FinancialForce.com blog

Cloud Accounting Evaluation Guide written and produced by Brian Sommer

Mon, 23 Apr 2012 12:00:00 +0100

Written by Brian Sommer, an expert in software application evaluations and influential blogger at ZDNet.com, we are pleased to offer our prospective customers FREE access to the first comprehensive guide to evaluating cloud accounting applications. It is designed to guide organizations through the process of making a cloud accounting software selection developed using Brian’s 30 plus years’ industry experience. From making the decision to replace an existing financial accounting system, to putting a selection team in place, shortlisting vendors, and gaining buy-in from senior management, the guide is simple to follow and easy to digest.
Cloud computing has changed the financial accounting software landscape, and although the process of purchasing software is simplified, there are still significant choices and decisions to be made. The guide is designed to: 
 
<ul><li> provide practical guidance to making a cloud accounting software solution choice</li>
<li>help your organization get productive quickly</li>
<li>collapse many of the best ideas in accounting software solutions into one, easy-to-read, structured publication</li>
<li>accelerate the selection team’s learning curve</li>
<li>define and structure the cloud accounting vendor selection process</li>
<li>pre-emptively address many of the issues the selection team will encounter in choosing a cloud accounting solution</li>
<li>make you, the reader, more self-sufficient and successful</li>
</ul>Brian Sommer is the CEO of TechVentive, Inc. - a market-strategy and content firm. He was the longest running (10 years) and most senior director of Andersen Consulting’s (now Accenture’s) global Software Intelligence unit - a position that required him to pick the best possible software solutions for hundreds of clients globally. He has authored numerous publications, methodologies and practice aids related to software purchase and implementation and is a recognized authority in this area. Brian also publishes a blog on the intersection of application software and professional services (http://blogs.zdnet.com/sommer/).
<a href="http://online-accounting.financialforce.com/cloud_accounting_eval_guide_what_in_it.html" target="_blank">Download the FREE evaluation guide now</a>

Are you still using morse code for your business?

Tue, 10 Apr 2012 09:00:00 +0100

Partnering with Baker Tilly

Wed, 04 Apr 2012 14:10:54 +0100

Professional services is one of the fastest growing industries in the U.S. today. However its systems are out of step with the demands on these operations. Most still run on spreadsheets, which are really workaround solutions to bridge gaps between disconnected systems and substitute for missing application functionality. Meanwhile, the integration of PSA and CRM is one of the most compelling value propositions for services organizations today.
We recently <a href="http://www.financialforce.com/news-events/press-releases/financialforce-com-professional-services-customers-rated-best-of-the-best-in-spi-research-report/" target="_blank">highlighted the results</a> from an analyst survey that benchmarked more than 200 services firms and found that the top five per cent performers all utilize a dedicated PSA application and report greater levels of integration between CRM and PSA. We have known for some time that Salesforce CRM is becoming the preferred CRM solution among professional services organization. The SPI Research report revealed that Salesforce CRM is now used by 50% of services organizations.
As such, we have <a href="http://www.financialforce.com/news-events/press-releases/baker-tilly-and-financialforce-com-announce-partnering-agreement/" target="_blank">announced a partnership</a> agreement with Baker Tilly in North America today. Baker Tilly has had one of the strongest cloud and Salesforce CRM practices among accounting and advisory firms. As FinancialForce PSA is designed specifically for services teams that use Salesforce CRM, providing native integration on the Force.com platform, we think this will be a beneficial relationship. Adoption of FinancialForce PSA solution in just its first year has far exceeded expectations.
Baker Tilly is the first accounting firm FinancialForce.com has partnered with to expand the access of FinancialForce PSA and we’re already engaged on three implementation projects. We intend to add the FinancialForce Accounting product to the partnership in the future. Suffice it to say that we are very excited about the future potential of our alliance.

PSOs – integrate your core systems. The evidence is irrefutable.

