Service Performance Insight.

Transcription

1 Service Performance Insight

2 Service Performance Insight Service Performance Insight (SPI Research) is a global research, consulting and training organization dedicated to helping professional service organizations (PSOs) make quantum improvements in productivity and profit. In 2007, SPI Research developed the PS Maturity Model as a strategic planning and management framework. It is now the industry-leading performance improvement tool used by over 10,000 service and project-oriented organizations to chart their course to service excellence. The core tenet of the PS Maturity Model is service organizations achieve success through the optimization of five Service Performance Pillars : Leadership Vision, Strategy and Culture Client Relationships Human Capital Alignment Service Execution Finance and Operations The SPI Advantage Research Service Performance Insight provides an informed and actionable independent third-party perspective for clients and industry audiences. Our market research and reporting form the context in which both buyers and sellers of information technology-based solutions maximize the effectiveness of solution development, selection, deployment and use. The SPI Advantage Consulting Service Performance Insight brings years of technology service leadership and experience to every consulting project. SPI Research helps clients ignite performance by objectively assessing strengths and weaknesses to develop a full-engagement improvement plan with measurable, time-bound objectives. SPI Research offers configurable programs proven to accelerate behavioral change and improve bottom line results for our clients. To provide us with your feedback on this research, please send your comments to: david.hofferberth@spiresearch.com or jeanne.urich@spiresearch.com For more information on Service Performance Insight, please visit: The information contained in this publication has been obtained from sources Service Performance Insight believes to be reliable, but is not guaranteed by SPI Research. All forecasts, analyses, recommendations, etc. whether delivered orally or in writing, are the opinions of SPI Research consultants, and while made in good faith and on the basis of information before us at the time, should be considered and relied on as such. Client agrees to indemnify and hold harmless SPI Research, its consultants, affiliates, employees and contractors for any claims or losses, monetary or otherwise, resulting from the use of strategies, programs, counsel, or information provided to client by SPI Research or its affiliates. The trademarks and registered trademarks of the corporations mentioned in this publication are the property of their respective holders Service Performance Insight, Liberty Township, Ohio

3 Copyright Notice Service Performance Insight trademarks Professional Services Maturity Model, Professional Services Maturity Benchmark Report, Service Performance Pillars, Service Lifecycle Management Maturity Model, and SLM3. The information contained in this publication has been obtained from sources Service Performance Insight believes to be reliable, but is not guaranteed by SPI Research. The trademarks and registered trademarks of the corporations mentioned in this publication are the property of their respective holders. This document is the result of primary research performed by SPI Research. SPI Research s methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by SPI Research and may not be reproduced, distributed, archived or transmitted in any form or by any means without prior written consent by SPI Research. You may download this report and print a copy for your personal use, but you may not distribute it, reproduce it, or alter it in any way or store it in a retrieval system without prior written consent. Service Performance Insight (SPI Research) is a global research, consulting and training organization dedicated to helping professional service organizations (PSOs) make quantum improvements in productivity and profit. In 2007, SPI Research developed the PS Maturity Model as a strategic planning and management framework. It is now the industry-leading performance improvement tool used by over 10,000 service and projectoriented organizations to chart their course to service excellence. SPI Research provides a unique depth of operating experience combined with unsurpassed analytic capability. We not only diagnose areas for improvement but also provide the business value of change. We then work collaboratively with our clients to create new management processes to transform and ignite performance. Visit for more information on Service Performance Insight, LLC Service Performance Insight

4 Table of Contents 1. Introduction... 1 What makes Project-Based ERP different?... 1 Project-Based ERP Defined Market Trends... 3 Strategic Considerations... 3 Technology Trends Project-based ERP Solutions Project-Based ERP Benefits... 8 Departmental versus integrated?... 9 Do you need an integrated ERP solution? Core Business Processes Quote-to-cash business processes Recruit-to-retire business processes Project-Based ERP Vendor Overview Primary Project-based ERP Application Providers Project-Based ERP Differentiators Selection Process Important Considerations Conclusions and Recommendations About Service Performance Insight Figures Figure 1: Project-based ERP Solutions Dashboard... 2 Figure 2: Success depends on inter-departmental cooperation... 3 Figure 3: Operating in Silos... 9 Figure 4: Suite vs. Best-of-breed Preference... 9 Figure 5: Primary Business Processes Cross Multiple Departments Figure 6: Quote-to-Cash Process Figure 7: Recruit-to-Retire Workforce Processes Figure 8: ERP Selection Process Service Performance Insight i

5 Tables Table 1: The Value of Integrated Client Relationship Management (CRM)... 5 Table 2: The Value of Integrated Professional Services Automation (PSA)... 6 Table 3: The Value of Integrated Human Capital Management (HCM)... 7 Table 4: The Value of Integrated Business Intelligence (BI)... 7 Table 5: The Benefit of an Integrated ERP Solution... 8 Table 6: Departmental Requirements and Primary Applications Table 7: Integrated ERP Checklist Table 8: Project-based Enterprise Resource Planning (ERP) Solution Providers Table 9: ERP Solution Providers for Project-Based Organizations Table 10: Project-based ERP Solution Differentiators Table 11: Selection Process Table 12: ERP Deployment Considerations Service Performance Insight ii

