Best practice is defined by the American Society of Quality (ASQ), the world’s leading authority on quality, as “A superior method or innovative practice that contributes to the improved performance of an organization, usually recognized as best by other peer organizations.”
Technology companies face increased competition and challenges in the delivery of professional services. Simply meeting past performance will not result in the level of improvement required in today’s market. Professional services revenue is the fastest growing line of business in most technology companies and a major contributor to total company revenues.
Below is a list of five of the top best practices implemented by professional services organizations that delivered world-class performance in productivity, costs and revenues. These organizations have implemented strategies, operations and processes that have enabled them to achieve a position of superiority based upon outperforming the industry averages reported in the 2006 Buswell Group’s Professional Services Benchmark. The best practices of “the best of the best” have resulted in:
- Billable utilization rates above the industry average of 68%
- Attrition rates below the industry average 13%
- Discounting below the industry average 17%
- Gross profit margins above the industry average 35%
Professional Services Sales Methodology
Most professional services organizations have an implementation methodology, but very few have a methodology for selling their services. Whether it is an eloquent sales methodology or a simple sales process, at a minimum it should consist of:
- Process for discovery and qualification
- Planning and execution tools
- Process for measuring
Every professional services organization that has implemented a sales methodology has achieved dramatic improvements in all the measurements of sales performance.
Utilization Management
The average billable utilization rate across all professional services positions is 68% (based on a calculation of 2,080 annual hours). Companies that have achieved higher utilizations rates all focus on minimizing the non-billable activities. These companies pursue the reduction with the passion that every 2% increase in billable utilization translates into $10,000 of additional revenue per consultant. The on-boarding process, compensation plans and delivery methods are reviewed and improved frequently, as everyone is focused on improving the utilization metric.
Sell without Sales People / Leverage Trusted Advisor Relationship
The pinnacle of any business relationship is what many call a trusted advisor. Prospects and clients with whom you have achieved trusted advisor status are more likely to:
- Seek your advice
- Accept and act on your recommendations
- Involve you in more strategic, complex issues
- Introduce and refer you to other sources of business
The typical sales rep to consultant ratio is 10 to 20 consultants for every sales rep. Unleashing the power of leveraging the consulting organization to uncover and activate opportunities is the secret that has enabled select technology companies to achieve break-through performance in selling professional services.
Rates and Discounting
The average published professional services rate across all positions was $214 per hour in North America. Discounting off the published rates averaged 17%. Companies that have achieved higher average rates and reduced discounting focused on the following:
- Published rates are not under priced
- Discounting policies are established and enforced
- Negotiation skills are developed
- Business value is linked to their professional services solution - SELL VALUE
Blended Resource Management
Sub-contractors contribute over 10% of the revenue within a professional services organization. Over 50% of North American professional services organizations engage off-shore resources for delivering services. Both pools of resources offer leverage points for improving revenues and margins.
Best practice is a powerful management tool because it overcomes paradigm blindness. It opens up organizations to new processes, skills and tools. Without incorporating best practices, you place your professional services organization at a competitive disadvantage to those who have embraced them.
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