Tue, 27 Mar 2012 12:08:08 +0100

Today <a href="http://www.financialforce.com/news-events/press-releases/financialforce-com-professional-services-customers-rated-best-of-the-best-in-spi-research-report/" target="_blank">we announced </a>that three FinancialForce Professional Services Automation (PSA) customers Perceptive Software, Centerstance and Architech, have been rated in the top five percent best-of-the-best Professional Services organizations (PSOs) benchmarked against more than 200 leading firms in the <a href="http://www.financialforce.com/resources/research/professional-services-automation/spi-survey/" target="_blank">2012 Professional Services Maturity™ Benchmark</a>.
According to Service Performance Insight (SPI Research), the research and consulting organization behind the Benchmark, CRM and PSA integration is at the heart of superlative sales and marketing effectiveness for the FinancialForce.com top performers. This integration allows them to analyze deals, segment clients and develop standard proposal and statement of work templates which reduce the cost of sale and improve quality and consistency. All three FinancialForce PSA best-of-the best winners credit the seamless integration between their PSA resource and project management application with their Salesforce CRM as a powerful catalyst to improve recruiting, on-boarding and career management.
Although Best-of-the-Best consultants work long hours and bill 86% of their time they are more likely to recommend the firm as a great place to work because they have more opportunity for advancement and get to work with leading edge clients and projects.
The Best-of-the- Best results from using an integrated PSA application speak for themselves: 25% higher billable utilization; 17% more projects delivered on-time and on-budget and 44% higher revenue per consultant due to better resource management.
<table class="standard" style="width: 660px;" border="0"><tbody><tr><th>Measurement</th>
<th>Top 10 Firms</th>
<th>All Others Average</th>
<th>Advantage</th>
</tr><tr><td>EBITDA</td>
<td>25.6%</td>
<td>12.7%</td>
<td>102%</td>
</tr><tr><td>Annual Revenue Growth</td>
<td>22.3%</td>
<td>13.3%</td>
<td>67%</td>
</tr><tr><td>Annual Revenue per consultant</td>
<td>$278K</td>
<td>$193K</td>
<td>44%</td>
</tr><tr><td>On-time project delivery</td>
<td>90%</td>
<td>75%</td>
<td>20%</td>
</tr><tr><td>Reference clients</td>
<td>83%</td>
<td>70%</td>
<td>19%</td>
</tr></tbody></table>Even more surprising then (something referred to in an earlier post but worth saying again) is the fact that although Salesforce CRM is the most used CRM system among PSOs (used by 50 per cent up from 30 per cent in last year’s benchmark), only 34 per cent of Salesforce CRM users report any level of integration with PSA or Accounting. Just 45 per cent of all respondents have partially or completely integrated PSA and Accounting and only 31 per cent have partially or completely integrated PSA and CRM. These numbers will change thanks to the proliferation of cloud apps on Force.com. The evidence is irrefutable.

CODiE's shortlists announced

Thu, 22 Mar 2012 15:33:59 +0000

The SIIA CODiE Awards recognize excellence in business software. FinancialForce Professional Services Automation (PSA) is among <a href="http://www.siia.net/codies/2012/finalist_detail.asp?id=59" target="_blank">five finalists</a> selected in the Best Project Management Solution category this year. This award category recognizes the best business application that automates the management of project-based business activities. Winners will be announced May 10th.
The financial management category makes for interesting reading this year. No accounting!

2012 Benchmark shows the benefits of system integration for PSOs

Mon, 12 Mar 2012 15:22:17 +0000

SPI Research has released its 2012 <a href="http://www.spiresearch.com/spi-research/reports/2012psmb.html" target="_blank">Professional Services Maturity Benchmark</a>, which we sponsored this year. The Benchmark is designed to help Professional Service Organizations (PSOs) understand their relative performance compared to an expansive benchmark of peers. It provides visibility into critical business processes and key performance measurements so organizations can compare, diagnose and improve their own performance. It makes for a fascinating read. We'll dissect the report in more detail in a later post looking at what differentiates the best firms and the results they report as a result compared to other firms in the Benchmark.
One of the key differentiators for leading firms is that they all utilize a dedicated PSA application and report greater levels of integration between their core systems including Customer Relationship Management (CRM), PSA and Accounting systems. Leading firms show substantially higher levels of cloud application utilization in the areas of Professional Services Automation (PSA) and Accounting and report significant benefits. More surprising then, is the fact that less than 15 percent of PSOs integrate their CRM and PSA directly.
This <a href="http://www.financialforce.com/resources/product/demo-center/webinar-recordings/fetch/sales-service-alignment/" target="_blank">event recording</a> provides more detail from SPI and Centerstance, a top performing PSO firm and describes how PSOs can position their people and processes for profitable growth in 2012.

Spring '12 has Sprung!