6 1. INTRODUCTION The growth engine of the world s economy has shifted from manufacturing to project-based, peoplecentric services businesses. These businesses rely on project-based Enterprise Resource Planning (ERP), also known as Services Resource Planning (SRP), applications to manage the financial aspects of the firm. These solutions automate core business processes such as quote-to-cash, resource and talent management, time capture and billing, and provide the real-time visibility necessary to improve organizational efficiency and effectiveness. Globalization, centralization, modernization and regulatory compliance are the key drivers for continued ERP investment among large project-based organizations. But the service industry is dominated by small and midsize firms; their growth has consistently outpaced the overall market. According to SPI s extensive service economy research, merely 5% of more than 1,500 organizations surveyed have not yet invested in an enterprise financial management system. Only the smallest organizations still rely on spreadsheets to manage finance and accounting. Small and mid-size service-oriented firms are buying new project-based ERP systems to replace legacy, on-premise solutions and to consolidate a hodgepodge of point solutions and spreadsheets onto a single platform. This project-based ERP Buyer s Guide provides an overview of important trends, business processes and selection criteria to help project-based businesses evaluate and choose ERP applications, which will provide the level of insight, management and control needed to improve productivity and profitability. What makes Project-Based ERP different? Services firms are uniquely people-driven organizations. They depend on the knowledge and skills of a talented workforce to sell, staff and deliver a range of services typically on a project or contract basis. The fundamental financial requirements of service-based businesses are very different from classic manufacturing and supply-chain focused ERP applications as they must include functionality for managing resources (people) and projects (tasks). Increasingly, project-based ERP application providers also add rich talent management capabilities to support recruiting, on-boarding, compensating and rewarding the employees who are the core asset of service-based businesses. Project- and service-based extensions to enterprise ERP applications started to appear in the late 1990 s at the same time as stand-alone Professional Service Automation (PSA) solutions supporting resource scheduling and time capture and billing became available. Over the past fifteen years project accounting, resource management and time capture and billing modules have been added to many ERP applications. Now most project-based ERP providers also add Human Capital Management (HCM) or talent management extensions to accentuate the important role that recruitment and engagement of a talented workforce has in today s economy. Support for specialized billing methods and complex revenue recognition rules for time and materials, work-in-process, deliverables-based or percentage completion are also important project-based ERP extensions Service Performance Insight 1

7 Client Relationship Management Figure 1: Project-based ERP Solutions Dashboard (CRM) has come to the fore to improve sales and marketing effectiveness so the capability of the vendor s own CRM application, or its ability to easily integrate with stand-alone CRM applications, is an increasingly important consideration. Project accounting and resource capacity planning are also important extensions which few classic manufacturing-oriented ERP applications do well. The key performance driver is out-of-thebox integration for greater visibility. Modern systems provide consistent, powerful dashboards giving team members the information they need to make informed decisions. Project-Based ERP Defined A project-based ERP system is an integrated information management system that manages the capture and flow of information across departments and functions. It includes a common enterprise-wide database and various application modules to support fundamental business activities, such as accounting, finance, sales, marketing, resource and project management and human resources. An ERP system is used to standardize business processes and provide reports, insight and control for both revenue and costs. The value of such a system is to enable critical information to be analyzed and shared across the organization for more insightful and timely decision-making. For purposes of this Buyer s Guide, SPI Research considers Project-Based ERP solutions to have several modules that include: Financial Management: The fundamental solution required to accurately collect and report financial transactions. Client Relationship Management (CRM): The automation of client relationship processes to improve sales and marketing efficiency and effectiveness. Professional Services Automation (PSA): The initiation, planning, execution, close and control of projects and services through the management and scheduling of resources that include people (both internal and partners), materials and equipment. Human Capital Management (HCM): Talent management solutions for recruiting, hiring, compensation, goal-setting and career and performance management which rely on integration with and extracts from the employee database. Business Intelligence (BI): The assembly and use of information to improve decision-making Service Performance Insight 2

