Keeping Tabs on Scattered Brains

Kent Baker, a partner at Accenture, says he believes that within large organizations, PSA functionality today fits between customer relationship management (CRM) systems and the ERP systems. CRM software, he says, feeds PSA systems when new sales cycles are created and require a services component. When a new project is identified, PSA systems take over and match the appropriate people to the project and automate the service delivery function through project collaboration, knowledge management, and so forth. Then, when the project is completed, PSA solutions transfer data to back-office ERP systems for billing and project accounting, he adds.

Baker emphasizes the enterprise nature of PSA solutions.

"I believe that relegating the solution only to the back office could be a mistake," he notes. "The solution should be positioned as a competitive weapon that enables the organization to drive revenue. I view PSA software as an enterprise solution focused on service delivery."

But, "the solutions themselves only automate a portion of the business processes that drive service firms," says Alan Brookbank, director of product strategy for PeopleSoft's enterprise service automation business. "To gain real value, customers require the entire process from recruit to revenue to be automated. To do this, service organizations require complex integration to the back-office systems such as billing, general ledger, and human resources. Vendors who do not offer this type of functionality will not really solve the problems of their customer base."

Reid French, chief marketing officer at Novient, disagrees. French says that Novient offers front-/back-office integration. He says that while the big ERP vendors "determine their strategy, Novient is meeting current demand from large-tier service organizations" such as Accenture, Compaq, DuPont, and Nortel.

Tim King, director of operations at Infosphere, a Fort Worth, TX, consulting firm, says that his company looked at a number of solutions before narrowing the field down to Novient and Evolve. The company chose Evolve because its core product appeared to be better integrated and more mature, he says.

"Our focus was on managing the pipeline, resource management (skills management, project staffing, and utilization maximization), tracking time and expense, and billing the customer," he says. In addition, "Evolve had a well-defined implementation framework."

Jon Mertz, director of marketing at Austin, TX–based QuickArrow, says that one of his company's differentiators has been its focus on the ability to integrate with front- and back-office applications. But it's not QuickArrow's role to replace those applications, he observes.

"Many customers have already made an investment in a front- and/or back-office application," Mertz says. "Replacing that investment may not be a prudent approach. Moreover, it may not be prudent for PSA vendors to try to be the best at everything that a services organization requires — it may dilute the value that PSA brings to the market."

Novient's French says that Novient has always viewed what it calls service process optimization (SPO) — which encompasses PSA — as an enterprise-wide solution that "fits squarely between both front-office CRM applications like Siebel and back-office ERP applications like SAP."

At the integration points, French says, CRM feeds SPO with services opportunities; SPO optimizes the match of people to projects and automates service delivery; and ERP completes the project accounting and billing.

"Novient takes an agnostic approach to existing CRM and ERP vendors, offering off-the-shelf integration to any existing system via our published API set," French says. In addition, French, who demonstrated Novient's solution at SAP's Sapphire user conference in Orlando last June, says, "we maintain a strong partnership with SAP to go to market to their installed base with integration pre-built." Meanwhile, Novient is in discussions with several CRM providers about partnerships as well, he adds.

Demian Entrekin, president and CEO of Oakland, CA, PSA software vendor Project Arena, says that he views PSA as "the inevitable extension of project-based accounting. PSA is project-based accounting on both vitamins and steroids." Therefore, relationships between PSA and financials are critical to the success of PSA, he notes.

"We also see that PSA will begin to encroach on both CRM and sales force automation (SFA), and there will be some interesting opportunities as those markets realize the threat posed to them by PSA," Entrekin says.

Project Arena, which comes out of the enterprise application integration realm, recently announced a portable EAI hub-and-spoke integration framework called Link Arena specifically to enable allegedly seamless front-to-back office integration, the company said.

John Lucas, CEO of Account4, says some companies entering the PSA market "seem to think that because they were ERP vendors at one point in time, somehow magically they can call themselves PSA vendors and sell an HR system or an accounting system and consider themselves part of the marketplace. But without this core competency of PSA, they're just pretenders."

Meanwhile, many of the PSA specialists such as Niku and Evolve, Lucas says, are suffering in this economy. "Some of the people who were supposed to be on top of the marketplace a year ago are now in deep trouble financially and competitively in the marketplace," he says.

Gary Steele, CEO of Portera, which offers an ASP-only PSA solution, says that he thinks being private has been an advantage for his company in today's economic climate. "We're seeing strong, healthy business in Q1, which was the worst tech quarter in history," he says. "We showed 10 percent revenue growth quarter on quarter. We had 34 transaction and 22 new customers."

Chuck Tatham, vice president of PSA vendor Changepoint, says that he thinks Microsoft's Great Plains represents an interesting opportunity regarding front-office and back-office integration in the PSA space. And he says he believes that Great Plains is considering a way to take advantage of the PSA play.