Wed, 07 Mar 2012 10:15:05 +0000

It's a big day for FinancialForce.com as we get to talk publicly about our latest product releases. The <a href="http://www.financialforce.com/news-events/press-releases/" target="_blank">press releases</a> provide the detail, but below I have detailed some of the highlights along with some screenshots to help illustrate the point.
The Accounting release includes two major enhancements:
<ul><li>FinancialForce Reporting, which is designed to simplify reporting and add deeper analytical capabilities while harnessing the power of crowd sourcing to develop reports.</li>
<li>FinancialForce ClickLink™, a tool which allows users to quickly create tight integration with other applications that leverage the Force.com platform from salesforce.com, without coding.</li>
</ul>See <a href="http://www.accmanpro.com/2012/03/07/financialforce-spring-12-release-brings-novel-reporting/?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+theaccman+%28Dennis+Howlett%3A+AccMan%29" target="_blank">Dennis Howlett's take</a> on the new reporting features including ReportExchange. He says: "Apart from the much needed ability to create static reports of the kind that are necessary for monthly report packs, the ability to mix data from both finance and CRM solutions means FinancialForce can provide real-time line of business operational information. That is a big deal. Having the ability to access information that explains the impact of on-the-ground actions on financial condition is exactly the kind of information <acronym title="Line Of Business">LOB</acronym> managers need."
<img src="assets/Uploads/blog/_resampled/resizedimage670412-FinancialForce-Spring-12-and-Company-Update-2-29-2012-8.png" width="670" height="412" alt="" title=""/> FinancialForce Reporting
<img src="assets/Uploads/blog/_resampled/resizedimage670435-FinancialForce-Spring-12-and-Company-Update-2-29-2012-10.png" width="670" height="435" alt="" title=""/> Report Exchange - Cloud Sourced Reporting
We're also very proud of the new ClickLink tool which enables quick and simple integration of Force.com apps without any programming. Benefits include:
<ul><li>The ability for users to link Force.com objects by simply clicking source and target object fields. </li>
<li>Automatically engages the FinancialForce.com API, ensuring data integrity.</li>
<li>Users can easily add integration logic and perform data transformations using native Force.com capabilities such as custom formula fields. </li>
<li>Users can link custom Force.com apps or packaged apps to FinancialForce.com apps.</li>
<li>“Buttonise” ClickLink™ rules to perform integrations one at a time or run them on a schedule.</li>
<li>Supports FinancialForce.com Accounting, Professional Services Automation (PSA), Billing and Media Billing applications.</li>
</ul>With the PSA release, we've focused on developing project communities and improving collaboration among services teams. We have done this in a number of ways including the new task management system that enables PS firms to securely extend project and task management capabilities to virtual teams and customers. The project community can access and update task information from anywhere at any time via a community portal. 
We've added new utilization methods and the ability for managers to tailor utilization calculations and budgets to better predict future utilization attainment. We think this is huge for professional services fimrs as utilization is the key indicator to determine billings, profitability, team goals and employee compensation.
And finally, we've added a new mobile app, FinancialForce Timecards for Android. As project management is inherently social, we want to make it easy for virtual teams to collaborate, and along with our built-in Chatter integration, Spring '12 takes us another step toward achieving our goal.

FinancialForce Accounting and PSA Spring ’12 launch imminent

Wed, 29 Feb 2012 12:52:30 +0000

We’re preparing to launch the latest releases of our <a href="http://www.financialforce.com/products/salesforce-accounting/home/" target="_blank">Accounting</a> and <a href="http://www.financialforce.com/products/professional-services-automation/home/" target="_blank">PSA</a> applications next week. They are major releases and include significant enhancements. Without going into too much detail in this post, FinancialForce Accounting Spring ’12 has been designed to address three key concerns of financial managers: financial reporting, implementation speed and opportunity to cash efficiency.
FinancialForce PSA Spring ’12 has been designed to improve virtual team collaboration and provide new methods for budgeting and calculating utilization metrics. Utilization is known as the “Master Metric” for professional services organizations. It is critical in determining billings, profitability, team goals and employee compensation, but despite this, most professional service automation applications don’t provide managers with the flexibility needed to capture this level of detail. FinancialForce.com has worked hard to address this. More details to follow next week.

When it's time to leave the comfort of QuickBooks

Wed, 15 Feb 2012 16:38:53 +0000

Dennis Howlett raises some interesting points in his latest <a href="http://www.cloudpro.co.uk/saas/accounting-and-financial/2819/why-two-blogs-get-it-wrong-falling-down-complexity-cloud" target="_blank">CloudPro blog</a>. He says: “The prime reason that Sage and QuickBooks users are so difficult to dislodge is that users become familiar with things they use, even when they know they are clunky. In order to overcome the stickiness, the SaaS provider has to go many steps beyond what the on-premise provider offers.” He later says: “The only way that users will readily switch is if they see that something new will obviously add value to what they are doing, reduce pain and be a joy to use. All three ingredients are needed; two out of three is not enough.”
This is something we’re only too aware of. Overcoming migration inertia among prospects is tough. The question is at what point in a company’s growth does a system start to hamper them because it can’t do what is required? Through working with customers that have moved away from systems like QuickBooks, we have developed our own list of obvious migration points, where a perfectly good system is no longer adequate.
Generally, companies need to consider a new way of doing things when they reach the next phase of maturity where transaction volumes have grown and the organization has become more complex with multi-site operations, trading abroad, additional subsidiaries perhaps. Accounting complexity is often a catalyst for change as the growing organization has an obligation to implement financial controls and report in accordance with international standards.
Certainly all our customers that have moved from QuickBooks were looking for increased automation and workflow to manage increasing workloads. Pandora has <a href="http://www.youtube.com/watch?v=Y1AIle3HROs" target="_blank">spoken publicly </a>about its rapid growth and how FinancialForce.com supported it when it went Public in June last year. We’re well aware that preparing the ground for going public is a key milestone for a business and one that is necessitating system evaluation. This is an intensive process where companies can see for the first time that they’re really hitting the limits of their entry-level software and that it is becoming costly and time-consuming to manage.
There is a new way of doing things and by showing organizations that we can help them perform tasks that they couldn’t before easily and scaleably, the tipping point is coming. QuickBooks is a great entry-level system but there comes a time when it just won’t cut it anymore. Customers that have moved from entry level bookkeeping to FinancialForce Accounting are finding that the cloud makes the jump to a full blown accounting system easier and they’re deriving huge value from the enterprise level tools available such as workflow, social, unified reporting that might be difficult to consume otherwise. I have covered the issues in brief here but there’s a lot more I could include. We’re working on a more in-depth paper that covers this topic for growing businesses which we’ll publish soon.