8 2. MARKET TRENDS The selection of a project-based ERP application is one of the most important investment decisions most organizations will make. Not to be taken lightly, the evaluation should include both current and future business requirements along with an understanding of market conditions and technology trends. Strategic Considerations Within project-based businesses, the core work is accomplished by Figure 2: Success depends on inter-departmental cooperation self-managing work teams that quickly come together to accomplish specific tasks. Staffing, managing and collecting time and expense and billing for projects is the principal ERP functionality required by project-centric organizations. Project-based ERP solutions must provide visibility into project accounting with budget-to-actual comparisons for both costs and revenue. These organizations also require powerful tools for planning, reporting and budgeting which support trend analysis and what if scenario and resource capacity planning. Choosing a new ERP solution is a major decision. Clearly defining requirements and fundamental business processes helps prioritize required versus nice-to-have functionality. Strategic considerations driving project-based ERP decisions include: Strategy: Leaders in project-based organizations must constantly refine their strategies to remain competitive and to attract the best and brightest talent. Leading performers in SPI Research s annual benchmark studies tend to be focused on high-growth niche areas, industries or particular business processes. This specialization enables them to focus on building differentiation and depth in their portfolio. Marketing and Sales: Marketing and Sales is, and always will be critical to success in any type of organization. The need to offer greater repeatability in service offerings has given rise to productized (packaged) services. This emphasis enables project-based organizations to sell services more like products, with less variability in the time and cost necessary to deliver the service, along with higher levels of differentiation and quality. Talent: Project-based organizations have reported it has become increasingly difficult to find, hire and retain qualified personnel, especially those with critical skills in science, technology, 2014 Service Performance Insight 3

9 engineering and math (STEM). The emerging Talent Cliff has caused project-based organizations to concentrate more heavily on employee-related issues. Service Delivery: Limited resources, higher employee costs, more demanding clients and shorter project durations have forced project-based organizations to improve project and service delivery. The importance of building repeatable project and quality processes has become paramount. Financial: Project-based organizations have become more complex. Now, geographic expansion, increased numbers of mergers and acquisitions, accompanied by greater regulatory scrutiny dictate the need for greater operational visibility and control. This additional level of control mandates the need for a global information infrastructure. Technology Trends SMAC (Social, Mobile, Analytics and big data, and Cloud) is a new acronym for the technology trends dominating the services landscape in SMAC and its underlying technologies have caused a seismic shift in technology buying. Power and control have shifted to employees and business executives, away from the IT domination of the past. Social media-fueled buying behaviors and perceptions have eclipsed IT-centric product and feature selling. These new technologies have ushered in a wave of employee and line of business buying power. Social: Buyers expect new applications to be socially aware, with Facebook-like functionality for crowdsourcing, instant messaging and telling a friend. Built-in connection and integration with the major social channels is becoming mandatory. Mobile: Support for a variety of mobile devices is no longer a nice to have, but a gotta have, meaning vendors must offer out-of-the-box integration and support for ios and Android devices while supporting emerging mobile standards. Analytics and Big Data: Much has been said and written about Big Data, especially as a means for legacy enterprise application providers to remain relevant. The answer lies not only in access to massive, virtual storage, but also in developing a workforce that can understand and use statistics to power business decisions. Analytic engines and technology often surpass the analytic skills and competencies of business users who have to make sense of it all. Graphical reporting, dashboards and availability of out-of-the box management reports have become mandatory. Cloud: The debate over cloud-based applications is over. The market has accepted and embraced the new software as a service model. Every leading provider of enterprise applications is now focused squarely on the cloud. Although typically smaller, and less expensive, today five cloudbased solutions are sold for every one on-premise solution Service Performance Insight 4

10 3. PROJECT-BASED ERP SOLUTIONS ERP vendors segment their products into application modules that emphasize the management of costs, clients and resources. Service Performance Insight highlights the five primary application modules that an ERP solution should have to support project-based businesses in the following sections. Enterprise Resource Planning (ERP) or Financial Management Financial Management or Enterprise Resource Planning (ERP) is the primary accounting solution required to accurately collect, bill, and report financial transactions. ERP provides the master general ledger database for accounts payable, billing, revenue and cash management. It provides the foundation for budgeting, revenue planning and forecasting by collecting and managing both revenue and cost information. The ERP system provisions Professional Service Automation (PSA) and Human Capital Management (HCM) applications with client, employee and cost information. Billing can occur either within the PSA or the ERP application but once bills are generated collection and revenue accounting occurs within the ERP application. Client Relationship Management (CRM) Table 1: The Value of Integrated Client Relationship Management (CRM) KPI No CRM Standalone CRM Integrated CRM Year-over-year increase in PS revenue 7.4% 12.3% 12.4% % of total revenue from new clients 29.9% 33.5% 37.4% Deal pipeline relative to quarterly bookings forecast 154% 208% 217% Annual revenue per billable consultant (k) $197 $203 $211 EBITDA % 13.9% 12.8% 16.5% Source: Service Performance Insight, September 2014 Client Relationship Management (CRM) supports the management of client relationships to improve sales and marketing effectiveness. CRM is based on a master client database, which records and manages the client opportunity lifecycle. CRM automates lead, contact and campaign management, sales pipeline forecasting and territory management. Opportunities are tracked through sales stages in which leads are converted into closed 2014 Service Performance Insight 5

