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For more information on resource utilization, read RTM's whitepaper "The ROI of Resource Utilization -- Measuring and Capturing the Real Business Value of Your People."
Learn more about Compuware Changepoint.
Today, we present a sponsored podcast discussion on how technology suppliers can get the most
from resource utilization and management in the global services economy.The shifts in technology and business models now under way and, in many ways, accelerated by the recession are forcing technology vendors, in particular, to adopt more of a professional services revenue model across their business lines. Increasingly, sellers of IT are finding it harder to win large software and hardware capital purchases contracts, which traditionally followed three- to seven-year obsolescence and refresh cycles.
Buyers of technology moving to IT shared services and software-as-a-service (SaaS) models internally, and off of the capital outlays roller coaster, are increasingly moving to smoother and more predictable operating and charging models outside, beginning with long-term professional services and outsourcing engagements.
Both the buyer and seller of services therefore need to focus on the implementation, integration, and solutions level of value, placing a much larger and more complex burden on the services delivery personnel themselves, as well as those who managing the services.
We’re here to find out some new, best ways of managing and automating the intellectual resources that support the professional services lifecycle. We’ll see how recent research shows that more of a just-in-time (JIT) methodology is required to keep the skills in balance with myriad project requirements and obligations.
Taking charge of the process around professional services fulfillment ensures that the people are well-managed, protected from missteps amid their responsibilities, and better utilized at what they do best.
To learn more about resource utilization and management in the global services economy, please join me in welcoming our panel. We are here today with Lori Ellsworth, Vice President of Changepoint Solutions at Compuware, the sponsor of this podcast. Welcome, Lori.
Lori Ellsworth: Thank you, very much.
Gardner: We're also here with Mark Sloan, Chief Operating Officer of RTM Consulting. Welcome, Mark.
Mark Sloan: Thank you.
Gardner: Let me throw my opening question out to both of you. Why is it that resourcing is such a challenge in professional services organization? Why is this so hard?
Necessary to have
Ellsworth: Just tapping into the comments you made a moment ago, first of all, it's the
increased importance of the professional services organization inside a technology company to meet their financial obligations and to promote customer success. The change and the focus on professional services is moving from something that was nice to have to something that is necessary to have to be successful.Now, organizations have to understand how to get a handle on the people they have working for them, how best utilize them, and how to make sure that your employees, those assets, are challenged and happy, but that you are delivering that service to provide value to your customers.
Gardner: Lori, are we seeing this extend beyond a small portion of companies? Are we seeing this extend to other business lines? Is that where the expansion is coming?
Ellsworth: The first part of the expansion is coming just because of the importance of professional services to technology companies. Software companies are a great example. Historically, companies in that sector may have done mostly product business and less service.
The stakes are higher, in terms of the discipline and the approach that we need to take to manage that part of the business.
To your comments that you made earlier about the change that’s going on in the market and the changes in the economy, services are now necessary to deliver success, and the services business is a very healthy part of the software business and is contributing significantly to the bottom-line.
So, the stakes are higher, in terms of the discipline and the approach that we need to take to manage that part of the business.
Gardner: For those organizations that have been focused on product management, finding the right balance mix in devoting the proper resources to the management of those professional services providers, that’s quite a different ballgame.
Ellsworth: It is. It’s dealing with people rather than product, many different types of attributes that have to be managed, and information you need to understand. Some of the points that RTM deals with every day. You have different issues on the table, when you're dealing with people, and those have to be effectively managed as part of the process.
Gardner: Let’s go to Mark Sloan at RTM. First, tell us a little bit about RTM and what you do, and then let’s hear a bit about this need to shift how companies are relating their business models towards more of a professional services’ portion of the mix.
Sloan: Thank you. RTM Consulting is focused on working with consulting, professional
services, and shared services organizations to drive operational improvements throughout the organization.One of our core areas of focus is in this area of resource management is how can you get the right person in the right place at the right time and drive up utilization, but at the same time, make sure that you're delivering value to your end customers and leaving them satisfied and coming back for more.
Accelerated rate of change
In terms of the shift, I’d agree with Lori’s comments. The economy over the last couple of years has only accelerated the rate and pace of change here. When a software company shows up with its professional services arm, the client is expecting that each and every one of the people who show up is an expert in the software, the technology, and the implementation process. The days of people learning on the job and coming up to speed are long gone.
The challenge today is for companies to get visibility into the type of work that’s coming down the pike, so that they can proactively train their internal resources and be prepared for that work, so that when they do show up, they are the experts.
