelligence
- Collaboration tools
- API for integrations
The actual functionality they offer varies greatly as well. A platform targeting enterprise customers is typically more feature-rich than smaller solutions — but also inherently more complex and rigid to use.
Flowmine (yep, that’s my PSA) belongs to the latter category and helps you with every aspect of your day-to-day work, regardless of your role. Just as many other smaller PSAs, we make up for our limited feature set by being more nimble and agile than the big players.
What are the typical improvements?
The typical first effect of implementing a PSA is you experience a significant lowering of revenue leakage. You literary make all billable hours count.
Another effect is improved resource allocation and staffing, along with higher resource utilization rates.
You typically experience a drastic cut in lead time between quoting and billing, often resulting in better liquidity.
The planning and timesheet functions tend to boost efficiency as well as your team’s ability to provide accurate estimates.
Finally — you will have real-time business intelligence available at all times.
In short, PSA software is designed to improve the performance and profitability of your business.
In an end-user study conducted by SPI Research in 2017, the results showed a significant upswing in KPIs measuring the improvements described above.
The study concluded with a ROI model for an average 172-person professional services firm. According to the research, the firm could expect to invest just under $200,000 in implementation and software license costs over a five-year horizon.
The return, however, was estimated at nearly $23 million in increased revenue and reduced costs.
That’s a 100x return of investment, over a period of five years.
But what about the disadvantages?
Well, of course, PSAs are not all unicorns and rainbows. When you go with an all-in-one solution, you literally put all your eggs in one basket. Do a thorough analysis of your current and future business needs, and then vet the market carefully.
Are there any PSA vendors targeting your specific industry? If so, do they fit the bill compared to your needs?
Another thing to consider is that different vendors will emphasize different parts of the average PSA feature set. Some are heavy on the project management side, while another is big on accounting. Yet another vendor might be the best when it comes to staffing and resource management.
They will also be more or less opinionated about the processes they support. While most PSAs are adaptable to some degree, someone still has to pay for the customizations.
Last but definitely not least — make sure that you have buy-in from your end-users. If they think the system sucks, they will resist using it. Or they will comply but then passive-aggressively obstruct. Which inevitably will lead to skewed data and, ultimately, business intelligence you can’t trust 100%.
Professional Services Automation software is definitely not the silver bullet that every company should embrace. But in many cases, it’s definitely the most viable option — especially for smaller businesses.
And while you might not see a 100x return of investment, let’s perform a simple calculation:
A typical, average monthly fee for a PSA is around $10 USD/user. With 20 users, you get a yearly cost of $2,400.
Over a five-year horizon, this amasses to an investment of $12,000.
A typical, average IT consultancy firm here in Sweden would charge around $100 — $150 for a small integration project. Building an invoice integration like the one in the preamble might take around 40 hours, maybe more.
This gives us an alternative to the PSA of $4,000. A third of the cost of a PSA over five years.
Which one is the best investment?
Let me tell you this: during my 25+ years as a developer and system architect, I have helped a host of businesses that went for the seemingly cheaper option, only to regret it further down the line.
What matters isn’t just the money you can save in the present— it’s also about the costs you avoid, now and in the future.
A good Professional Services Automation software will not only support your processes and operations. It will also — with ruthless clarity — show you where you can cut costs.
And most importantly, it will enable you to take your business to the next level.
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