11 deals. CRM may include marketing automation software to capture and automate customer touch points from both inbound marketing activities and outbound lead generation campaigns. CRM allows organizations to track clients throughout the sales lifecycle, and to specifically target customer segments by understanding details of the relationship. Table 1 demonstrates that the value of a CRM investment is multiplied when the CRM application is integrated with the core ERP application. Professional Services Automation (PSA) Professional Service Automation (PSA) provides the systems basis for initiation, planning, resource management, scheduling, execution, close and control of projects and services. PSA provides a resource and project dashboard and demand forecast. It helps manage service delivery by overseeing opportunities, staffing, project management, and collaboration, combined with accurate and timely expense and time Table 2: The Value of Integrated Professional Services Automation (PSA) KPI No PSA Standalone PSA Integrated PSA % of employees billable or chargeable 73.0% 75.5% 75.7% Average project duration (man-months) Projects canceled 2.1% 2.0% 1.9% A standardized delivery methodology is used 64.4% 65.2% 67.5% Annual revenue per billable consultant (k) $189 $203 $216 Annual revenue per employee (k) $156 $166 $181 capture. PSA manages all aspects of service and project delivery and resource management based on project data. Table 2 shows the value of a PSA investment is amplified when it is integrated with the core ERP application. Source: Service Performance Insight, September 2014 Human Capital Management (HCM) Human Capital Management (HCM) solutions (also known as talent management) give employers the tools to effectively recruit, manage, evaluate and compensate employees. By tracking performance, skills and career progression, HCM helps companies develop and maintain a high-performance workforce. Software modules may include the employee database or employee database extract, payroll, benefits, recruiting, employee learning, skills, compensation, performance management, career and succession planning each of which help organizations manage personnel growth and development Service Performance Insight 6

12 Table 3: The Value of Integrated Human Capital Management (HCM) KPI No HCM Standalone HCM Integrated HCM Year-over-year change in PS headcount 8.2% 10.0% 10.1% % of PS revenue delivered by 3rd-parties 11.9% 12.6% 15.1% Employee to management ratio Average project staffing time (days) Average project staff (people) EBITDA 13.3% 13.6% 17.3% Source: Service Performance Insight, September 2014 Table 3 shows the value of HCM solutions burgeons when the HCM solution is part of an integrated ERP solution. Management span of control expands while the time it takes to staff projects decreases due to better visibility to in-demand skills, allowing firms to synchronize their recruiting with demand. Business Intelligence (BI) Business Intelligence also known as reporting and analysis aggregates information from primary business applications to improve reporting and analysis, demand and capacity planning, budgeting, forecasting and financial planning. Adoption of BI solutions continues to increase with the advent of powerful graphical reporting and analysis tools. As Table 4: The Value of Integrated Business Intelligence (BI) KPI No BI Standalone BI Integrated BI Size of PS organization (employees) Annual company revenue (mm) $74.4 $231.2 $264.1 Quarterly revenue target in backlog 43.1% 45.3% 50.0% % of annual revenue target achieved 91.0% 92.7% 95.3% % of annual margin target achieved 87.6% 90.9% 93.3% EBITDA 13.1% 16.4% 16.0% Source: Service Performance Insight, September 2014 organizations mature, BI becomes a more critical tool to provide real-time visibility to all aspects of the operation allowing executives to spot trends and take corrective action early. Trend and what-if analysis, and scenario and capacity planning are used to support accurate forecasting, planning and budgeting. Other Modules There are many other integrated modules sold by ERP vendors. Recruiting and knowledge management modules along with social collaboration and anytime access from mobile devices are becoming essential requirements. Take the time to understand which modules your organization needs as well as how the vendor supports integration with your current legacy and planned future applications Service Performance Insight 7

13 4. PROJECT-BASED ERP BENEFITS Each year SPI Research s Professional Services Maturity benchmark quantifies the benefits achieved by services organizations with solutions that integrate Client Relationship Management and financial processes, Human Capital Management and financial processes, and Professional Services Automation and financial processes. Of course, the systems themselves are only part of a broader firm-wide commitment to behavioral change that fosters collaboration and enhanced communication, coordination and quality management. When it comes to financial software, project-based organizations now have a range of attractive choices systems that are designed to support the needs of the always-on, virtual, mobile service economy by providing a number of key benefits: project revenue and cost data is contained in a central database; the user interface is consistent across all applications; costs and deliverables reside in the same place so productivity can be measured, analyzed and improved at the territory, account, project and individual resource level; reporting and analytics are embedded within the application, alerting decisionmakers to issues before they become problems; Table 5: The Benefit of an Integrated ERP Solution a more seamless audit trail is provided to better identify success and failure points; enhanced support for global operations with multicurrency, multilingual applications, which conform to local regulations and taxes; new multi-tier project-based ERP applications support both the needs of corporate and subsidiary organizations with global control and visibility combined with cost-effective local extensions and management; improved cash management based on improved billing and faster financial period close; lower administration costs due to fewer manual, error-prone spreadsheets and costly data reentry; and, One-source of the truth real-time information visibility, constantly updated. KPI Integrated ERP Standalone ERP Delta EBITDA 16.7% 13.2% 27% Annual revenue per billable consultant (k) $213 $203 5% Revenue per employee (k) $269 $240 12% Project Margin 36.8% 34.4% 7% Concurrent projects managed by PM % Average project staffing time (days) % Deal pipeline relative to quarterly bookings forecast 227% 200% 14% Executive real-time visibility (out of 5) % Source: Service Performance Insight, September Service Performance Insight 8

