Service Performance Insight, LLC

2019 Professional Services

Maturity™ Benchmark

February 2019

Service Performance Insight

www.SPIresearch.com
Service Performance Insight
Service Performance Insight (SPI) 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 developed the PS Maturity Model™ as a strategic planning and management framework. It is now
the industry-leading performance improvement tool used by over 25,000 service and project-oriented
organizations to chart their course to service excellence.
The core tenet of the PS Maturity Model™ is PSOs achieve success
through the optimization of five Service Performance Pillars™:
➢ Leadership
➢ Client Relationships
➢ Human Capital Alignment
➢ Service Execution
➢ Finance and Operations

The SPI Advantage – Research

Service Performance Insight provides an informed and actionable third-party perspective for clients and
industry audiences. Our market research and reporting forms 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:

www.spiresearch.com

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
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resulting from the use of strategies, programs, counsel, or information provided to client by SPI Research or its affiliates.
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© 2019 Service Performance Insight, Naples, Florida, USA
 Table of Contents
Welcome to the 2019 Benchmark Report from Kimble..................................................................... xi

1. Report Summary ....................................................................................................................... 1

The Numbers Don’t Lie........................................................................................................................ 1
Rise of the Services Economy.............................................................................................................. 3
Profits Soar!......................................................................................................................................... 4
Show Me the Money!.......................................................................................................................... 4
Competition Intensifies ....................................................................................................................... 6
You’re Hired! ....................................................................................................................................... 7
2019 is going to be a good but turbulent year in PS ........................................................................... 9

2. The Professional Services Maturity™ Model....................................................................... 11

Service Performance Pillars™ ............................................................................................................ 12
Professional Services Maturity™ Model Benchmark Levels ............................................................. 13
Building the Professional Services Maturity™ Model ....................................................................... 15
Why Maturity Matters ...................................................................................................................... 17
Pillar Importance and Organizational Maturity ................................................................................ 18

3. Survey Demographics ............................................................................................................ 20

The Global Services Market .............................................................................................................. 20
What’s Hot and What’s Not in IT ...................................................................................................... 22
The North American Professional Services Market .......................................................................... 22
The European Professional Services Market ..................................................................................... 25
The Asia-Pacific Professional Services Market .................................................................................. 26
PS Maturity™ Benchmark Vertical Market Demographics ............................................................... 27

4. Best-of-the-Best ....................................................................................................................... 41
Introducing the 2019 Best-of-the-Best Service Organizations.......................................................... 41
Pillar Performance............................................................................................................................. 58
Best-of-the-Best Conclusions ............................................................................................................ 66

5. Professional Services Business Applications ..................................................................... 67

Primary Professional Services Business Applications........................................................................ 68
Quote to Cash.................................................................................................................................... 69
PS Solution Adoption......................................................................................................................... 70
Solution Satisfaction.......................................................................................................................... 75

6. Leadership Pillar ..................................................................................................................... 90

The Leadership Index ........................................................................................................................ 92

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 Leadership Issues .............................................................................................................................. 93
Corporate Culture ............................................................................................................................. 94
Challenges Faced by PSOs ............................................................................................................... 100
Steps Taken to Improve Profitability............................................................................................... 102

7. Client Relationships Pillar ...................................................................................................103

PS Sales Maturity............................................................................................................................. 105
Solution Development Effectiveness .............................................................................................. 109
Survey Results ................................................................................................................................. 110

8. Human Capital Alignment Pillar .........................................................................................126

Survey Results ................................................................................................................................. 128

9. Service Execution Pillar ........................................................................................................148

Strategic Resource Management for PSOs ..................................................................................... 149
Survey Results ................................................................................................................................. 152

10. Finance and Operations Pillar.............................................................................................169

Survey Results ................................................................................................................................. 171
Income Statements ......................................................................................................................... 186

11. 2019 Professional Services Maturity™ Model Results ...................................................192

Maturity Levels................................................................................................................................ 192
Model Results.................................................................................................................................. 195
The Financial Benefits of Moving Up Levels.................................................................................... 197
Model Conclusions .......................................................................................................................... 199

12. Conclusions and Recommendations .................................................................................200

13. Appendices ............................................................................................................................203