Gardner: Mark, also tell me about some of the research you’ve done recently, and I'm particularly interested in this notion of JIT. I know that we worked with that 15-20 years ago in the manufacturing field. It's also spread into logistics, transportation, and the supply chain, so it’s been something that’s been permeating across business, but how does it relate to professional services?
In some organizations they are operating at zero idle resource capacity. I know all the CFOs out there would truly appreciate that.
Sloan: In looking into resource management in some of the research we’ve done, we’ve actually taken the principles of JIT manufacturing and directed them to the professional services organization.
Just as 30 years ago, any manufacturing company had big inventories of supplies, finished products, sitting in their warehouse. Ten or 15 years ago, the big services organizations were able to have excess resources on the bench, in the office, waiting for that next project to arrive.
In the services business, these margins have contracted and customers have gotten more savvy in their purchasing. The ability to have a bank and have surplus resources is diminished significantly. In some organizations they are operating at zero idle resource capacity. I know all the CFOs out there would truly appreciate that.
What we’ve done is taken those same principles -- forecasting what the future scenarios look like, what the demands look like, and then translating that back into how many resources you are going to need, the types of resources, the skills those resources need to have. You can, at that right moment, bring on a new employee, go to a third-party contractor to fulfill that demand, or give yourself enough advanced notice to cross-train your existing resources on new technologies, new products, so that they can work across your portfolio and not just focus on one particular area.
Gardner: Before we go into Mark's research and some of the major findings, it sounds as if managing and getting utilization benefits from professional services has moved and is required to now move from being an art to a science. Lori, from your vantage point there at Compuware, is that a good way to look at it?
Ellsworth: That’s a fair statement, and Mark’s comment about it needing to become proactive
is really the important thing, in that it can no longer just be people scrambling around the office, trying to find out who is in the office, and plug someone into a slot on an engagement, because you won’t deliver the value.There needs to be more discipline, more information, and a better process for decision-making and forward planning, so that the organization can scale and scale in a financially successful way, if I can use that expression.
Gardner: Mark, what have been some of the critical success factors that for those folks that have made the transition and moved from the art to more of a scientific, proactive, data-driven approach? What are some of the success factors that they’re finding?
Key things
Sloan: There are two or three key things. First and foremost is the change management aspect. As Lori said, managers historically are used to walking around the office or having on their whiteboard their list of employees in their department available and where they are. Then, late at night, they can think about where they go next.
In a sense, they have to rely on the technology that’s out there to give them visibility not just into their people, but to give them the visibility to the entire organization, so that they're thinking about optimizing what the company does and what the professional services organization does for the end client, and not just how do I optimize what I do with my 5, 10, 15 people and my department.
So, getting managers focused on that is one big thing, but the second critical success factor is laying out some forecast of the future scenarios. What is in the pipeline? What revenue do we think we are going to get? What's the timing in that revenue? And then, translating that back into what are the resource requirements of the different stages of those projects?
By creating that future visibility, you can compare that to resources that you do have in the overall organization -- what gaps there might be in terms of skill sets or just in raw quantity? Then, you will lay out a recruiting plan to get people, a training plan to cross-train people, or contracting plans to source from third-party vendors.
Gardner: Lori, when you saw the research from RTM Consulting and saw some critical success factors, what was top of mind for you? What jumped out?
You need to start with the fundamental. You need to understand your people and their skills and get that view of your business.
Ellsworth: Well, there are four critical success factors, but also the building-block approach. In other words, you need to start with the fundamental. You need to understand your people and their skills and get that view of your business. Then, you can start to add levels of maturity, look at forecasting, look at different models for resource allocation, and bring in project management.
The success factors were very sound in terms of the building-block approach, and how you mature the organization through them. You don’t just go from 0 to 60, turn everything on, and think that your organization is going to be performing very well.
Gardner: What is the change point it's bringing to the table in order to help make these transitions automate, control, develop this as a methodology?
Ellsworth: It's both the automation and the best practices, as organizations start to put the buildings blocks in place and adopt the disciplines and build the processes that work in their business. You can't scale that.
You can make that work within a small team or across a couple of small teams, but if you need to scale that to your entire services organization, including management, and then broaden the picture to other critical stakeholders in the company that need visibility, perhaps sales or others in the organization, you can't scale and reinforce that discipline without automation.
The two really have to go together. One won’t be successful without the other in a large professional services organization. Automation brings the scale factor.