14 There are many more benefits provided by integrated project-based ERP solutions. It is intuitively obvious that with one consistent set of information, decision-makers have the visibility and control they need to improve organizational performance. Departmental versus integrated? As service organizations grow in size and scope, the needs of the Figure 3: Operating in Silos organization increase. Nowhere is this more evident than in the information infrastructure. Many project-based organizations operate in functional silos, meaning each department uses stand-alone applications to improve specific departmental processes. While the benefits to each department might be significant, does the overall organization prosper if departments do not communicate and collaborate? According to SPI Research, Figure 4 shows centralized finance and IT organizations favor the purchase of a single integrated, project-based ERP application to Figure 4: Suite vs. Best-of-breed Preference ensure consistency and visibility across all aspects of the business. Independent service organizations require a powerful, integrated financial management application to ensure revenue and costs are kept in balance. Embedded service organizations within larger product-oriented firms have traditionally favored best-of-breed departmental PSA and CRM applications for greater autonomy and control. But now with the advent of powerful project-based ERP applications, finance, IT and departmental leaders can all have access to a central ERP application which also provides the departmental support they need for sales, service delivery and talent management. Source: Service Performance Insight, September Service Performance Insight 9

15 Table 6: Departmental Requirements and Primary Applications Department Core Requirements Primary Applications Executive & Administrative Human Resources Strategic planning, budgeting, management reporting, decision support Payroll, Benefits, Recruiting, Hiring, Training, Compensation, Performance and Career Management Business Intelligence, Budgeting & Planning Legal Patents, law suits, contract management and approvals Case Mgmt. Finance & Accounting Marketing & Sales Financial management, operations, planning, forecasting, budgeting. Time & expense capture, billing, collections. Marketing automation, sales force automation, account, contact and territory management, pricing & proposals. Purchasing Material, equipment and external service procurement. Procurement Service Delivery Information Technology Research & Development Estimating, Project Management, Resource management and staffing, Knowledge Management and Collaboration, Quality Management. Web 2.0 social networking tools and web and video conferencing and remote service delivery tools. Project scheduling, technology evaluation, systems development and implementation New service development; knowledge sharing; template, tool and methodology development HCM ERP, Financials, Budgeting & Planning, BI CRM (PSA) Project Mgmt, Resource Mgmt., Knowledge Mgmt., Collaboration Remote Service Delivery Application Lifecycle Mgmt., Project Portfolio Mgmt. Knowledge Mgmt., Product Mgmt. Do you need an integrated ERP solution? The primary driver of ERP selection is real-time visibility and control of the financial aspects of the business. If the answer is yes to the following questions it may be time to consider an ERP purchase. Table 7: Integrated ERP Checklist Y/N Question Have you outgrown your current systems? Do you have more than 20 employees? Are your current financial applications outdated and expensive to update and maintain? Have you or are you planning to expand globally? Can you support multinational currencies, regulations and taxes? Is it important to have access to information in real time? Do departments need to share information to better plan and execute? Does it take too long to manually collect time and expense to bill clients? Are invoices inaccurate making it hard to collect? Does it take several days to manually close the books? Do you have visibility to the sales pipeline and project backlog to quickly and accurately forecast demand? Do you know most in demand skills and can you forecast demand to begin recruiting? Do you look to improve service sales and service delivery consistency? Are you ready to adopt consistent sales and delivery methods? 2014 Service Performance Insight 10

16 Y/N Question Has assigning resources and managing projects by spreadsheet and become overwhelming? Do you have low utilization levels (or do you even know your billable utilization)? Do you know your project margins (by client, practice, region and consultant)? Are they acceptable? What initiatives do you plan to emphasize over the next year to improve performance, and will your underlying information infrastructure need to change? Remember, all operations begin with financials. The financial (or core ERP) solution is the most important solution in your organization as it supports finance, accounting and operations by recording financial transactions, costs and revenue to ensure regulatory compliance and reporting. 5. CORE BUSINESS PROCESSES The power of modern project-based ERP solutions is that they provide workflow, rules, alerts and reporting, which mimic best practices in business management. Decades ago services businesses had few viable options as they were forced to build their own, or substantially customize manufacturingoriented ERP applications, to handle projects and resources. Now, the project-based ERP providers highlighted in this Buyer s Guide provide modules which support essential business processes, which include Quote-to-Cash and Recruit-to-Retire human capital management. Figure 5: Primary Business Processes Cross Multiple Departments Project-based ERP solutions are designed to integrate core business processes across the organization so that each department has a clear understanding of their specific goals and measurements and how they ultimately impact the organization s ability to succeed. Success can be defined in many terms, such as growth, profit, quality, streamlined operations or reduced administration and rework. Regardless, when everyone works with the same set of information and is focused on the critical path to complete projectbased work, results tend to improve. The most important reason why project-based organizations purchase integrated ERP solutions is their ability to support and streamline business processes across the entire organization. No longer can solutions only provide visibility into specific functions. Now, as each department adds value, the business processes that enable success must be mirrored in the ERP solution. The following sections 2014 Service Performance Insight 11