Appendix A: Acronyms Used in This Report ................................................................................... 203
Appendix B: Financial Terminology ................................................................................................ 204
Appendix C: Professional Services Maturity™ Benchmark Survey Tool ......................................... 210
Appendix D: Related SPI Research ................................................................................................. 215
About Service Performance Insight................................................................................................. 216

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 Figures
Figure 1: Annual PS Revenue Growth vs. Headcount Growth ..................................................................... 2
Figure 2: US Bureau of Labor Employment Projections (2010-2020) .......................................................... 2
Figure 3: Annual Revenue Growth by Geography ....................................................................................... 3
Figure 4: Annual Revenue Growth by PS Industry Segment ........................................................................ 3
Figure 5: Net Profit Comparison by Geographic Region .............................................................................. 4
Figure 6: Growth, Profit and Utilization ....................................................................................................... 5
Figure 7: Net Profit (EBITDA) by PS Industry Segment................................................................................. 6
Figure 8: Percentage of Total Revenue from New Logo Clients .................................................................. 6
Figure 9: Bid-to-Win Ratio............................................................................................................................ 7
Figure 10: Employee Attrition by Geography .............................................................................................. 7
Figure 11: Integrated Information Drives Performance Higher! ................................................................. 8
Figure 12: Service Performance Pillars™ .................................................................................................... 12
Figure 13: Services Maturity™ Model Levels ............................................................................................. 13
Figure 14: Service Performance Pillar Maturity™ ...................................................................................... 15
Figure 15: Professional Services Maturity™ Progression .......................................................................... 17
Figure 16: PS Performance Pillars – Core KPIs ........................................................................................... 19
Figure 17: European Professional, Scientific and Technical Service Revenue and Employment............... 25
Figure 18: European Computer Programming and Consultancy Services ................................................. 26
Figure 19: Vertical Market Distribution ..................................................................................................... 28
Figure 20: Regional Demographics ............................................................................................................ 30
Figure 21: Independent vs. Embedded Survey Orgs Surveyed (2007 – 2017) ........................................... 33
Figure 22: Organization Size....................................................................................................................... 35
Figure 23: Headquarters Location – Region ............................................................................................... 35
Figure 24: Total Company Revenue ........................................................................................................... 36
Figure 25: Total Professional Services Revenue......................................................................................... 36
Figure 26: Year-over-Year Change in PS Revenue ...................................................................................... 37
Figure 27: Year-over-Year Change in PS Headcount .................................................................................. 37
Figure 28: Percentage of Employees Billable ............................................................................................. 38
Figure 29: Percentage of PS Rev. Delivered by 3rd-parties ....................................................................... 38
Figure 30: Three-year Mergers & Acquisitions .......................................................................................... 39
Figure 31: Core Professional Services Business Applications..................................................................... 68

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Figure 32: Primary business processes span multiple departments.......................................................... 69
Figure 33: Quote-to-cash process .............................................................................................................. 69
Figure 34: Commercial Solution Adoption ................................................................................................. 71
Figure 35: Corporate Financial Management (CFM) Solution Used .......................................................... 77
Figure 36: Client Relationship Management (CRM) Solution Used ........................................................... 78
Figure 37: Professional Services Automation (PSA) Solution Used ........................................................... 80
Figure 38: Human Capital Management (HCM) Solution Used ................................................................. 82
Figure 39: Business Intelligence (BI) Solution Used ................................................................................... 84
Figure 40: Knowledge Management (KM) Solution Used .......................................................................... 85
Figure 41: Remote Service Delivery and Collaboration Tool Used ............................................................ 86
Figure 42: Social Networking (SN) Solution Used ...................................................................................... 87
Figure 43: Success depends on inter-departmental cooperation.............................................................. 88
Figure 44: Project Margin Five-year Trend .............................................................................................. 163
Figure 45: Project Margin......................................................................................................................... 163
Figure 46: Revenue per Billable Consultant Five-year Trend ................................................................... 175
Figure 47: Revenue per Employee Five-year Trend ................................................................................. 177
Figure 48: Professional Services Maturity Model™ Levels....................................................................... 192
Figure 49: Increase performance by focusing on low-performing KPIs ................................................... 195
Figure 50: Key Performance Indicators (KPIs) are Correlated ................................................................. 199