Gardner: And doesn’t the automation also allow for governance, for allowing for the scale that the automation entails, but also to keep it under control?
Critical success factors
Ellsworth: It certainly brings the governance angle. It also brings the ability to measure, and measurement and monitoring is something that Mark highlights as critical success factors. Again, you’ve got a large group of people with a lot of activity going on. There's lots of data, but you have to roll that up to the management level to make it valuable to help drive decisions in the business.
Gardner: For those of our listeners who might not be that familiar with Changepoint, perhaps you can give us a quick encapsulation of its history -- how it got to where it is and what it does?
Ellsworth: The Changepoint solution has been active and working with customers in their professional services organization for many years, going back to the late 1990’s. Our focus has been on driving that view as a professional services organization, but importantly driving that view inside the context of the broader company.
It starts with those building blocks around who are your resources, what are their capabilities, and where are they being utilized. It brings you to the next level of maturity in terms of being able to look at forecasts and do some demand and capacity planning. And then it goes even further from a resource perspective to that professional development side that Mark just talked about. Let's look at the gaps in the next six to nine months. Where can we identify resources and put them on a development plan to fill those gaps?
We're managing the day-to-day business of a professional services organization and going beyond that to deal with project management, engagement management, and right through to billing for a professional services organization and for technology companies that also have a strong product side of a business.
The paybacks can be, and are, significant. First and foremost, is really speed to revenue and cash flow.
We also deliver a project portfolio management capability to allow them to manage products and manage delivery of those product applications.
Gardner: Back to you, Mark Sloan. For those organizations that do this well, making that transition focusing on professional services, getting the right mix, understanding where their resources are, where they are needed, and how to manage those personnel to make them the most productive, what are the paybacks? What do you get from doing this right?
Sloan: The paybacks can be, and are, significant. First and foremost, is really speed to revenue and cash flow. Lori mentioned that doing this in a large services organization is critical and an enabling technology is required to make that happen.
I’d argue the same for small professional services organizations. Having the information that tools like Changepoint can put at your fingertips, you can quickly identify people in your organization that have the right skills, that off the top of your head you might not think of, and staff projects quickly with the appropriate resources, ultimately enabling you to get that revenue.
Billable utilization
Secondly, you start to see a significant lift in overall billable utilization. This is for the professional services organization. Again, by getting better visibility into the skills that different resources have, you realize you have many more people in the organization that can do work than you think of.
For more information on resource utilization, read RTM's whitepaper "The ROI of Resource Utilization -- Measuring and Capturing the Real Business Value of Your People."
Learn more about Compuware Changepoint.
Other research points to the fact that companies who do this development of staff and get projects started on time are significantly more likely to finish their projects on budget and on time and drive significantly positive customer satisfaction.
Companies that aren’t able to do this -- take an extra five, 10, or 15 days to fill some of the slots on a project -- tend to go over-budget, don’t get it done on time, and, as a result, have poor customer satisfaction. If you think about it, it's back to that mantra, "Do it right the first time." This process helps you do that.
Ellsworth: If I can just add one comment there. Mark’s point is really important in terms of your ability to staff the project at the right time. If you think about technology companies who are out there competing, it's no longer a world where you are competing solely on the basis of the features and functions available in your product.
We’ve found, as we've gone back and studied organizations that have adopted JIT resourcing, that their attrition levels actually decrease.
There is just so much more that your more educated customer is evaluating. In my mind, your services capability that you bring to the table is a clear differentiator for you. Not only the services you have, but your ability to deliver them effectively and in a timely fashion. It's a necessary capability to allow you to compete effectively today.
Gardner: I have to imagine that buy in from the actual practitioners is important. Is there something about this more organized and managed approach, using these tools, that benefits the consultant. Perhaps it reduces the lack of clarity of where they will be next week, or the sense of being yanked around like a yo-yo. Mark, anything anecdotal out there?
Sloan: Absolutely. We’ve found, as we've gone back and studied organizations that have adopted JIT resourcing, that their attrition levels actually decrease. We were curious as to why this happened. What we found when we talked with various practitioners is that people were able to more closely align the work they wanted to do with the work that was out there.
So, just as forecasting your revenue and the resources you are going to need helps services organization, your services employees can now get involved and identify the types of work they want to do. For some of your folks that will be, "I want to go deeper and become the subject matter expert in this area." For others, it will be, "I want to broaden my horizons and get involved with different roles."