17 highlight two of the most critical business processes within project-based organizations: 1) quote-tocash, and 2) recruit-to-retire. Quote-to-cash business processes In today s economy, cash flow rules. Every organization must focus on cash flow to maintain a solid financial position and maximize profitability and liquidity. In service-oriented organizations this process begins with a client quote and ends once payment is received and the money is in the bank. This macro process of converting sales opportunities into paying customers is often referred to as quote-to-cash, and its optimization is essential for financial well-being. Figure 6 shows Figure 6: Quote-to-Cash Process Quote-to-cash is a series of interrelated processes supported by CRM, PSA and ERP modules. To optimize these fundamental business processes, executives rely on the integration of essential business applications to provide visibility, transparency and control. These applications include: Client Relationship Management (CRM), Professional Services Automation (PSA) and the primary financial solution (ERP), with each managing aspects of the quote-to-cash process. Although each of these applications are offered on a stand-alone basis, the true power of managing the complete quote-to-profit business cycle is best accomplished by an integrated suite of applications, often referred to as project-based ERP or Service Resource Planning (SRP). Recruit-to-retire business Figure 7: Recruit-to-Retire Workforce Processes processes By definition, service organizations are judged by the quality of the people within the firm. All service-oriented organizations must place a premium on attracting, retaining and motivating a superlative workforce. Regardless of an organization s size and maturity level, the firm s people are the essence of the organization. They determine financial viability, brand quality and client satisfaction Service Performance Insight 12

18 They define the effectiveness of service delivery, sales and marketing. From inception, service organizations must intently focus on attracting, hiring, retaining and motivating a high quality staff. Figure 7 shows the essential elements of workforce processes from recruiting to retirement. 6. PROJECT-BASED ERP VENDOR OVERVIEW Rapid growth and change in the Professional Services (PS) industry and other project-based businesses demands a comprehensive information infrastructure. SPI Research s seven years of PS Maturity benchmarking has shown increasing adoption of business solutions and other analytic and collaboration tools to improve operations, effectiveness and cash flow. Recently, greater emphasis has been placed on social, enabling workers to communicate, collaborate and build their own personal brand and communities within the information infrastructure. Both small and large project-based organizations have embraced cloud solutions as they are a good fit for the mobile, virtual world of services. Traditional ERP vendors like SAP, Oracle and Microsoft have extended their core business suites with resource, project management and project accounting capabilities to meet the unique needs of the service industry. They are transitioning their core business suites from on-premise to the cloud while also offering hybrid and managed service deployment options. As a leading business application provider, existing SAP enterprise business suite capabilities of quote-to-order, resource management, mobile time entry and project accounting have been extended by Commercial Project Management which includes bid management, planning and forecasting with enhanced front office functionality. Oracle has extended its E-Business Suite to include resource and project accounting and now offers cloud-based Oracle Fusion Financials, Project Portfolio Management, Human Capital Management and Customer Relationship Management for Sales and Marketing. Microsoft leads with its Dynamics AX service industry solution with powerful project-based functionality throughout, all accessible from its intuitive Outlook-based user interface. Born-in-the cloud ERP providers like Workday, NetSuite, FinancialForce and Intacct aggressively focus on project-based businesses. Each leads with differentiating capabilities: Workday specializes in enterprise-class businesses with a penchant for talent management; NetSuite supports complex multicurrency and revenue accounting rules prevalent in global businesses and the technology sector; FinancialForce is making big strides based on its tight relationship with Salesforce.com and development on the Force platform while Intacct is a favorite of smaller organizations and accountancies. Deltek is a leader in the AEC market and with federal government systems integrators based on its support for complex project-completion and FASB accounting rules. UNIT4 s Agresso solution, with its roots in the Netherlands and Norway is a strong competitor in Europe, and is one of the few mature vendors to have successfully transitioned its line of on-premise solutions to a multi-tenant cloud solution. Although SAP and Oracle remain the dominant suppliers for enterprise-class service firms (greater than 1,000 consultants), the fastest-growing project-based ERP suppliers focus on the mid-market. The top mid-market project-based ERP suppliers are NetSuite, Microsoft, Deltek and UNIT4 with Intacct and Financial Force aggressively gaining share in the mid-to-low end of the market Service Performance Insight 13

