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Professional Services Firms Boost Profits by Moving to the Cloud

by Greg Chase | SAPinsider

April 1, 2012

Wouldn’t it be nice if you could integrate your business processes and create a single business system in the cloud? You could interconnect all of your operations into a single architecture and get a real-time view of key data, among other benefits. This is what the cloud-based SAP Business ByDesign offering provides to professional services firms, enabling the predictability and visibility into operations so they can develop the methodologies that productize services.
 

Imagine you’re a practice lead at a fast-growing boutique IT services company. You pitch a new project to a prospective customer, offering to provide the company unprecedented visibility into and optimization of its business processes. Intrigued, the company’s CEO says, “I love your ideas! Show me how you use them at your own company.” You flush red — your business runs almost entirely on spreadsheets.

A Delicate Balance of Priorities

This situation is common not just at IT services companies, but at many professional services firms and in services divisions within manufacturing and distribution companies. There are several drivers behind this reality:

  • Low capital and tight cash flow prevail. Services companies often put their capital toward business expansion, not software.
  • Virtual offices are common. Services employees are frequently on the road and geographically dispersed near their clients. Services firms also often have overseas operations.
  • Time is revenue. A services employee’s time devoted to a project is often the basic unit billed, so experts devoted to internal management are lost potential income.
  • Employees are profit and cost centers. A lot of record keeping is required to track employees’ time and expenses and to accurately transfer this information to customer invoices.

Successful professional services companies have to maintain a delicate balance between project bidding, scheduling, personnel availability, cost, margin, and cash flow. To achieve this balance, executives need visibility into and predictability of operations and delivery data, both real-time and historical. At small services firms with a single practice, it’s feasible to manage this on spreadsheets. But for growing firms that operate in multiple countries and sprout multiple lines of business, maintaining this visibility without a centralized system is nearly impossible.

Professional services companies need cloud-based, mobile-friendly business systems that cater to their unique requirements. This is why SAP Business ByDesign is ideal for such firms, particularly those that provide:

  • Customer-specific, project-based services, such as consulting services
  • Standardized services with a set scope and price, such as training
  • Services managed over a period of time, such as IT hosting services
  • Service entitlements where customers can request services per a contract, such as warranties

Integrating Your Business with Your Service Delivery

Wouldn’t it be nice if you could integrate your business processes and create a single business system in the cloud? You could interconnect all of your operations into a single information architecture, without having to initiate additional internal IT projects. You could get a real-time view of key data, such as the status of projects, customer interactions, project-related costs, the utilization of your people, and the state of your finances. Executives, managers, and project participants could see the current status of their work areas, drill down to prioritize the right items, and make informed decisions.

In a nutshell, this is what the cloud-based SAP Business ByDesign offering provides to professional services firms. An example of this integration is depicted in Figure 1 that shows the integrated opportunity-to-cash process with sales, settlement, and accounting functions that any professional services firm must follow. They can integrate business operations and projects with SAP Business ByDesign to develop a cloud-centered IT strategy that improves predictability and visibility, allowing them to refine offerings to include productized services and managed contracts. A highly integrated solution like SAP Business ByDesign offers many advantages:

  • Predictable and repeatable projects. Comprehensive project management features integrated with sales, finance, and staffing provide forecasting, real-time visibility, and shared information to help your teams see the status of any project, determine what works, and develop templates that standardize delivery for future projects. Figure 2 shows a project manager’s work center in SAP Business ByDesign.
  • Customer visibility. Integrated marketing and sales functions allow you to manage leads from campaigns through to orders and project booking. Reps can have a single view into open opportunities, projects in process, and the status of payments. Analytics help you develop insight into customer and project profitability.
  • Simplified record keeping for time, expenses, and purchasing. Tracking, approving, and invoicing timesheets and related expenses is often an administrative nightmare for consulting companies. SAP Business ByDesign integrates this necessary function into project management and financial settlement processes, ensuring that this key data is accurately tracked. Integrated procurement means project-related purchases are also tracked. This includes third-party services so firms that use external time-based consultants can also account for these expenses.
  • Optimal utilization of your people. Built-in resource utilization analysis enables project staffing managers to understand where resources may be over- or under-utilized and adjust the project strategy accordingly. By tracking employees’ skills, capabilities, and assignments, managers can easily see which people have the right skills for a particular job and whether they are available. As a result, managers will be better equipped to seize opportunities as they arise.
  • Fast and accurate billing and financials. These integrated processes mean your accounting team has the information on hand to accurately invoice customers to ensure timely payment. Liquidity forecasting allows management to optimally oversee the payment of expenses according to cash flow. Also, automated revenue recognition appropriate for professional services firms, such as project milestones recognition, simplifies and improves financial reporting accuracy.

 

Figure 1 Integrated opportunity-to-cash business processes for professional services companies supported by SAP Business ByDesign.
Figure 2 With SAP Business ByDesign, users can easily monitor and manage projects from an intuitive work center.

 

A Cloud-Centered IT Strategy to Improve Service Delivery

A cloud-centered IT approach follows the principle of “cloud first” for architecting solutions for business processes. Less in-house expertise is needed to maintain IT, and cloud solutions are often mobile friendly, satisfying your virtual workforce. Basing your IT strategy on a cloud ERP system tailored to professional services provides the predictability and visibility into your operations so you can develop the methodologies that productize your services. This level of maturity creates consistent delivery, while making it easier for your sales staff to sell, scope, and bid on projects. Finally, you can develop business models to foster strategic relationships with your customers and deliver consistent predictable margins.

To learn more, visit www.sap.com/solutions/products/sap-bydesign/what-is-sap-business-bydesign/for-your-industry/index.epx.

Greg Chase (greg.chase@sap.com) is Senior Director of SAP Business ByDesign Solution Marketing at SAP. He joined SAP in 2006 and has nearly 20 years of experience in the software industry, holding roles in product marketing, sales, product management, and engineering. Greg is a frequent blogger on topics such as IT cloud strategy, software tools and development, software-as-a-service, hybrid cloud/on-premise IT architectures, platform-as-a-service, and business process management methodology.

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