Social Accountants – an oxymoron?

Wed, 01 Feb 2012 09:59:44 +0000

I’m slow to pick up on this but I felt it worth highlighting in any case. In December, <a href="http://www.accountingweb.com/topic/community-news/results-socialcpas-2011-social-media-survey" target="_blank">AccountingWEB reported</a> on this <a href="http://www.socialcpas.com/socialcpas-2010-survey.html" target="_blank">survey of social media adoption</a> within CPA firms. This is a topic of great interest to us at FinancialForce.com given how our customers are receiving Chatter and embracing the collaboration opportunities it delivers. What I did find surprising was that in this survey, the focus is on Facebook, Twitter and LinkedIn – in other words external, public social networks – and the potential risks those tools present when sensitive information is at hand. There’s no discussion about the benefits of collaboration, which is driving the rapid adoption of enterprise social tools in other corporate functions. But what’s very encouraging is that the survey attracted responses from accountants in 18 countries and a 25% higher response rate than the 2010 survey. That accountants are paying more attention to “social” speaks volumes in itself. In an <a href="http://www.accountingtoday.com/news/Social-Media-Accounting-Facebook-Finance-61120-1.html" target="_blank">article I wrote recently </a>for Accounting Today called ‘Why do I need a Facebook for Finance’, I said:
“Teamwork and collaboration are no longer goals, but requirements. On top of that, controllers and CFOs want to be more integral to the business: a trusted advisor to the lines of business rather than an isolated department. Today’s lean and agile companies need new ways to break down the walls between siloed departments and leverage the finance department’s skill sets. 
…the espousal of cloud computing has set the technology groundwork for social accounting to succeed. Cloud-based applications, like those built on the proven Force.com platform, create a cost-effective, efficient way to centralize and share data, increase visibility into accounts and improve collaboration.”
The article provides some examples of what accounting and finance teams can do with social media tools. It’s tapped into a clear demand as I’ve been asked to write a follow-up piece giving tips for implementing social accounting. So stay tuned...
I think we will see collaboration and social apps become even more mainstream inside companies in the coming years. For a few years, business people had a hard time grasping why they would need Facebook or Twitter-like functions inside their companies, and I fault the industry for selling it that way. Social inside the enterprise is much more than how many “friends” you have. Tools like Chatter are encouraging collaboration inside companies in ways we haven’t seen before, and it is paying off in a big way. 
FinancialForce.com customers are breaking down the barriers between sales and accounting, for instance, to help collect cash and reduce bad debt as a team, and essentially providing a better service to their customers. You can find some examples of this in the case studies of <a href="http://www.financialforce.com/assets/ffdc/customer/case-study/BlueShieldofCaliforniaFoundation_Case-Study.pdf" target="_blank">Blue Shield of California Foundation</a>, <a href="http://www.financialforce.com/assets/ffdc/customer/case-study/Centerstance-High.pdf" target="_blank">Centerstance</a> and <a href="http://www.financialforce.com/assets/ffdc/customer/case-study/denmat.pdf" target="_blank">Denmat</a> that are on our site.

The promise of the ‘millennial’ generation

Thu, 19 Jan 2012 10:05:28 +0000

Technology has completely <a href="http://www.accountingtoday.com/news/Social-Media-Accounting-Facebook-Finance-61120-1.html" target="_blank">changed the way we socialize </a>and the way we socialize and interact is influencing the way we develop and make use of technology.
It's clear that the way we communicate, socialize and manage our lives at home and in the office has changed unrecognizably from a decade ago. That makes it really exciting to look forward to the next decade. It's difficult for us to even conceive how we will live in 10 years' time? ‘Millennials’, a term I'll use for the new generation of technology savvy youngsters posied to join and affect the global workforce, have been born into this new digital world, and as such, their minds are digitally attuned. They just get it because they’ve grown up with it, and in 10 years’ time, they will make up a significant proportion (around 50%) of the population. The pace of cloud, social and mobile technology development will accelerate and innovation will proliferate.
Millennials only started joining the workforce in earnest over the last few years and have not yet had time to make their mark. What’s clear is that as they do, change will be rapid.
One of the most significant changes, driven by cloud and mobile technology innovation, our generation has seen is to the way we find, try and buy technology or apps, via app marketplaces. Salesforce reports almost 100 thousand AppExchange customers. With at least 1300 listed apps, it is clear that customers are already building out broad portfolios of apps on Salesforce.com’s cloud computing platform, Force.com (approximately 10 on average). We call this ‘free market ERP’ and it’s a complete departure from the ERP of the past. And salesforce.com just launched <a href="http://blogs.salesforce.com/company/2011/11/salesforcecom-launches-appexchange-mobile-a-marketplace-for-the-mobile-enterprise.html" target="_blank">AppExchange Mobile</a> to expand those apps onto the millions of mobile devices in the hands of business users.
In six years, the AppExchange has upset the closed world of on-premises based ERP and created a transparent marketplace where competition and collaboration drive innovation. Now, using Force.com-native apps available on the AppExchange, organizations can build a comprehensive, on-demand portfolio of applications that work together seamlessly. It means that organizations can better serve customers, differentiate themselves from competitors, and run a leaner, faster, more effective business. A no-brainer, but the pace of technological innovation has made it a reality only recently.
To millennials, who are used to instantly downloading an app to an iPhone, it’s become an expectation that innovative apps deploy easily and help people move their businesses forward. As the pace of technological change quickens and digitally-attuned millennials start to take the helm, imagine what will be possible in 10 years …

