TSW Review: Risk and Opportunity for Services Organizations in 2013

NetSuite has returned from the Technology Services World (TSW) 2012 show in Las Vegas,
where the Technology Services Industry Association (TSIA) pulls together leaders from the services industry to discuss trends and best practices. NetSuite is proud to sponsor this event, and it was great to see so many of our customers learning more about services and discussing how NetSuite helps them run their services business more efficiently and more effectively. Our customers are our best marketing, and we thank you for your support!

TSIA Executive Director Thomas Lah continues to impress us with his insights on industry trends and outstanding research into professional services. One theme of the TSW show, reflecting what seems to be occurring in our US economy overall, is that firms aren’t necessarily staffing up in great numbers, but work is increasing and target consultant utilization will be increasing in 2013. Doing more with less is always challenging, but for an industry that still predominantly bills by the hour, there is no way to avoid the increased burden on the consultants who deliver results.

Higher Target Utilization

Most services organizations set realistic utilization targets for employees, and these utilization numbers help drive organizational profitability, as well as employee bonus calculations. By increasing the target utilization, an organization is obviously looking to perform an increased amount of work without hiring any more consultants. The motivation for this is not increased profitability, but a fear of onboarding new consultants based on uncertainty over the economic future.

So for consultants, the bad news is more worked hours, but the good news might be increased compensation as firms realize that they need to keep their productive consultants. But along with these financial gains comes a big risk—consultant burnout.

Higher Risk of Consultant Burnout

A fear of every consulting manager is the burnout conversation. Productive consultants bill many hours and most do significant travel. Furthermore, given the typical bonus structure for consultants, too many consultants take too little vacation, as they strive for high numbers of billable hours. Factor in higher utilization targets, and the risk of burnout is even higher. Proactive organizations will monitor this risk, balancing high-travel projects with low-travel projects and enforcing mandatory vacation policies.  Unfortunately for consultants who strive for more work-life balance, the industry is moving in a direction that will ask more of you, at least in the short term.

Larger Backlog

Doing more work with the same number of consultants will have a customer-facing impact—larger backlog. Successful services organizations will continue to sell more projects, and the lag time from closing a sale to beginning the engagement will likely be increasing. Managing backlog is nothing new for a successful services organization— balancing customers who demand immediate response with those customers who are “next in line” is never easy.  

The good news for customers is that the consultants who work on their engagements are likely to be seasoned delivery experts, but the bad news is those expert consultants might start the project a week or two later than the customer would wish.

The New Dynamics of 2013

The workload for successful services firms will increase in 2013. This means that keeping consultants happy and customers enthusiastic will be challenging. But these challenges present opportunities for those firms able to take advantage of the new dynamics.

Perhaps 2013 is the year to introduce more packaged offerings and fixed price offerings, with a higher margin. Perhaps this is the year to invest in partner support, broadening your ability to service customers beyond your employee base. Now is the time to think about your own challenges in 2013, and your keys to making these challenges a benefit
to your organization.

Implementing a PSA tool can help you track KPIs to monitor these challenges. It will be even more important to track utilization in real time, to know which projects require travel and which ones don’t, to manage customer expectations around engagement timing, and to measure your profitability. NetSuite can help you overcome these challenges, as our customers at TSW proclaimed.

-Ed Marshall - General Manager, Professional Vertical

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