Tables
Table 1: Five-year PS Key Performance Metrics .......................................................................................... 1
Table 2: Maturity Matters! ........................................................................................................................ 11
Table 3: Performance Pillars Mapped Against Service .............................................................................. 15
Table 4: Service Pillar Importance by Organizational Maturity Level ........................................................ 18
Table 5: IDC Worldwide Semiannual Services Tracker – First Half 2018 ................................................... 21
Table 6: Worldwide IT Spending Forecast (Billions of U.S. Dollars) ........................................................... 21
Table 7: IT Technology Impact Stack Ranking ............................................................................................ 22
Table 8: Vertical PS Markets — the North American Industry Classification System ................................ 22
Table 9: 2018 NAICS Services Rollup (Firms).............................................................................................. 24
Table 10: 2018 NAICS Services Rollup (Employees and Revenue) ............................................................. 24
Table 11: Australia IT Spending Forecast (Billion Australian Dollars) ........................................................ 27
Table 12: Number of Participating Firms by Vertical Market (2007 through 2017) .................................. 29

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Table 13: Survey Participant Demographics by Organization Type and Geographic Region..................... 29
Table 14: Survey Participant Demographics by Organization Size............................................................. 30
Table 15: Survey Participant Demographics by Vertical Market ............................................................... 31
Table 16: Survey Participant Demographics by Vertical Market ............................................................... 31
Table 17: Type of Work Sold by Organization Type and Geographic Region ............................................ 32
Table 18: Type of Work Sold by Organization Size .................................................................................... 32
Table 19: Consulting Sector Merger and Acquisition Activity and Deal Multiples .................................... 39
Table 20: Best-of-the-Best Performance Advantage ................................................................................. 41
Table 21: Best-of-the-Best Comparison – Demographics .......................................................................... 58
Table 22: Best-of-the-Best Comparison – Leadership Pillar (1 to 5 Scale)................................................. 59
Table 23: Best-of-the-Best Comparison – Client Relationships Pillar ........................................................ 60
Table 24: Best-of-the-Best Comparison – Human Capital Alignment Pillar............................................... 62
Table 25: Best-of-the-Best Comparison – Service Execution Pillar ............................................................ 63
Table 26: Best-of-the-Best Comparison – Finance & Operations Pillar ..................................................... 64
Table 27: Best-of-the-Best Comparison – Business Applications .............................................................. 65
Table 28: Commercial Solution Adoption .................................................................................................. 70
Table 29: Business Application Use by Organization Type and Geographic Region .................................. 72
Table 30: Business Application Use by Organization Size .......................................................................... 73
Table 31: Business Application Use by Vertical Service Market ................................................................ 74
Table 32: Business Application Use by Vertical Service Market Continued............................................... 74
Table 33: Solution Satisfaction ................................................................................................................... 75
Table 34: Impact – Client Relationship Management (CRM) Use .............................................................. 78
Table 35: Impact – Commercial CRM Integration ...................................................................................... 79
Table 36: Impact – Professional Services Automation (PSA) Use .............................................................. 80
Table 37: Impact – Commercial PSA Integration ....................................................................................... 81
Table 38: Impact – Human Capital Management (HCM) Use .................................................................... 83
Table 39: Impact – Commercial HCM Integration...................................................................................... 83
Table 40: Impact – Business Intelligence (BI) Use...................................................................................... 84
Table 41: Impact – Commercial BI Integration .......................................................................................... 85
Table 42: Impact – Knowledge Management (KM) Use ............................................................................ 86
Table 43: Impact – Remote Service Delivery and Collaboration Tools Use ............................................... 87
Table 44: Impact – Social Networking (SN) Use ......................................................................................... 88
Table 45: Solution Integration with Core Financials .................................................................................. 89