19 Primary Project-based ERP Application Providers There are scores of ERP solutions, however, very few are designed to support project-based organizations. Table 8 highlights nine of the leading providers today. Each has strong project driven capabilities, and may also support organizations that develop products. Table 8: Project-based Enterprise Resource Planning (ERP) Solution Providers Project-based ERP Solution Provider Deltek based in Herndon, Virginia offers multiple industry-specific project-based ERP solutions that manage the complete project lifecycle. Its Vision product focuses on the unique requirements of A/E/C firms and consulting firms. It s Maconomy product, while also a fit for A/E/C firms, has seen success inside professional services firms of all types including consulting firms, CPA firms, creative agencies, research firms, and more. It s Costpoint product powers the businesses of government contractors and project-based manufacturers including some of the largest Fortune 500 companies. Finally, it s Deltek First suite uses the capabilities of the products above to deliver Deltek in the Cloud to all of these markets. All of Deltek s ERP solutions, while tailored to specific verticals, share common characteristics that manage the complete project lifecycle including modules to help win more business (CRM), run the financial back-office, staff and deliver projects, capture time and expenses, and improve overall operational performance for firms as small as 10 employees to those with tens of thousands of employees. Deltek complements its ERP solutions with business intelligence, social collaboration, and mobile capabilities so companies can analyze business performance, collaborate on projects, and access Deltek from anywhere at any time. Intacct founded in 1999 in San Jose, California offers a cloud-based financial system that enables customers to use Intacct s project and resource management capabilities or integrate with nearly any PSA for deeper functionality. Natively, Intacct provides time and expense capture, resource scheduling, project management, project accounting, order management and billing, in addition to financial capabilities such as multi-ledger and multi-entity. For those requiring CRM or deeper resource and project management functionality, Intacct provides built-in integration to the Salesforce.com CRM application and partners with Clarizen and KeyedIn for project and resource management. Its affordable and flexible financial solution, endorsed by the AICPA (American Institute of Certified Public Accountants), delivers hundreds of templates for complex revenue, compliance reporting, and project metrics, such as profitability analysis by project and client. Designed for small and medium businesses, the system is affordable, easy to use and offers a wealth of standard reports. FinancialForce.com, headquartered in San Francisco, California delivers ERP at Customer Speed. Built on the Salesforce1 Platform, FinancialForce ERP equips customer-centric businesses with a unified cloud platform and all the applications necessary to grow both the top and bottom line. FinancialForce s Financial Management, Human Capital Management (HCM), Professional Services Automation (PSA), and Supply Chain Management (SCM) applications allow businesses to increase the speed in which they operate and be more responsive along every touch point of a customer s journey. Founded in 2009, FinancialForce.com is backed by UNIT4 and salesforce.com. Microsoft Corporation based in Redmond, Washington offers the Dynamics line of business applications. Microsoft Dynamics CRM delivers contact, marketing, pipeline, sales and proposal management capabilities essential to practice development. Microsoft Dynamics SL delivers project-centric ERP for small to mid-sized professional services, construction, and project manufacturing firms, including government contractors. Microsoft Dynamics AX serves large enterprises and multinationals in these industries with integrated project estimation, planning, staffing, time and expense, billing and accounting (PSA components), as well as human resources, purchasing, finance, business intelligence and other essential ERP capabilities. Microsoft customers variously use Dynamics products as firm-wide end-to-end solutions and as operational front-ends to administrative SAP and Oracle systems. The Dynamics products are all highly configurable and extensible to interoperate with firm-specific applications and tools. As one would expect, the products also provide built-in integration into other Microsoft products. For example, Dynamics AX integrates with Dynamics CRM, Outlook, Word, Excel, Project and SharePoint, all operating on SQL Server within an on-premises/hosted Windows Server or an Azure cloud-based environment (IaaS model today with a SaaS model forthcoming) Service Performance Insight 14