Paul Greenberg's CRM Watchlist

Tue, 10 Jan 2012 17:15:11 +0000

FinancialForce.com has been included in <a href="http://www.zdnet.com/blog/crm/crm-watchlist-2012-the-winners-list/3966" target="_blank">Paul's 2012 CRM Watchlist</a> as 'broad brush' winner. We are mentioned as out of category winners (we do not deal directly in CRM, although we add essential stuff for CRM) that will have an impact on CRM in 2012. Paul says:
"Financialforce - There is no doubt about this one. Financialforce has been a, if not the leader for back office financial applications for a long time. This year, which is why they are Broad Brush winners is their addition of a Professional Services Automation (PSA) services offering that puts them in the in between area between CRM and the back office. They have had a clear perspective from day one that they need to be tightly integrated with CRM, particularly, as I’m sure you’ve guessed, salesforce.com. These guys have nailed a position as a Broad Brush winner because they provide the contemporary ancillary services that CRM practitioners need to make their offering stronger. Never forget that."
A lot of time and research has gone into this listing and it's fascinating to see how the industry is changing. Congratulations to all the winners!

PSA, The Killer Social Application

Tue, 03 Jan 2012 08:30:00 +0000

Today, social users exceed email users and that trend is growing. As a new generation moves into today's businesses, they will expect to be using the best social collaboration tools - that's their world and this is the group that will shape the future of business. 
Projects are social by nature making professional services a perfect fit for social networking tools like Chatter. Professional Services organizations are more virtual than ever with vast extended teams including contracters and other third parties. Although we are already working socially, we're doing it the hard way - messaging, Skype and email for example are all disconnected from core business systems, with no audit trail and conversations only visible to a select few. It is difficult to run a successful and competitive services company in this context.
The industry is more competitive than ever, making it vital for firms to find areas of differentiation, where they can offer value over competitors. One of the biggest challenges firms face is managing virtual project teams in a way that makes them as effective as possible and delivers differentiation. The way to do this is through intellectual property development which will help PSOs to productize services, routinize services and help develop new competencies. 
In today's environment, how do firms know where their experts are and where their intellectual property resides? The firms that are leveraging social media and integrated CRM, PSA and Accounting applications are successfully creating <a href="http://www.financialforce.com/resources/product/demo-center/webinar-recordings/fetch/higher-bill-rates/" target="_blank">differentiation and higher bill rates</a>.
<img class="center" src="assets/_resampled/resizedimage395348-slide-for-psa-social-blog2.png" width="395" height="348" alt="" title=""/>
Chatter is an internal collaboration tool very much like Facebook that enables teams to collaborate in reference to any object on the Force.com platform, so it could be a Chatter stream related to a competitor, project, bid or invoice for example. Users can follow the status of a project or account and ensuing conversations enabling them to easily engage with the experts in the business. By connecting the experts in this way firms can build intelligence to help win projects and differentiate. Projects can be managed more effectively and consultants can help each other to learn.
<img class="center" src="assets/_resampled/resizedimage437328-slide-for-psa-social-blog_2.png" width="437" height="328" alt="" title=""/>
This topic is covered more extensively in a <a href="http://www.financialforce.com/resources/product/demo-center/webinar-recordings/fetch/social-media-in-psos/" target="_blank">recent webinar</a>, which provides more specific everyday use cases, clearly demonstrating the value of social media in professional services organizations. For those firms already benefiting, it’s no longer a question of the purpose of social collaboration tools, but how they can deliver even more differentiation.