It's not that each individual can dictate exactly where they're going to go on every project, but you give them more insight and more control. They become a better part of the process. They feel empowered and enabled and they don’t feel like they are just a body that you are moving from project to project to project. They feel like they can really guide their career much more closely.
Gardner: Lori, this is a competitive landscape. Highly skilled workers are often in demand. So, this plays into the advantage across the board I expect.
What's in it for me?
Ellsworth: It does. I want to add a comment to what Mark just said. I definitely think that you need to think about what's in it for the practitioner. What you find when you are making the change is that you're adding discipline, automation, and maybe some requirements for your practitioners to interact with that automation. You have to think about the "what's in it for me" factor.
As you're adding discipline and increasing maturity, there is participation from the practitioner, if you can position the value to them in terms of increased opportunity or an ability for them to better manage their schedule and not be burnt out. They have access to different opportunities. It's very valuable and can help them actively participate in moving the business forward and not kind of fight against it.
Gardner: This certainly sounds very clear and compelling in theory. Do we have any actual examples where we can look at what's happened? Do we have a use case scenario, something that will give us something a bit more tangible to draw some conclusions from?
Sloan: There are some very specific and real-world examples that companies that we’ve worked with that have adopted JIT Resourcing. I've generally seen a five- to 10-percentage point improvement on their billable utilization.
It's through being able to forecast the work that's coming. They can better align both their employees and their third-party contractors. If work is starting to decline for a quarter, they can reduce their reliance on contractors, get their employees billable, and demonstrate to their employees that there is long-term job security in the organization. That helps them avoid having idle resources.
Customers . . . on a year-over-year basis . . . are able to reduce that non-productive time and therefore the cost of that non-productive time by 16 percent.
A client that we just finished working with had to go back before their investment board. They had achieved a 6.5- to 7-times return on investment (ROI) by deploying JIT Resourcing through improved utilization.
These are all companies that are leveraging technology to support that process to get them to visibility. But, they are really taking on that process change, as Lori alluded to earlier. They're not just deploying the technology and putting it out there. They're going through an effective and constructive change-management process to change the way people are using the available information and drive real positive returns.
Gardner: Lori, some anecdotes form the field. What are companies experiencing when they start to use these things?
Ellsworth: Many of the customers that I am talking to, after they have focused on both the process and discipline side as well as the automation side, will often articulate the benefit they are seeing in terms of something Mark just mentioned, and that is the improved turnaround time or the reduction in non-productive time.
Customers of mine, in Europe for example, are quoting that on a year-over-year basis, they are able to reduce that non-productive time -- and therefore the cost of that non-productive time -- by 16 percent.
Other customers will articulate the value of this entire solution in terms of revenue increase, the focus of getting control over their resources, who they have and how they can most effectively deploy them. Another customer of mine in Europe talks about a 30 percent increase in revenue, linked directly to implementing some of these practices in getting that control over their resources.
Strategic activities
Sloan: We have worked with other services organizations that are designed to support the product. They aren't necessarily managed as a P&L, but the goal is to break-even. They’ve also deployed these processes, plus the goal of increasing bottom line, but were freeing up time for their resources to get involved with more strategic activities.
They've worked with their third-party systems integrators (SIs). They also do work with their product, and it’s enabled them to better train those organizations, so that they can go out and deploy the software more broadly as well. So, it can drive both hard financial benefits, but also additional strategic benefits as well.
Gardner: Mark, are you seeing other verticals or industries or types of organization that can use this? We've been focusing on IT suppliers today, but where does this also go? Is there a role for this in the creative types of professional services, service report, user help desk, that sort of thing?
Sloan: Absolutely. We've spent a good part of the conversation talking about the professional services organizations and driving up billable utilization. The same lessons apply to shared services organizations, internal captive large IT departments managing multiple projects per year to deploy technology.
They can leverage the technology that Changepoint offers to keep track of the people, where they are deployed, what skills they have, what new projects are coming in, and achieve a similar increase in productive utilization of those resources. But to your point, in terms of creative organizations, this would apply to any organization that is focused on moving people with particular skill sets to a unique project.
When we architect a solution for clients, it’s a unique solution taking into account the various constraints and the environment of that client.
That includes engineering services organizations, creative agencies that are moving talent from one project to the next -- anyone who relies on definite skills and knowledge that aren’t just easily interchangeable. This helps forecast where you can get the biggest bang for the buck with those people.
Gardner: Well, it sounds like something to look into. How do you get started? Where do you go to find more information? In addition to getting more information, what’s a typical approach to putting this into actual use?