20 Project-based ERP Solution Provider NetSuite founded in San Mateo, California in 1999 is one of the world's leading providers of cloud-based business management software. NetSuite has been a first-mover in cloud-based ERP applications for small to medium businesses and now supports more than 20,000 organizations including subsidiaries of large enterprises, generating $415 million in revenue and growing at 34% per year. NetSuite Service Resource Planning (SRP) is a complete bid-to-bill solution for project-based organizations. It encompasses modules for project, resource, client and expense management, project accounting, time capture and billing along with a rich set of standard reports. NetSuite s powerful general ledger and multi-entity, multi-lingual, multicurrency revenue accounting supports the complex needs of global businesses. In addition to its industry-leading standalone OpenAir Professional Service Automation solution, NetSuite SRP, native to the NetSuite platform, provides one of the most powerfully complete Service Resource Planning solutions available today. Oracle based in Redwood City, California provides a number of project-based ERP applications most notably its traditional onpremise E-Business Suite and now its cloud-based Fusion solutions for finance and project portfolio management. Although Oracle is the financial solution of record for many of the largest IT and consulting service providers its high cost of ownership and confusing array of overlapping modules makes it an attractive alternative only for large firms with a strong IT department. Oracle has struggled for almost a decade to consolidate and modernize its vast empire of acquired software onto the Fusion cloud platform. Fusion is Oracle's next-generation suite of open-standards-based software, available on-premise or in some "cloud" form. The Fusion suite covers financials; procurement; project portfolio management (PPM); human capital management (HCM); supply chain management (SCM) and customer relationship management for sales, marketing and partnering (CRM). Even with Fusion Oracle never makes buying simple, as there are more than 100 modules to choose from, often with overlapping functionality. SAP headquartered in Waldorf, Germany is the market leader in ERP business applications and is credited with creating the category. Gartner pegs SAP with 24% of the overall $25 billion ERP market. SAP offers a comprehensive suite made up of financials, human capital management, enterprise resource planning, client relationship management and much more. Simple and Cloud are SAP s 2014 themes with a focus on making SAP simpler to implement, use, enhance and operate. SAP has started fulfilling the promise of HANA by porting most of its major applications to its lightning-fast in-memory database. HANA is offered on-premise, hybrid and in the cloud as HANA Enterprise Cloud for running mission-critical applications such as SAP Business Suite. SAP continues to expand its native cloud portfolio with SuccessFactors human capital management, SAP Cloud for Customers (CRM) and SAP Jam for cloud-based social collaboration. One of SAP s service-industry specific solutions is Commercial Project Management, which offers quote to order, resource management, mobile time entry and project accounting capabilities. Although SAP is primarily focused on enterprise service organizations with more than 1,000 employees its extensive array of Rapid Deployment Solutions (RDS) offer fixed-price, predefined software, best practices, training and templates for common business processes for sales, marketing and service, lowering the cost to deploy and operate SAP solutions. UNIT4 is a global, cloud-focused, business software and services company aimed at helping dynamic public sector and commercial services organizations to embrace change simply, quickly and cost effectively. The UNIT4 Group incorporates a number of the world s leading change-embracing software brands including UNIT4 Agresso, its flagship ERP suite for mid-sized and large services intensive organizations; UNIT4 Coda Financials, its best-of-class financial management software; and FinancialForce.com, the cloud application company formed with investment from salesforce.com. UNIT4 is headquartered in the Netherlands, with operations in 26 countries worldwide and over 4,000 employees. UNIT4 has 3,250 mid-sized to large ERP customers in over 100 countries. Workday headquartered in Pleasanton, California, founded in 2005 by the legendary leaders of PeopleSoft, is now the fastest growing, cloud-based enterprise human capital management and financial management software provider having grown revenues 89% in 2013 to $274 million. Recently Workday turned its sights on building extensions to support the people-intensive service sector with Human Capital Management, Project and Resource management, time and expense tracking, revenue and cost management and reporting and analytics. Workday is targeting enterprise class organizations with more than 1,000 employees who put people at the core with support for multi-currency, multi-language, multi-practice billion dollar enterprises. Workday looks beyond conventional ERP to enable operational decision-making and flexibility, with a philosophy of providing transactions, governance and analysis all in the same system. While there are many ERP solution providers very few focus on project-based organizations. The Table 9 lists the leading software providers by market segment Service Performance Insight 15

21 Table 9: ERP Solution Providers for Project-Based Organizations Provider Core Verticals URL Deltek Intacct FinancialForce Microsoft NetSuite Architects, engineers, advertising, government contractors, management and IT consulting. Small to medium size businesses, IT Consulting, embedded service organizations and management consultancies. Embedded service organizations, independent IT, marketing and management consultancies. Built on the Salesforce 1 Platform with powerful out-of-the-box integration with Salesforce CRM. Mid-size to larger domestic and multinational project-based organizations. Medium to large enterprises. Especially strong in technology and professional services. Supports global businesses and complex revenue accounting. New ecommerce and social collaboration capabilities services-resource-planning.shtml Oracle Large enterprises with more than 1,000 employees. essional-services/overview/index.html SAP Large enterprises with more than 1,000 employees. UNIT4 Workday Agile ERP focused on people-centric organizations that are defined as Businesses Living IN Change (BLINC ). Strong in project-intensive industries such as Engineering, Off-shore, Research and Consulting. Medium to large enterprises with a focus on people and talent. agresso Project-Based ERP Differentiators The decision to purchase a project-based ERP solution is not an easy one. While there are many vendors who sell ERP, many lack the focus and versatility to support project-based businesses. Also, there are a variety of considerations which underlie vendor selection. These range from technology infrastructure, to organization size, location and support for specific functionality. Just like no two service or projectbased organizations are alike, nor are ERP solutions. Table 10 highlights some of the most important aspects to consider. Each organization places a different emphasis on these criteria, so it is important the vendor you choose builds solutions to match your priorities. Table 10: Project-based ERP Solution Differentiators No. Differentiator Description 1 Heritage Origin of ERP solution vertical market focus, size of organization, languages, currencies, etc. 2 Solution Depth and Breadth There are scores of modules and applications for project-based organizations. Several ISVs offer all, while some offer a subset. Some ISVs offer in-depth functionality in one or several modules, while some offer minimal functionality Service Performance Insight 16