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Table 46: The Leadership Maturity Model................................................................................................. 91
Table 47: Impact Based on Leadership Maturity Scores ............................................................................ 93
Table 48: Impact – Corporate Culture........................................................................................................ 95
Table 49: Impact – Well understood vision, mission and strategy ............................................................ 96
Table 50: Impact – Confidence in PS Leadership ....................................................................................... 96
Table 51: Impact – Ease of getting things done ......................................................................................... 97
Table 52: Impact – Goals and measurement alignment ............................................................................ 97
Table 53: Impact – Employees have confidence in PSO's future ............................................................... 98
Table 54: Impact – Effectively communicates with employees ................................................................. 98
Table 55: Impact – Embraces change - nimble and flexible....................................................................... 99
Table 56: Impact – Innovation focused ...................................................................................................... 99
Table 57: Challenge by Organization Type and Geographic Region ........................................................ 100
Table 58: Challenge by Vertical Market ................................................................................................... 101
Table 59: Challenge by Vertical Market ................................................................................................... 101
Table 60: Steps Taken to Improve Profitability by Organization Type and Geographic Region .............. 102
Table 61: PS Sales and Marketing Maturity Model™ ............................................................................... 104
Table 62: Client Relationships Pillar 5-year trend .................................................................................... 105
Table 63: PS Sales Maturity Model™........................................................................................................ 105
Table 64: Impact – Service sales effectiveness ........................................................................................ 106
Table 65: PS Marketing Maturity™ Levels................................................................................................ 108
Table 66: Impact – Service marketing effectiveness................................................................................ 109
Table 67: Impact – Service development effectiveness........................................................................... 110
Table 68: Client Relationships KPIs by Organization Type and Geographic Region................................. 111
Table 69: Client Relationships KPIs by Organization Size ......................................................................... 111
Table 70: Client Relationships KPIs by Vertical Market ........................................................................... 112
Table 71: Client Relationships KPIs by Vertical Market ........................................................................... 112
Table 72: Type of Work Sold by Organization Type and Geographic Region .......................................... 113
Table 73: Type of Work Sold by Organization Size .................................................................................. 114
Table 74: Type of Work Sold by Vertical Market ..................................................................................... 114
Table 75: Type of Work Sold by Vertical Market ..................................................................................... 115
Table 76: Impact – Percentage of Business from New Clients................................................................. 115
Table 77: Impact – The Effect of Sales Measurements on Performance ................................................. 116
Table 78: Impact – Primary target buyer for services .............................................................................. 117

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Table 79: Impact – Bid-to-win ratio (per 10 bids) .................................................................................... 117
Table 80: Impact – Size of deal pipeline................................................................................................... 118
Table 81: Year-over-year change – Deal Pipeline .................................................................................... 119
Table 82: Impact – Sales cycle (days: qualified lead to contract sign.) .................................................... 119
Table 83: Year-over-year change – Sales cycle (days).............................................................................. 120
Table 84: Impact – Service Discounting ................................................................................................... 120
Table 85: Year-over-year change – Service Discount ............................................................................... 121
Table 86: Impact – Percentage of "referenceable" clients ...................................................................... 122
Table 87: Year-over-year change – Client references .............................................................................. 122
Table 88: Fee Structure by Organization Type and Geographic Region .................................................. 123
Table 89: Fee Structure by Organization Size .......................................................................................... 124
Table 90: Fee Structure by Service Market Vertical ................................................................................. 124
Table 91: Fee Structure by Service Market Vertical ................................................................................. 124
Table 92: Human Capital Alignment Maturity Model .............................................................................. 127
Table 93: Human Capital Alignment Performance Indicators tied to Maturity levels ............................. 128
Table 94: Human Capital Alignment Pillar 5-year trend .......................................................................... 128
Table 95: Human Capital Alignment KPIs by Organization Type and Geographic Region ....................... 129
Table 96: Human Capital Alignment KPIs by Organization Size ............................................................... 130
Table 97: Human Capital Alignment KPIs by Vertical Market .................................................................. 130
Table 98: Human Capital Alignment KPIs by Vertical Market .................................................................. 131
Table 99: Workforce Age and Gender by Organization Type and Geographic Region ............................ 132
Table 100: Workforce Age and Gender by Organization Size .................................................................. 132
Table 101: Workforce Age and Gender by Vertical Market ..................................................................... 133
Table 102: Workforce Age and Gender by Vertical Market ..................................................................... 133
Table 103: Primary organizational structure ........................................................................................... 133
Table 104: Why employees leave ............................................................................................................ 134
Table 105: Impact – Voluntary Attrition .................................................................................................. 135
Table 106: Year-over-year change – Voluntary Attrition ......................................................................... 136
Table 107: Year-over-year change – Involuntary Attrition ...................................................................... 137
Table 108: Impact – Recommend company to friends/family................................................................. 137
Table 109: Year-over-year change – Recommend company to friends/family ....................................... 138
Table 110: Impact – Management to employee ratio ............................................................................. 138
Table 111: Year-over-year change – Time to recruit and hire for standard positions (days) .................. 139