Backstage at Business Cloud Summit 2011

Mon, 19 Dec 2011 11:00:00 +0000

Adrian Ivanov, VP Sales at FinancialForce.com. Speaking backstage at Business Cloud Summit 2011 about;
<ul><li>FinancialForce.com.</li>
<li>The changes FinancialForce.com is seeing in cloud computing markets.</li>
<li>How the mobile workforce is driving the uptake in cloud computing.</li>
<li>The use of social media in cloud computing applications. </li>
</ul>
<iframe
id='VideoFile_inline'
name='VideoFile_inline'
width='660'
height='429'
frameborder='0'
marginwidth='0'
marginheight='0'
style='visibility:hidden;'
onload='this.style.visibility="visible"'
scrolling='auto'
allowtransparency='true'
src='http://blog.financialforce.com/assets/bucket/demo/video/Webinar_Adrian_Ivanov_Business_Cloud_Summit_2011.mp4/standalone/?autostart=false'>
</iframe>

Why is pricing important?

Mon, 19 Dec 2011 09:00:00 +0000

In a labor-based business like professional services, profit comes from the right balance of revenue and costs. PSOs have a very high fixed labor cost so the two primary profitability levers are either lowering cost (sourcing strategies, limiting benefits and overhead, virtual business models, limiting discretionary spending on IT, travel, training and recruiting) or increasing revenue (higher bill rates, higher revenue per person, higher billable utilization). During three recessionary years most PSOs have focused intently on the cost side of the equation and are running very lean. Now with a glimmer of economic improvement it is time to focus on growing revenue through a combination of rate, market expansion and productivity enhancements. 
<h2>Pricing Strategies</h2>
The percentage of time and materials priced contracts across all markets and geographies was reported to be 58.8%. Each year a greater proportion of contracts across all verticals and geographies are fixed price reflecting client interest in shifting more risk and accountability to service providers. A comparison of pricing strategies across PS vertical markets reveals IT Consultancies and PSOs within software companies depend heavily on time and materials based pricing strategies. Hardware and Networking providers and SaaS PSOs have shifted the majority of their work to service packages and fixed price contracts while Management Consultancies favor time and materials based contracts but may include performance guarantees.
Interestingly, the percentage of fixed price contracts increases corresponding to the size of the organization. Presumably this is because larger organizations have more mature estimating and change management processes or because their larger enterprise clients demand this pricing structure. The smallest organizations offer the highest levels of shared risk or performance-based contracts which can be disastrous if they do not have adequate change provisions or tight scope control. For many professional service engagements, establishing a shared risk or performance-based model may be very difficult. From the PS Maturity™ Benchmark, shared risk projects are still in the minority with this pricing strategy deployed on less than 3% of all contracts. 
Service Performance Insight Founder and Managing Director, R. David Hofferberth, P.E., has over 25 years experience in information technology (IT) serving as an industry analyst, product director and consultant. Hofferberth’s research is focused on the services economy, and in particular, on white-collar productivity issues and the technologies that help people perform at their highest capacity.

Are your bill rates competitive?

Wed, 14 Dec 2011 09:00:00 +0000

Professional services organization (PSO) executives continue to ask about bill rates. They need this information to understand how their organization is positioned from a pricing perspective relative to the market, and to make decisions on how much more or less they should charge, depending on their own and their clients' perception of the business value they provide. They need bill rate information to push back on their sales and finance counterparts when asked for price concessions or PS margin improvement. 
Pricing information also provides insight into the health of the overall service market and a gauge for market expansion or contraction. And finally, pricing is one of the most visible and controllable levers service organizations have when seeking to improve profitability. 
In the past three years, as the market suffered from global economic doldrums, PSOs experienced significant bill rate pressure causing many firms to discount heavily and make price concessions to win business. In 2010 and through the first half of 2011 the economy appears to be growing again; although slowly, and bill rates have begun to rise. 
Until the recent debt crisis caused a new round of recessionary fears, the greatest challenge reported from 30 client phone interviews has been managing growth. After two years of layoffs, headcount cuts and salary freezes, many firms are hiring again but are finding few qualified resources. Firms are reinvigorating their recruiting pipelines and reinvesting in new-hire training and ramping programs. 
Increasingly, firms are expanding their recruiting horizons to include recent college graduates, home-based consultants, subcontractors and offshore and near-shore resources. The war for talent is driving increased resource management and pricing complexity, which means firms must constantly re-evaluate their pricing and staffing strategies. 
SPI Research recently published a new report the “2011 Professional Services Global Pricing Report” <a href="http://www.spiresearch.com/reports/rpt11PSPS.htm" target="_blank">(http://www.spiresearch.com/reports/rpt11PSPS.htm)</a>, which surveyed over 200 firms from around the world representing nearly 12,000 consultants. The report analyzes bill rates by job title, geography and PS vertical to show published and realized rates around the globe. The following sections highlight some of the key findings of the report. 
<h2>Published versus realized rates</h2>
This study compares PSOs' published bill rates versus realized bill rates. In other words, the actual hourly bill rate firms receive. In general, realized rates are approximately 80 to 90 percent of published list rates. The difference between published and realized rates reflects both discounts and written-off consulting hours. 
The report examines four primary job categories (management, project management, business consulting, and technical consulting), with three corresponding experience levels per job family. For the 12 job titles SPI Research analyzed in this report, technical consultants achieved the highest percentage of realized rates with a realized rate of 90 percent of the published rate. Interestingly, SPI Research found the greatest disparity between published and realized rates was associated with the most senior level positions in each job category. In other words, the most senior resources in any job category commanded the highest list rates but also reported the highest levels of discounting. Key questions around lower price realization are: Is the high level of discounting due to an excessively high target bill rate? Or is there more room for discounting because of a higher list rate? Or is it hard to establish incremental value for more senior resources? SPI Research suspects the answer is based on a combination of these factors. 
Service Performance Insight Founder and Managing Director, R. David Hofferberth, P.E., has over 25 years experience in information technology (IT) serving as an industry analyst, product director and consultant. Hofferberth’s research is focused on the services economy, and in particular, on white-collar productivity issues and the technologies that help people perform at their highest capacity.

