Few labels carry greater weight inside the consulting world than “client-facing.” Even software makers have learned to love it.

What constitutes professional services automation (PSA) at your firm? A decade or more after PSA emerged to stake out a claim to its own market segment, there remains no commonly agreed upon definition of PSA or widely accepted set of tools to support it.

    Does CRM constitute a PSA solution? Does email? Every organization, consulting firm or not, has to record its financials, invoice its clients, and manage its personnel. Do these tasks fall under PSA? Is something more needed, maybe a consulting firm version of ERP?

    “For most firms, PSA consisted of a good project management tool and a good resource management tool,” says Dave Hofferberth, managing director, SPI Research. More recently, as the consulting industry experiences a resumption of growth, the focus has changed. “Now, firms are more interested in opportunity management, of which CRM is a key component,” he continues. Consulting firms are buying PSA tools sporting opportunity management capabilities.

    Jeff Kaplan, managing director, ThinkStrategies, Wellesley, MA, has picked up on the same trend: “After struggling through a downturn for the past few years, there is no question that the PSA segment is coming back.” Like other industries, consulting firms were reluctant to initiate new technology projects when the business was slow and survival was paramount. So, they made do with the tools they had and kept a tight lid on expenses.

PSA Options

With the positive economic climate for consulting firms, the focus has shifted from survival to growth. This means cultivating customers and managing opportunities. “Now, there are new options, and times are good, so consulting firms can afford tools,” says Kaplan.

    Those new options include CRM tools that capitalize on the software-as-a-service (SaaS) model, such as Salesforce.com, and traditional PSA functionality delivered through the SaaS model by firms like OpenAir and QuickArrow. And SaaS, with its pay-for-what-you-use subscription pricing, is a low-cost option to start with.

    Consulting firms also can opt for open source tools to meet their PSA needs, although few have yet to do so. SugarCRM is starting to attract a following, notes Bernard Golden, CEO, Navica Consulting, a firm specializing in deploying open source software. Compiere provides an open source ERP offering. Neither Sugar nor Compiere, however, has been tweaked specifically for the consulting industry, but that is just a matter of time.

    “Open source products still find vertical markets a challenge,” in that they usually have not been customized for a specific industry like consulting, says Golden. Since open source products provide the source at no cost, a skilled consulting firm could easily customize SugarCRM or Compiere for its own use and then market it as a proprietary consulting industry product to others.

    The new PSA options certainly are attracting the attention of firm managers. For good reason: This new generation of PSA tools is easier and faster and less expensive to deploy.

Opportunity Management/CRM

In terms of functionality, the latest PSA tools are focusing more on opportunity management and collaboration than the PSA products of the past, which focused on resource management, billing, accounting, time, and expense — the basic nuts and bolts of operating a consulting firm.

    Opportunity management — managing the sales pipeline from the point when the prospect first shows up on the firm’s radar screen through delivery of the completed project to the
client — is high on the agenda for both traditional and new-breed PSA vendors. Although not a PSA tool per se, Salesforce.com, the poster child for SaaS success and a dominant CRM player, has attracted numerous consulting firms, notes Kaplan, who manages an online SaaS product directory, SaaS Showcase (www.saas-showplace.com).

    “In the past, PSA always had some amount of opportunity and bid management. CRM is more encompassing,” says James Norwood, vice president, Epicor Software Corp., Irvine, CA, a conventional PSA tool provider.

    Traditional CRM, which initially amounted to little more than glorified contact management, was static, giving back the information someone put in. Vendors now try to make CRM functionality more dynamic. “We take feeds from any CRM product and put them into our opportunity management tool. This makes it more real-time, more dynamic. CRM becomes feeder data that ripples all the way to invoice and billing,” says Joanne McCool, general manager, Primavera Services.

Even then, unless CRM is optimized for consulting, the products may not meet the needs of consulting firms regardless of how they are delivered. Selling services requires a different relationship with a customer compared to with a product company. “You need to integrate with resource management from day one. For example, when you are building a quote, you really are building a project plan. When billing, services booking may not be recognized on the day I sell it. You have different revenue recognition,” Norwood explains.

The New PSA Players

“In the past, consulting firms had some sort of work-in-progress system or built something on their own or pulled together a bunch of different commercial software. Now, we’re seeing consulting firms take advantage of SaaS,” says Morris Panner, CEO, OpenAir Inc., Boston, a PSA software vendor that follows the SaaS model.

    Epicor also is exploring SaaS. “SaaS is resonating with consulting firms, and we are investing in it. It will be especially important for smaller organizations,” says Norwood. He sees small, 10-person firms gravitating to SaaS PSA products.