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Table 112: Year-over-year change – Time for a new hire to become productive (days) ........................ 140
Table 113: Impact – Guaranteed annual training days / employee ........................................................ 141
Table 114: Impact – Well-understood career path for all employees ..................................................... 141
Table 115: Impact – Employee Billable Utilization................................................................................... 142
Table 116: Year-over-year change – Employee Billable Utilization ......................................................... 143
Table 117: Impact – Annual fully loaded cost per consultant.................................................................. 143
Table 118: Hours Worked by Organization Type and Geographic Region............................................... 144
Table 119: Hours Worked by Vertical Market ......................................................................................... 145
Table 120: Hours Worked by Vertical Market ......................................................................................... 145
Table 121: Employee Location by Organization Type and Geographic Region ....................................... 146
Table 122: Employee Location by Organization Size ............................................................................... 147
Table 123: Employee Location by Vertical Market .................................................................................. 147
Table 124: Employee Location by Vertical Market .................................................................................. 147
Table 125: Service Execution Performance Pillar Mapped Against Service Maturity.............................. 149
Table 126: The Resource Management Maturity Model ......................................................................... 150
Table 127: Impact – Resource Management Strategy ............................................................................. 152
Table 128: Service Execution Pillar 5-year trend ..................................................................................... 152
Table 129: Service Execution KPIs by Organization Type and Geographic Region .................................. 153
Table 130: Service Execution KPIs by Organization Size .......................................................................... 154
Table 131: Service Execution KPIs by Vertical Market ............................................................................. 155
Table 132: Service Execution KPIs by Vertical Market ............................................................................. 156
Table 133: Impact – Project staffing time ................................................................................................ 157
Table 134: Impact – Revenue per project ................................................................................................ 158
Table 135: Impact – Concurrent projects managed by a PM................................................................... 158
Table 136: Impact – Project staff size ...................................................................................................... 159
Table 137: Impact – Project duration ...................................................................................................... 160
Table 138: Impact – Ontime project delivery .......................................................................................... 160
Table 139: Impact – Projects canceled .................................................................................................... 161
Table 140: Impact – Project overrun........................................................................................................ 162
Table 141: Impact – Standardized delivery methodology use ................................................................. 162
Table 142: Impact – Project margin for time and materials projects ...................................................... 164
Table 143: Impact – Project margin for fixed price projects.................................................................... 164
Table 144: Impact – Project margin — subs, offshore ............................................................................. 165

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Table 145: Impact – Effectiveness of the Resource Management Processes.......................................... 165
Table 146: Impact – Effectiveness of estimating processes and reviews ................................................ 166
Table 147: Impact – Effectiveness of change control processes ............................................................. 166
Table 148: Impact – Effectiveness of project quality processes .............................................................. 167
Table 149: Impact – Effectiveness of knowledge management processes ............................................. 167
Table 150: Finance and Operations Performance Pillar Maturity ........................................................... 170
Table 151: Finance and Operations Pillar 5-year trend ........................................................................... 171
Table 152: Finance & Operations KPIs by Organization Type and Geographic Region ........................... 172
Table 153: Finance & Operations KPIs by Organization Size ................................................................... 172
Table 154: Finance & Operations KPIs by Vertical Market ...................................................................... 173
Table 155: Finance & Operations KPIs by Vertical Market ...................................................................... 174
Table 156: Steps Taken to Improve Profitability Comparison: 2017-2018 ............................................. 174
Table 157: Impact – Revenue per Billable Consultant ............................................................................. 176
Table 158: Year-over-year change – Revenue / Billable Consultant ........................................................ 176
Table 159: Impact – Annual Revenue per Employee ............................................................................... 177
Table 160: Year-over-year change – Annual Revenue / Employee.......................................................... 178
Table 161: Impact – Quarterly Revenue Target in Backlog...................................................................... 178
Table 162: Year-over-year change – Qtr. Revenue Target in Backlog ..................................................... 179
Table 163: Impact – Percentage of annual revenue target achieved ...................................................... 179
Table 164: Year-over-year change – Percentage of annual revenue target achieved............................. 180
Table 165: Impact – Percentage of Annual Target Margin Achieved ...................................................... 181
Table 166: Year-over-year change – Percentage of Annual Target Margin Achieved ............................. 181
Table 167: Impact – Revenue Leakage..................................................................................................... 182
Table 168: Year-over-year change – Revenue Leakage ........................................................................... 182
Table 169: Impact – Invoices Redone due to Errors or Client Rejections ................................................ 183
Table 170: Impact – Days Sales Outstanding (DSO) ................................................................................. 183
Table 171: Impact – Quarterly non-billable expense per employee ....................................................... 184
Table 172: Impact – Percentage of Billable Work Written-Off ................................................................ 184
Table 173: Impact – Information Visibility ............................................................................................... 185
Table 174: Income Statement Comparison ............................................................................................. 186
Table 175: Income Statement by Organization Type and Embedded Service Type ................................ 187
Table 176: Income Statement by Organization Size ................................................................................ 188
Table 177: Income Statement by PS Market Vertical .............................................................................. 189