The cause and effect of higher bill rates

Wed, 07 Dec 2011 11:02:59 +0000

Price realization based on realized bill rates in combination with billable utilization is a leading indicator of the overall quality and differentiation of the professional services (PS) organization. The fact that PS organizations with the highest bill rates and price realization tend to reinvest profit into their employees leads to a continuing improvement cycle.
Highly skilled, well-trained, motivated and loyal consultants undoubtedly produce the best client results. In turn, satisfied clients provide referrals and buy additional services resulting in improved sales effectiveness.
The correlation between high bill rates and employee investment resulting in superior project delivery metrics and overall financial profit is one of the consistent themes we have seen through five years of benchmarking over 800 service organizations. But bill rates only tell a small part of the story. Rates are primarily governed by the market, the types of services provided, and the reputation of the firm. SPI Research has seen management consulting senior partner daily rates as high as $8,000, but the top strategic management consultancies do not publish their rates, nor are they visible to their clients. These rates are justified based on the significant “bet your business” types of projects these firms deliver; high rates are indicative of the strategic business value provided.
At the other end of the spectrum, the lowest bill rates are shown in the hardware and networking sector, where providers are still primarily focused on implementation and have not yet moved to more strategic consulting services. Staff augmentation garners low rates because the client assumes almost all of the responsibility for successful business outcomes – clients are buying a “body” with a specific skillset as opposed to a project based on a defined business outcome.
Service Performance Insight Founder and Managing Director, R. David Hofferberth, P.E., has over 25 years experience in information technology (IT) serving as an industry analyst, product director and consultant. Hofferberth’s research is focused on the services economy, and in particular, on white-collar productivity issues and the technologies that help people perform at their highest capacity.

PSOs - improve billable utilization substantially

Thu, 01 Dec 2011 00:00:00 +0000

Research and consulting firm Service Performance
Insight (SPI) recently released findings from a <a href="http://www.financialforce.com/resources/research/professional-services-automation/crm-psa-integration-spi/">survey</a> of more than <a href="http://www.financialforce.com/resources/research/professional-services-automation/crm-psa-integration-spi/">200 Professional Services Organizations</a> (PSOs)
that showed the lack of integration between professional services automation
(PSA) and CRM, backed by Financials is limiting their growth and success.
<img class="left" src="assets/Uploads/blog/_resampled/resizedimage670537-graph-margin-vs-utilization_2.png" alt="Professional Services Economics - Margin vs Utilization" width="670" height="537" title=""/>
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. 
<table class="standard data" style="width: 670px;" border="0"><tbody><tr><th>FTE</th>
<th>Cal hrs</th>
<th>UTE</th>
<th>Cost</th>
<th>Bill rate</th>
<th>Total Cost</th>
<th>Total Rev</th>
<th>Margin</th>