    “Consulting firms like the cost model of SaaS, and the distributed, mobile aspect of consulting with people on the road makes SaaS appealing,” adds Justin Foster, general manager for professional services at NetSuite, Inc., San Mateo, CA, which provides integrated CRM tools.

    Except for its SaaS model, OpenAir looks like a traditional PSA tool. It provides time and expense management, project management, resource management, workspaces, and billing and invoicing. Although it doesn’t offer a CRM capability, it provides an opportunities module that handles the initial stages of the client relationship. In the opportunities module, firms can begin soft-booking resources as current projects wind down and new projects start to ramp up. From there, it integrates with Salesforce.com, which is a full-fledged SaaS-based CRM product that helps with sales forecasting.

    While its functionality may look like that of traditional PSA tools, the SaaS model enables one major difference. “We can change the software every 30 days. We make incremental changes that improve how things are done,” says Panner. With traditional PSA software, consulting firms could request changes or enhancements, but they would have to wait until the next release cycle, maybe 12 to 18 months out, before they would see the particular enhancement.

    PRTM, Inc., a leading management consulting firm, turned to the OpenAir PSA product set in 2006 and expects to go live with the software in January. Previously, the 30-year-old global consulting firm, with 500 staff members spread across 16 offices in the U.S. and Europe, had used a combination of homegrown legacy systems built with Oracle Forms and a patchwork of other aging functionality, none of it particularly well integrated.

    “We wanted an end-to-end solution. We wanted all the linkages, from developing new business to closing out a project,” says Susan Kantor, partner and CFO for PRTM’s Atlantic region. With everything linked end-to-end, PRTM would be able to “apply our human resources across the world. We’d see hard and soft booking and forecast revenue. We wanted a really robust resourcing tool,” she adds.

    Before turning to OpenAir and the SaaS approach, PRTM looked at the traditional PSA offerings. “The existing products had been around for a long time. They had gone through a lot of acquisitions and changes. Many had been modified for PSA,” Kantor explains. They certainly couldn’t deliver the seamless end-to-end experience the PRTM sought. “The functionality was not well knitted together. Some were bolt-ons to accounting or other systems,” she continues. In other cases, the individual functional modules simply weren’t as strong as the OpenAir offering, which is being continually improved.

    Even the SaaS model, which is new — and some say quite radical — proved appealing to PRTM. “We’re moving away from legacy systems. We don’t want to be an applications development shop. We want to focus on managing our consulting business, not on doing software development,” notes Kantor. With SaaS, the organization doesn’t install and run the software. The vendor runs it; the customer uses it over the Internet through a browser.

    PRTM still runs financial systems in-house using Oracle Financials, but even there, management is weighing the benefits of outsourcing maintenance. For CRM, it uses a different product for part of the job and feeds the output into OpenAir, where it does the hard/soft resource booking.

Collaboration: The Next PSA Frontier

If opportunity management and CRM is the current hot item in PSA, “collaboration is the next frontier,” predicts Eric Berridge, principal and cofounder of Bluewolf Group, a consulting firm that specializes in SaaS implementations. Bluewolf Group itself uses OpenAir for PSA functionality and Salesforce.com for CRM.

    “Collaboration has become an absolute business imperative. It becomes more important because of changes in the workforce, namely dispersed virtual teams,” says McCool. She sees collaboration tools managing communications processes and workflow as well as shared documents.

    Epicore, too, has noticed the growing interest in collaboration. The company embedded Microsoft Sharepoint, a collaboration tool, into its PSA product.

    But when it comes to collaboration tools, consulting firms have a wide range of choice. Bluewolf Group, with nearly 200 consultants spread across the U.S., uses a variety of Google tools, such as Writely for collaborative work on documents and Gmail for email. “Collaboration is really a form of knowledge management. Through Google, we get tight integration of our email with documents. We all access the same documents,” says Berridge.

    Instant Messaging (IM) also has emerged as a key collaboration tool. “We use IM all the time among ourselves and with clients. It lets us get answers quickly,” Berridge adds.

    Wikis, too, represent an emerging collaboration tool. Wikis enable the Web-based joint authoring of documents. “Wikis are getting to be popular, especially for consultants in the field who do things on- and off-line,” adds McCool.

    The changes under way in the PSA market will benefit consulting firms that previously avoided PSA tools due to their cost, complexity, and difficulty. SaaS products allow firms to eliminate the need to invest in systems infrastructure and custom programming to support a PSA environment. At the same time, the focus on opportunity management and CRM will help firms increase revenue even as they reduce costs. Finally, the emergence of effective collaboration tools, from Wikis to IM, will help firms with far-flung consultants work together as if they were sitting in adjacent cubicles. CRM and opportunity management may be the hot features today, but your PSA won’t likely stop there.