What Ever Happened to PSA?

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Professional Services Automation didn’t disappear, it just evolved.

by Carly Lombardo

A funny thing happened to Professional Services Automation. It was supposed to be the next great thing after Customer Relationship Management. But these days, the acronym seems hard to find.

Partner Insights

In its place are often other TLAs (three-letter acronyms), such as ESA (Enterprise Service Automation) and PPM (Product Portfolio Management). The term PSA originally denoted functionality similar to CRM, except that it was to be used largely for organizations that sell services, instead of organizations that make things. Along the way, the term evolved.

“PSA has become an umbrella term to describe the functionality required to manage core processes,” says David Hofferberth, research director with the Aberdeen Group.

Call it PSA, ESA, or PPM, software that performs these functions has not disappeared and customers know what they want from the products. More often than not, clients are looking to increase revenues through higher employee utilization, lower costs through personnel productivity, and lower financing costs through reduced billing-cycle time.

Broadly defined, PSA encompasses a suite of integrated applications that increases the productivity and profitability of employees across the services value chain. Some key points are improved planning, enhancing collaboration, and measuring the efficiency of billable employees, while also encompassing customer relationship management.

And vendors and their resellers are rising to the occasion by offering a variety of tools to help Professional Services Automation firms manage these processes. Industries such as construction, engineering, and information technology want to be able to hire and manage personnel and projects as well as improve their ability to gain knowledge, sell, charge, and collect from clients.

In the last few years, PSA has become more widely adopted and understood, and Hofferberth speculates that the market in 2003 will be approximately $1.2 billion. But, there are still a few points of confusion. First, many people still think PSA is only for professional services organizations that plan, sell, deliver, and invoice for services to external clients. However, vendors such as Epicor, Best, Microsoft Small Business Solutions, Deltek, and Open Air break the market into three categories:

● Professional service organizations sell, deliver, and invoice for services to external clients. These include management and IT consulting, engineering, architectural, accounting, finance, and legal operations.

● Internal service organizations support internal enterprise clients. These organizations use PSA to manage projects and charge back for services rendered. Firms include internal IT and internal consulting.

● Embedded services organizations support external clients, but deliver services that are involved with supporting the sale of another product. Such users include services groups that implement computer hardware and/or provide ongoing maintenance support services.

The key for PSA vendors is to have different areas of expertise, Hofferberth says. For instance: Deltek focuses on architecture, engineering, and the construction market; Lawson is strong in all types of professional service organizations and a high-end market leader; while Epicor has mid-market strength and the new .Net architecture. Also, Microsoft is strong with small/medium-sized organizations of 1,000 people or less, and OpenAir has a strong mid-market hosted system.

Hofferberth explains, “Right now, internal service organizations are purchasing the most PSA products, approximately 55 percent, followed by professional service organizations at 30 percent, and embedded services at 15 percent.”

In fact, Jeffrey Einig, a CPA and PSA practice manager for Norwalk, Conn.-based MaxQTechnologies, a Solomon reseller, has found many of the firm’s PSA clients are IT shops and software developers.

MaxQ’s lineup includes the combination of Solomon and the enterprise version of Microsoft Project 2002 used by Microsoft Business Solutions to address the PSA market. The reseller focuses on both the PSA and distribution markets.

Einig has found a key phrase to explain to people what PSA is in a few words.

“I use the term ‘Human Capital Supply Chain,’” he says. “Most business people understand the term Supply Chain in the distribution industry to be the system or systems required for the flow of goods: to acquire, sell, and deliver goods. It is a way to put in words what PSA is to those that identify with the term ‘Supply Chain Management.’”

Furthermore, he continues, “I clarify the term by likening PSA to distribution in that it is about the flow of services (goods), acquiring resources to perform services (the human capital), facilitating the efficient performance of the professional services (delivery), and billing and collecting of those services (selling). Thus, it is the same acquiring, delivery, and selling, and they both involve planning systems for production, control, and customer service systems.”

It must be working, because MaxQ has approximately 30 client companies using parts of the PSA applications and approximately 20 percent of the firm’s annual revenue is derived from PSA-related services or sales.

Delivering to the Customer

VARs understand PSA well simply because they are in the same type of business as their clients, says Eric de Jager, lead product manager for MBS’s PSA business.

“For more than 10 years, our resellers have been selling to professional services organizations, not to mention they are professional services organizations. It gives them a great home base—they understand the language and they know what the customers need,” he notes.

The PSA line from Fargo, N.D.-based MBS was introduced to resellers in March. Tools manage all phases of projects, from planning, scheduling, and status review to expense capture, profitability analysis, and billing, and they let project and financial managers work together to plan projects and control budgets. MBS’s sweet spot is organizations with about 1,000 employees. Software licensing costs run from $15,000 up to $200,000 per client company.

The PSA product has been received well by MBS’s network of resellers. According to Jager, half of the 500 Solomon resellers are active in PSA.

“PSA is a primary vertical in our office and it drives a lot of business. The integration between Solomon and Microsoft Project 2002 allows project managers and financial managers to see how the other side works,” says Karen McAteer, vice president of the Philadelphia office for Altara, an MBS VAR with headquarters in San Francisco, Calif., and Cedar Knolls, N.J., and nine offices nationally.

Although Duane Connor is new to the PSA market, the president of Altara’s southwest office estimates that 25 percent of his business will come from PSA in the next 12 months. “We’ve been getting a great response. Collaboration is important to our customers. They want to tie projects with accounting to get a 360-degree view of their business,” he says.

Connor and McAteer conduct the firm’s free seminars, called the PSA Power in Projects, which have been drawing about 50 to 100 people per event. The seminars help customers understand how each member of their project teams can plan, execute effectively, and manage more profitably using shared data, integrated financials, and project management tools.

Irvine, Calif.-based Best Software offers its customers and resellers a PSA package through MAS 500 Project Accounting. MAS 500 tackles the primary concerns of professional service firms such as time and billing, remote time entry and expense entry (approval, alerts, and project status), Microsoft Project integration, and profit recognition. The product starts at $10,000.

Lou DePasquale, president and CEO of the Michael Allen Group, uses MAS 500 internally for his practice and resells it to his clients.

“We found out of 30 of our PSA customers, 40 percent were using Best,” says DePasquale. DePasquale knows his clients are happy with the MAS 500 product because it provides tight integration to financials and project accounting. He says, “E-TimeSheets allows organizations to enter time and expenses through the Internet while staff in the office can enter project time and expense through the intranet. All project information flows into project accounting for analysis and processing.”

Providing an Option

Vendors who don’t offer their own PSA modules often partner to serve this market. This includes Accpac International, whose Advantage software integrates with applications from two Canadian software developers with offices in the U.S., Groupe A.G.I. and Tenrox.

Groupe A.G.I., headquartered in Montreal with a U.S. office in Clearwater, Fla., created Abak, which can be a stand-alone PSA product, but also integrates with QuickBooks and Accpac. Eighty percent of its business comes from North American clients.

“We found most people are satisfied with their accounting packages, and we’re taking advantage of that,” says Eric Lacourciere, Abak’s director of sales. In fact, more than 50 percent of Abak users are also Accpac users, and Abak has 40 resellers of its line who also sell Accpac.

For example, Manny Buigas, CPA and vice president of sales for NextLevel Information Solutions, says, “Our ability to service the PSA market is instrumental to our growth and to our ability to deepen our relationships within our existing customer base.” Miami, Fla.-based NextLevel is an Accpac and Abak reseller with offices in New York, Florida, Louisiana, South America, and the Caribbean.

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