</tr><tr><td>200</td>
<td>2080</td>
<td style="background: #CF7A78">66.0%</td>
<td>$250,000.00</td>
<td>$170.00</td>
<td>$50,000,000.00</td>
<td>$46,675,200.00</td>
<td>-$3,324,800.00</td>
<td> </td>
</tr><tr><td>200</td>
<td>2080</td>
<td style="background: #CF7A78">68.0%</td>
<td>$250,000.00</td>
<td>$170.00</td>
<td>$50,000,000.00</td>
<td>$48,089,600.00</td>
<td>-$1,910,400.00</td>
<td> </td>
</tr><tr><td>200</td>
<td>2080</td>
<td style="background: #CF7A78">70.0%</td>
<td>$250,000.00</td>
<td>$170.00</td>
<td>$50,000,000.00</td>
<td>$49,504,000.00</td>
<td>-$496,000.00</td>
<td> </td>
</tr><tr><td>200</td>
<td>2080</td>
<td style="background: #CCFFCC">72.0%</td>
<td>$250,000.00</td>
<td>$170.00</td>
<td>$50,000,000.00</td>
<td>$50,918,400.00</td>
<td>$918,400.00</td>
<td> </td>
</tr><tr><td>200</td>
<td>2080</td>
<td style="background: #CCFFCC">74.0%</td>
<td>$250,000.00</td>
<td>$170.00</td>
<td>$50,000,000.00</td>
<td>$52,332,800.00</td>
<td>$2,332,800.00</td>
<td> </td>
</tr><tr><td>200</td>
<td>2080</td>
<td style="background: #CCFFCC">76.0%</td>
<td>$250,000.00</td>
<td>$170.00</td>
<td>$50,000,000.00</td>
<td>$53,747,200.00</td>
<td>$3,747,200.00</td>
<td> </td>
</tr><tr><td>200</td>
<td>2080</td>
<td style="background: #CCFFCC">78.0%</td>
<td>$250,000.00</td>
<td>$170.00</td>
<td>$50,000,000.00</td>
<td>$55,161,600.00</td>
<td>$5,161,600.00</td>
<td> </td>
</tr><tr><td>200</td>
<td>2080</td>
<td style="background: #CCFFCC">80.0%</td>
<td>$250,000.00</td>
<td>$170.00</td>
<td>$50,000,000.00</td>
<td>$56,576,000.00</td>
<td>$6,576,000.00</td>
<td> </td>
</tr><tr><td colspan="9"> </td>
</tr><tr><th>FTE</th>
<th>Cal hrs</th>
<th>UTE</th>
<th>Cost</th>
<th>Bill rate</th>
<th>Total Cost</th>
<th>Total Rev</th>
<th>Margin</th>
<th style="text-align: left;">Notes</th>
</tr><tr><td>200</td>
<td>2080</td>
<td style="background: #CF7A78">70.0%</td>
<td>$250,000.00</td>
<td>$170.00</td>
<td>$50,000,000.00</td>
<td>$49,504,000.00</td>
<td>-$496,000.00</td>
<td style="whitespace:no-wrap; text-align: left; font-weight: bold;">This is the baseline</td>
</tr><tr><td>200</td>
<td>2080</td>
<td style="background: #CCFFCC">72.8%</td>
<td>$250,000.00</td>
<td>$170.00</td>
<td>$50,000,000.00</td>
<td>$51,484,160.00</td>
<td>$1,484,160.00</td>
<td style="whitespace:no-wrap; text-align: left; font-weight: bold;">72.8% is a 4% increase from 70%. $2M swing</td>
</tr></tbody></table>

How sociable do we have the capacity to be?

Mon, 28 Nov 2011 10:27:04 +0000

Many cloud apps vendors are starting to talk about building new social tools. Marketo CEO said last week that marketing automation should move beyond the prospect funnel and help manage engagement throughout the customer lifecycle by <a href="http://www.zdnet.com/blog/saas/marketo-looks-to-buy-into-social/1448?tag=search-results-rivers;item8" target="_blank">moving into social</a>. Of course he would say that, but it raises a more fundamental question about how organizations are going to manage such an array of social tools in the future.
If all apps are going to be social, then there will be so many places to be social, how will users know what to use when and where to go for what?
It’s easy to jump on the bandwagon but as always, vendors need to think about the business value of such tools. Perhaps ‘social’ is the domain of the cloud platform rather than cloud apps vendors – so users have a single social stream like Chatter running across all their applications on a single cloud platform like Force.com?
Only time will tell, but already we’re seeing the beginnings of social fatigue in the wider marketplace – Google+ a case in point.

Down about Uptime

Mon, 21 Nov 2011 10:22:14 +0000

Quickbooks users (whether on prem or online) will have some tough questions for the vendor following downtime on Monday and early Tuesday morning last week. It wasn’t widely reported but must have created a significant problem for users. <a href="http://www.tgdaily.com/business-and-law-features/59662-quickbooks-goes-down-but-no-one-cares" target="_blank">TG Daily correctly points out</a> that downtime can have a serious impact on accountants, especially when it hits on a payroll day. (Ed: we don’t subscribe to TG Daily’s thinking that accountants are stuffy with a difficult disposition. Well, not many anyway ;-) 
As the cloud takes hold, security and downtime are being talked about a lot. Although the former seems to be less of an issue as end users, including the largest financial institutions in the world, realize they have been using cloud services for years without incident. 
Uptime (forgive me, I want to be more positive about this), on the other hand, is one area where cloud platforms like Force.com really distinguish themselves. Imagine having the visibility and transparency of <a href="http://trust.salesforce.com/trust/security/">http://trust.salesforce.com/trust/security/</a> across all your business applications. If there is planned downtime you’ll know well in advance. If it’s unplanned, which rarely happens, it’s remedied fast. 
Surely that removes much of the headache for the IT department. And it should make the business users feel even better, since as TG Daily summarizes, “financial sites going down are a real drag and can affect the everyday lives of ordinary people like you, me and the person sitting next to you in that ugly cubicle.”
It has to be a serious consideration when considering your cloud application strategy.