ERP Vendors Venturing into PSA

ERP Vendors Venturing into PSA
P.J. Jakovljevic - April 12th, 2000

Event Summary

On February 29, PeopleSoft Inc. took the wraps off its Professional Services Automation (PSA) product, software that aims to help services firms better manage financial and human-resources systems. PeopleSoft PSA targets firms that have difficulty managing the skills and availability of staff. The product provides opportunity and service-resource management, which handles project proposals and planning; identifies employees with the right skills for the job; and manages billing, invoices, and contracts.

PeopleSoft is not alone in the emerging professional services market. Evolve, Novient, and Niku provide billing and management services to professional firms. Craig Conway, PeopleSoft president and CEO, says the difference between PeopleSoft and its rivals is that the competitors are focused on a single piece of the market. "You don't see comprehensive billing and contract management being integrated with opportunity management, which is what PeopleSoft delivers", he says. Pricing will be based on the number of employees who use the product, which is unlimited. But Conway says PeopleSoft is considering switching from a user-pricing model to value-based pricing.

On March 6, Lawson Software joined the fray by reaffirming its position as a "premier total solution provider for the professional services industry". Lawson currently serves 165 professional services customers with a focus on delivering full front- to back-office integration and automated, closed-loop e-business processes. Lawson, which announced its professional services initiative in November 1998, has been delivering industry-specific functionality in a fully integrated solution suite for professional services since September 1999.

"With Lawson's one-year lead in development, we feel confident that we can continue to outpace the competition with real solutions deliverable today and real ROI," said Carol Hallock, director, Professional Services Business Unit, Lawson Software.

"This is a dynamic and rapidly expanding market that has not been adequately addressed by our competitors, which have traditionally focused on manufacturing rather than services industries. Lawson has been offering Web-deployable solutions for more than four years, and has delivered front-to-back office integration capabilities for more than one year. Since its inception, Lawson's professional services vertical has given business management and information technology consulting firms, professional employer organizations (PEOs), staffing offices, consulting firms, employment agencies, law firms, engineering firms, government contracting agencies and other services organizations single-point access to integrated business data." Hallock added.

According to Lawson, its Web-enabled professional services software includes:

  • An in-house developed, fully integrated customer relationship management (CRM) module for client and prospect opportunity management

  • Resource scheduling capabilities

  • Deployment and utilization features that allow users to not only search and match the skills of their internal employees, but also to perform skill searches against their partner and sub-contractor employee base

  • Web-based time and expense entry with management functionality to capture project costs and track labor utilization

  • A fully integrated Activity Management module to handle all necessary billing, revenue recognition and contract management functions, as well as budgeting, analysis and other project management tasks

  • Advanced workflow to create and fully automate closed-loop business processes

  • Web-based self-service for easy application and data access by a widely distributed workforce

  • When combined with Lawson's human resources, payroll, and procurement solutions, this fully integrated solution suite allows professional services organizations to realize efficiencies and analytic opportunities that newly hatched and non-integrated systems cannot provide.

Market Impact

Contrary to ERP vendors' generally tardy and belated reactions, as in the case of CRM or e-commerce opportunities, the above vendors have swiftly acted on the opportunity to encroach into the PSA space. The market is still nascent and evolving, with fragmented offerings and no established strong leaders. As a matter of fact, a vast majority of PSA vendors are start-up weaklings. We believe the future will bring more similar announcements as well as news of ERP vendors acquiring their PSA counterparts. The usual ERP suspects for these moves are Geac Computers Corporation, SAP, Oracle, J.D. Edwards, Infinium, and SCT Corporation.

While Lawson and PeopleSoft have the advantage of an early market entry, they will face stiff competition from a number of the native PSA players. Some of them, like Niku Corporation, Evolve, and Account4 have already created market visibility.

The scenario is somewhat similar to the CRM market: PSA players will emphasize their relevant product completeness with the appropriate price tag, their expertise in handling unstructured data, and will spread the FUD (Fear, Uncertainty, and Doubt) about immature ERP offerings and the danger of buying irrelevant modules in an ERP bundle. On the other hand, ERP vendors will try to sell their holistic, back-office integrated paradigm, which does not require any applications interfacing or integrating. At this stage, neither side claims a sharp vertical focus and ready-made interfaces to third-party systems like airlines, hotels, and credit card companies.

User Recommendations

Professional service organizations are advised to familiarize themselves with the offerings of all relevant players. While there is no clear-cut PSA functionality scope, one should look for the following common functions: opportunity management, qualification management, resource scheduling, delivery management, knowledge management, and data warehousing and business intelligence. From the technical standpoint, the solution should be flexible enough to accommodate both mobile and stationed users; in addition to this, both groups will typically be divided into users who need access to the bulk of the application, and those who enter more narrowly defined data.

Although this is an evolving area with not much implementation experience accumulated so far, users should be aware of similarities and differences between PSA and ERP. PSA products are much smaller and simpler in scope than their ERP equivalents. Also, most PSA systems lack a built-in suite of development tools; therefore we expect much less room for complex customizations. Moreover, the "legacy systems" that PSA replaces often either do not exist or are manual practices; therefore we expect minimal data conversion. All the afore-mentioned suggests that PSA implementations should be much shorter and generally less traumatic than ERP.

On the other hand, professional service organizations tend to have an unstructured work style that would challenge any organized approach to project management. Professional service managers can typically commit much less time than their counterparts in manufacturing. These managers are the people who would be "key users" on an ERP implementation, who would attend frequent working sessions in a project war room, and in many cases even work full-time on the implementation. In PSA implementations, client managers will likely serve only as sources of information and validation, but not as full-time team members. Therefore we anticipate PSA projects should have more of a turnkey approach.


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