"Right now, they recommend Changepoint," Tatham says. "We have two packaged integrations to Great Plains. You don't install PSA anywhere without integrating to financials. Great Plains has good penetration, and we have good integration to it."

Account4's Lucas calls Microsoft and Great Plains "an interesting combination." He says that an entry from Microsoft in the PSA space could do for PSA what Microsoft Project did for the project management space, which is "expand the marketplace tenfold." Lucas says he would welcome that.

Hofferberth calls Microsoft's Great Plains acquisition "significant" for the PSA market because PSA players that have built on the Microsoft architecture "have a back-office solution they can ship out-of-the-box. For the players that really don't want to purchase, merge, or whatever with a back-office play or be acquired, that will be their solution."

However, Hofferberth says he believes that "the big trend is that as we go forward, more and more companies aren't just going to want PSA to handle the billable side of their business. They're going to want this PSA-type enterprise solution to run all their business."

Halsey Wise, CEO of Novient, says that "there's a siren call in to this industry right now. The services economy is the largest economy in the world that's never been automated."

Wise says that he expects to see more of the large ERP vendors competing in the PSA market. However, "I think you'll see the larger brands come in with lighter functionality to address the market, but bring together an integrated full suite versus best-of-breed providers like Novient."

Wise adds that he believes the dedicated PSA software providers hold an advantage over newcomers from other areas. "A low-end offering will not stand up to the rigors of scale, speed, security, and performance that a global company will put it under," Wise says. "Those are the four dimensions that we usually win on."

David Hsieh, vice president of marketing at Evolve, says that he believes the early PSA pioneers like Evolve and others have "a huge lead in terms of delivery and in terms of customer progress" over newer, larger competitors.

Hsieh concludes: "None of those companies has delivered anything substantial. I think that their biggest impact on the market is freezing out certain types of accounts by promising to deliver a PSA solution in the future."

As the war of words heats up in the PSA arena, pundits speculate that even the most congealed clients will begin to thaw.

Sidebar: How a Village Became PSA Quarry

It's been a tough year for on-line skills exchanges, once a hot category of PSA tools. Many on-line marketplaces that a year ago promised to revolutionize the way organizations find and manage contingency workers (consultants) and engage consulting firms have floundered. Others have repositioned themselves so many times that they are barely recognizable. Still, the suspicion lurks that a combination of the Internet and software could bring greater efficiency to the process of finding, engaging, and managing external services.

PeopleSoft, Pleasanton, CA, ignited a small spark in the struggling market in June when it scooped up Skills Village of Sunnyvale, CA, for an undisclosed amount of its stock and cash. The acquisition, according to the company, will propel PeopleSoft into a leadership position in the nascent enterprise service automation (ESA) market. The company intends to incorporate Skills Village's technology into its own ESA offering, resulting in what it claims as "the industry's only pure Internet collaborative solution to automate a company's entire services procurement process." Through its ESA offering, customers can manage spending on services and automate the procurement of services from requisition to payment. It also promises real-time collaboration among the users and their services suppliers.

Industry analysts, however, remain cool to the market and to this particular deal. "The industry is still trying to figure out what it wants to be, procurement or human capital management," says Monica Barron, senior analyst, AMR Research, Boston. The answer today seems to be both, which hardly makes things clearer. As for PeopleSoft's Skills Village acquisition: "It lends credibility to this market, but it doesn't make PeopleSoft a sure winner," she adds.

PeopleSoft is convinced the payoff from ESA can be huge, and the market potential is great. "The idea of services procurement is a great epiphany," says Chris Wong, PeopleSoft vice president/products and technology. Companies that go to great lengths to manage the procurement of indirect supplies — paper clips, toilet paper, and such — are going to wake up soon and realize that they are spending much more, typically three times more, in services and doing almost no management of the process. "Often a company doesn't know how many service providers they use or how many contingent resources they are paying," he observes.

IQ4Hire, Inc., Chicago, a competitor in this space, reports that 20% to 40% of the corporate IT budget is spent on professional services. Yet, "it is the least well-planned and well-procured of the IT investments," suggests Vinnie Mirchandani, CEO. By using an effective ESA tool, he continues, companies can routinely save 10% to 15% on their professional services procurement without losing quality. The savings come primarily from better resource management, planning, and scoping.

PeopleSoft sees the ESA challenge as a procurement problem and identifies Ariba and Commerce One, the big procurement players, as the primary competition. "But Ariba and Commerce One don't solve the problem," Wong insists. Conventional procurement systems, for example, don't handle time entry and can't manage the interview and hiring process. PSA tools, on the other hand, handle time entry, interviewing, and hiring, but are designed to meet the needs of consulting firms, not the buyers of consulting services. So maybe there is yet life ahead for the on-line PSA tools that can hang on.

— Alan Radding