Sloan: There are a couple of things. The white paper that we published with Changepoint can be accessed off www.compuware.com under Changepoint.
In terms of getting started, when we typically work with clients, we come in and do a quick assess and architect phase where we’ll take a look at how resource management is being done today, compare that to the best practices that we’ve defined for JIT Resourcing, and identify areas where you are strong and areas where there is an opportunity for change and improvement. When we architect a solution for clients, it’s a unique solution taking into account the various constraints and the environment of that client.
JIT Resourcing is a defined approach. We have recognized that there are unique aspects to every business, and can tailor the solution to fit there.
Gardner: Lori, from the perspective of Changepoint, how do you see folks often getting started with this?
Discipline and maturity
Ellsworth: Our approach is very much consistent with what Mark has talked about. Mark and his organization, for example, might be in up front, doing some of that assessment in laying out a roadmap for pure resource management discipline and maturity.
When we participate with customers from an automation perspective, we obviously want to take the same approach. We don’t want to just drop something in there and turn it on. It has to be configured to support their level of maturity. It has to be able to easily grow with them as they expand their capabilities and some of the things they want to do in terms of the resource management discipline.
It’s very much about understanding their level of maturity, the goal or the vision they are driving to, and then the appropriate steps and milestones to get there. That’s important to factor into some of the concepts we’ve talked about like change management within the organization, ensuring adoption of the discipline and the solutions, so that you're getting the return you are looking for and so on.
Gardner: We're just about out of time, but I want to wrap up with a look into the future. It seems to me what we are hearing from the industry around cloud computing has a bearing on more services, more choices for the location of technology, more types of supply chain and ecosystem activities around solutions coming together. It seems that also offers an opportunity for the need for the need for management and automation and bringing people, process, and technology together.
First to you, Mark Sloan. The trends that you see pushing us into the everything-as-a-service era, how does that relate to some of our discussion and the need for these types of tools and methods?
Those processes were developed to deal with on-demand needs for products, because we now are in this era of on-demand needs and services.
Sloan: It’s really only going to accelerate the need to be prepared for on-demand work. You can go back to JIT manufacturing. Those processes were developed to deal with on-demand needs for products, because we now are in this era of on-demand needs and services.
You're going to need to be prepared with the right person at the right place at the right time. By deploying these processes now, you can start to learn the continuous improvement that’s needed, but be enabled as more and more of your clients go to SaaS, but you’ve got to have to deploy people with the moment’s notice.
You're going to get much better at predicting and forecasting what your future needs are, enabling you to align your resources and capabilities accordingly. You want to achieve the benefits we talked about -- speed to revenue, speed to cash-flow, and zero idle resources.
Gardner: Lori, last word to you. Is there anything more to offer in terms of how the future will create more demand through this?
Ellsworth: I would certainly echo what Mark was just talking about in terms of the types of service or the portfolio that companies are going to need to step up to the more traditional capabilities, and then shorter duration, more JIT-type services and different methods for delivery of those services.
It's the need, as it comes back to resourcing, to draw on the broader organization, something that Mark touched on earlier. But, as we're looking at being flexible in the types of services and how we deliver them, it’s more likely that we need to draw on not only our professional services organization, but maybe forward in the cycle to support and backward in the cycle to product development or technical resources.
So, a broader pool of resources comes there to help you respond to customers which just increases the need to understand who those resources are and what they can bring to the table to support these services.
Gardner: We’ve been learning about getting the most from resource utilization and management across global services industries and the economy, particularly with an emphasis on the technology sector, but it certainly sounds like this has applicability beyond that and the more aspects of each company maybe impacted as well.
I want to thank our guests. We've been joined by Lori Ellsworth, Vice President of Changepoint Solutions at Compuware, the sponsor of this podcast. And, we've been joined also by Mark Sloan, Chief Operating Officer at RTM Consulting. Thanks to you both.
Ellsworth: Thank you.
Sloan: Thank you.
Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions. You’ve been listening to BriefingsDirect. Thanks, and come back next time.
For more information on resource utilization, read RTM's whitepaper "The ROI of Resource Utilization -- Measuring and Capturing the Real Business Value of Your People."
Learn more about Compuware Changepoint.
Transcript of a BriefingsDirect podcast on how bringing automation and new methodology advances resource utilization from an art to a science. Copyright Interarbor Solutions, LLC, 2005-2010. All rights reserved.
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