PSOs – improve billable utilization substantially

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PSOs – improve billable utilization substantially

Research and consulting firm Service Performance Insight (SPI) recently released findings from a survey of more than 200 Professional Services Organizations (PSOs) that showed the lack of integration between professional services automation (PSA) and CRM, backed by Financials is limiting their growth and success. Professional Services Economics - Margin vs Utilization Aside from showing that by integrating these systems PSOs gain improved executive visibility, superior bid-to-win ratios and more projects delivered on-time, one of the most important findings from the SPI report is that PSOs that have integrated CRM and PSA have seen a 4% increase in utilization of billable staff, a potential source of pure profit. It may not seem an awful lot, but let’s just look at how big a 4% increase is. Let’s take a hypothetical 200 person services organization in the chart below, again from the SPI study. This PSO generates around $50 million in annual revenues; each services team member bills out at $170/hour; they bill an average of 8 hours a day; and they carry a fully loaded cost to the PS organization of $250,000/year. By increasing its billable team utilization by 4%, this PS team can generate an additional $2–4 million in profit without spending (or cutting!) one dime – simply by integrating CRM and PSA.
FTECal hrsUTECostBill rateTotal CostTotal RevMargin
FTECal hrsUTECostBill rateTotal CostTotal RevMarginNotes
200208070.0%$250,000.00$170.00$50,000,000.00$49,504,000.00-$496,000.00This is the baseline
200208072.8%$250,000.00$170.00$50,000,000.00$51,484,160.00$1,484,160.0072.8% is a 4% increase from 70%. $2M swing
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