5 Facts MSPs Need to Know About Using Professional Services Automation

With a PSA tool, you can bill more time, operate more profitably and win more deals.

If you’re on the fence about using professional services automation (PSA), or if you never fully explored the capabilities of your PSA software, it’s time to face facts. Here are five things every managed services provider (MSP) needs to know about the impact using a PSA can have on their businesses.

1PSA users bill more time per year

An infographic from Projector PSA illustrates that service firms who use a professional services automation tool bill 0.8 more months per consultant per year.

Steve Chong, COO of Projector PSA, explains that PSA solutions generally affect services firms in a couple of ways related to billing. “PSA solutions often include tools that allow organizations to more efficiently match the supply and demand of people within the organization,” he says. “People are the most valuable asset within the firm and are how a services firm generates revenue. Not only that, but their time is extremely perishable as it can’t be stored or saved for future use and goes bad if not utilized.”

Chong points out that the latest SPI Research Professional Services Maturity Benchmark study shows that firms using commercial PSA tools have a 4.5 percentage point advantage in billable utilization as compared to those that don’t. “That advantage can climb as high as 8.1 percentage points for the top-performing PSA vendor,” he says. “As such, firms that use a PSA solution are able to deliver more billable work with the same staff.”

Another factor impacting billable hours is discipline. “Organizations that don’t have a disciplined and organized way to ensure that every billable hour worked and every reimbursable dollar spent actually gets billed to the client is losing money,” Chong says. “This is something we call revenue leakage, and it’s another source of waste that PSA solutions help address.”

“By tying together time and expense capture workflows with approvals and invoicing, these systems can ensure everything that should be billed is billed, exactly once. The best PSA solutions out there have been shown to reduce revenue leakage by 23.4 percent,” he adds.

2PSA users can accomplish more work than nonusers in the same amount of time

Industry benchmark research shows that to generate $1 million in revenue, PSA users, on average, require 4.4 billable consultants and 1.2 non-billable support staff. Firms who don’t use a PSA require, on average, 5.4 billable consultants and 1.5 non-billable support staff.

The Projector PSA infographic cites data from a National Computing Centre study that found 54 percent of businesses implement a PSA tool to improve resource utilization and 58 percent to increase project effectiveness.

3PSA users are more profitable

It follows from Fact #2 that MSPs using PSA tools are also more profitable. “There is a natural and healthy tension in the professional services business between resource utilization and profitability,” says Chong. “It’s easy to increase one by sacrificing the other, which is why top-performing firms know how to balance the two. PSA solutions help with exactly that by providing visibility into both of those worlds. That is, balancing the supply and demand for resources to ensure people’s time and skills are being appropriately utilized.”

Research into Projector’s user base reveals an average of $20,000 more profit per billable resource annually using a PSA.

He adds that professional services automation also provides visibility into how profitable that work has been in the past and what it will be like in the future. “The key here is that these tools provide you a glimpse into what investments are required to finish projects the firm is contractually obligated to deliver to a client. This view allows the organization to forecast staffing requirements, revenue, profitability, performance to budget, and more. Most importantly, it provides that visibility early enough that savvy managers can make smaller course corrections early on as needed before projects start to go off the rails or staffing shortfalls require last-minute substitutions with more expensive resources,” says Chong. “They can, in a sense, tell the future.”

4PSA users win more projects

SPI Research’s industry benchmark also shows that out of every 100 proposals, Projector PSA users win an average of 2.9 more deals compared to firms not using a PSA.

Newer users of PSA solutions tend to use them as mechanisms to just help automate the mundane,” says Chong. “Don’t get me wrong, this is valuable in its own right, but it does miss one of the most powerful characteristics of this type of software. Firms that use PSA tools as a competitive advantage are getting more strategic use out of them.”

He says, for example, MSPs bidding on a new project can use the vast amounts of historical data a PSA tool can provide. “This gives them insight into how much effort similar projects took to deliver in the past as well as what factors may have contributed to their success or failure. With this quantitative historical record backing them up, firms can bid both more competitively and more confidently than their peers,” he explains.

Chong adds, “The trend over the past decade has seen contracts shifting from primarily time and materials to fixed price to complex mixed contractual terms. This, in turn, has driven a material shift in where risk lies in the vendor-client relationship. Those firms that are able to use a PSA to their advantage can embrace that shift and confidently turn it into a competitive advantage.”

5PSA tools benefit MSPs of all sizes

The last fact you need to know is that professional services automation isn’t just for large organizations. Projector PSA points out it’s for “high-performance ones.” The infographic cites Aberdeen Group research, which found that best-in-class service organizations are three times more likely to use a PSA tool than their counterparts on the lower end of the spectrum.

If you’re still managing your team with manual methods, you’re wasting time, resources and money. Isn’t it time to make a fact-based decision about implementing professional services automation?

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The former owner of a software development company and having more than a decade of experience writing for B2B IT solution providers, Mike is co-founder of XaaS Journal and DevPro Journal.