Professional Services Organizations Automate their Processes


In response to market demand, a relatively new software space aimed at professional services organizations has emerged as a viable software category. Viewed as "Enterprise Resource Planning for People," this class of software is continuously redefining its parameters. Although professional services organizations were initially targeted by niche vendors, in the last couple of years, we have seen the entrance of major enterprise resource planning (ERP) vendors staking their place with extended functionality and the acquisition of smaller players. In turn, vendors are redefining their position in this dynamic landscape. As a result, service organizations are inundated with mixed messages and changing acronyms, such as professional services automation (PSA) and portfolio project management (PPM), making it difficult for them to navigate this new marketplace.

The following article provides a general overview of PSA and its historical development. Please note in this article the terms professional services automation (PSA) and portfolio project management (PPM) are used interchangeably.

Defining the Professional Services Software Space

Whether you call it professional services automation (PSA), enterprise service automation (ESA), service process optimization (SPO), enterprise project management (EPM) or project portfolio management (PPM), it is clear that a software category specifically catering to professional services organizations is here to stay. Six years ago this new category of software emerged, and the demand for service organizations and IT departments to automate and streamline their business processes is incrementally growing every year. Originally developed for internal information technology (IT) departments, the first PSA solutions targeted professional services firms focused on billable projects and service delivery. Over the last couple of years the shakeout of major players like Changepoint (acquired by Compuware), Evolve (acquired by Primavera), and Niku (acquired by Computer Associates), has driven PSA vendors to adopt a "new" banner—project portfolio management or PPM. So what does this mean for end user organizations? In this relatively new software space, professional services organizations are faced with the challenge of evaluating the changing faces of their vendors.

PPM for Professional Services

Today most PSA vendors categorize themselves as PPM vendors. Project portfolio management or PPM facilitates an organization to manage multiple projects within its portfolio by incorporating project management, resource planning, time and expense tracking, billing, and accounting functionality as core components to the solution. Best-of-breed vendors in accounting, time and billing, project management, ERP, human resources (HR) and PPM have adopted the PPM banner. Already comprising a key component to the PPM cycle, many of these vendors developed additional functionality, points of integration or acquired complementary solutions to establish their position in the PPM marketplace. As a result, service organizations are faced with the daunting challenge of determining the best PPM vendor to meet their particular needs.

PPM Vendor Categories

PPM vendors tend to classify their solutions into two primary customer segments:

  1. Internal IT departments
  2. Professional services organizations

Vendors selling to internal IT departments traditionally target enterprise organizations that manage multiple portfolios across various business units. Returning to their original roots, many vendors recognize the enormous potential of portfolio management for IT departments. This avenue opens doors to many vertical markets outside professional services organizations. As technology becomes increasingly central to an organization's survival, solutions that can facilitate, streamline, and monitor IT governance are becoming a "must have" to large IT departments.

Vendors targeting the professional services market position themselves as cost efficient best-of-breed solutions that can easily adapt to the business models of small and medium business (SMB) service organizations. However, it is important to note that these vendors have jumped into the professional services space with varying expertise. Many of these vendors have competed in niche markets, such as time and billing or accounting, to differentiate themselves from their competitors. For most SMB professional services organizations it is crucial that the PPM vendor they select integrate with their existing systems. From an end user's perspective, best-of-breed vendors must be carefully evaluated by identifying their strengths and their relevance to a service organization's business model.

Best-of-Breed versus Integrated Solutions

Every service organization is unique in its IT strategy. Managing multiple vendors and adopting the integrated solution approach both have their strengths and weaknesses. Best-of-breed solutions are strong in providing deep functionality for specific areas of business; however, they tend to be weak in providing seamless integration among different software packages. The murky waters of integration among different applications can range anywhere from basic flat file import/export functionality to real time live updating of data between two systems. Moreover, the detail of data transferred between applications can vary widely from vendor to vendor.

Single-vendor solutions cover all components of the service cycle; however, they can typically show signs of weaknesses in terms of their functionality. Similar to ERP systems, integrated solutions for professional services organizations can have difficulties addressing the core competencies of a particular industry or business model. Consequently, best-of-breed solutions will adapt better to the diverse requirements of SMB service organizations.

Service Cycle Components

At the heart of most professional services organizations and IT departments lies a portfolio of projects and the people managing and executing those projects. The key components in the delivery of these projects include

  1. Portfolio, Project, and Engagement Management—managing all aspects of a group of projects, their tasks, milestones, and resources from the time of their engagement to their delivery.

  2. Resource Planning and Scheduling—identifying and recruiting the necessary resources and staff based on priorities and availability for a portfolio of projects.

  3. Opportunity, Contact, and Contract Management—managing the sales cycle of potential clients, customer support, and contracts.

  4. Time and Expense Management—The gathering and management of time and expense entries against project tasks, and their integration with accounting.

  5. Knowledge Management, Collaboration, and Analysis—The centralization and sharing of documents and mission critical data for informational and reporting purposes.

  6. Billing, Invoicing, and Project Accounting—Capturing and executing project billing for clients and charge backs for cost centers in the context of project accounting.

Identifying which components are core competencies in a service organization will impact the success of PPM software selection and implementation. Although most PPM vendors claim to provide all components of the service cycle, the depth of functionality in each area will usually depend on the origin of the vendor. In most cases, in order to stay competitive PPM vendors that once played in a niche market (dedicated to one of the above components) have already developed the best functionality in that area. For this reason, service organizations need to dig deep into a vendor's past when evaluating the best solution to meet their needs.


PPM vendors are still defining their space. Currently, service organizations are faced with a changing market conveying mixed messages. Separating the market messages from the functional capabilities of vendors will illuminate the strengths and weaknesses of PPM applications. Professional services organizations and internal IT departments need to identify their pain points and match the vendors with the strongest functionality to their weakest areas. To facilitate users in this process, future articles will evaluate the strengths and weaknesses of vendors in the context of the different components of the service cycle.

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