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Table 178: Income Statement by PS Market Vertical .............................................................................. 190
Table 179: Minimum Normalized Performance Pillar Scores .................................................................. 194
Table 180: Average Service Maturity by PSO Size (People) ..................................................................... 195
Table 181: Average Service Maturity by PSO Type .................................................................................. 196
Table 182: Average Service Maturity by Vertical Market ........................................................................ 197
Table 183: Key Performance Indicators (KPIs) by Maturity Levels .......................................................... 197
Table 184: Lexicon of Acronyms and Abbreviations ................................................................................ 203
Table 185: Standard Key Performance Indicator (KPI) Definitions .......................................................... 204

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Welcome to the 2019 Benchmark Report from Kimble

From Mark Robinson

It is encouraging to see in the latest SPI report - sponsored by Kimble - that the professional services
sector continues to grow at an impressive rate. The 2019 Professional Services Maturity™ Benchmark
found the highest average net profit ever since 2007 - up from just over 14% in 2016 to almost 17% in
2017 and heading for 19% in 2018.
This was not an even picture across the sector, however, with some companies doing much better than
others, Revenue growth declined slightly on average, at just over 9% year on year - while the top
performers saw almost 15%. There were also gulfs in performance in key areas such as delivering
projects on time and maintaining billable utilization. This year’s benchmark report concludes there are
two tracks that businesses are on - those on the fast track are expanding rapidly and are very profitable.
The future looks bright for them. Those on the other track “are either in a commoditizing market or
have not found a way to differentiate themselves. Quite often, lackluster performance emanates from
management failure and the inability to measure and improve execution.”
At Kimble, we are aware of the challenges that services organizations face within a globalized and
competitive market and are proud of our role in driving customer success. Many Kimble customers are
performing significantly better than the industry average. A growing number of the most dynamic
services organizations, from mid-size to enterprise, are implementing Kimble PSA to fuel business
growth and improve performance - last year Kimble was selected by three of the top 50 consulting
organizations by revenue, by many other international services businesses, and by the services arms of
marquee-brand product businesses.
In 2018, Kimble saw rapid expansion, securing significant investment from Silicon Valley technology-
focused Accel--KKR, opening offices in San Francisco, Chicago and Atlanta, and moving into prestigious
new headquarters in Boston and London. It released new Kimble enhancements and add-on products
which put state of the art diagnostic analytics into the hands of customers. Kimble PSA was also named
on the G2 Crowd best software awards list.
Collaborative workplace management tools such as Kimble PSA are becoming industry standard. The
report concludes: “Technology ecosystems are emerging as preferred platforms as buyers seek to
minimize complexity and amplify application integration.”
If you are interested in finding out how Kimble can help your organization to lift your company
performance to the level of the very best, please go to https://www.kimbleapps.com/

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 2019 Professional Services Maturity™ Benchmark

1. Report Summary

Service Performance Insight (SPI Research) is proud to introduce the twelfth-annual Professional
Services Maturity™ Benchmark. For over a decade we have researched, benchmarked and built a
maturity model to:
∆ Help professional services (PS) executives better understand how their organization compares
to others that are both similar in size and scope of work, as well as to the broader professional
services market; and,
∆ Provide an objective, fact-based framework for performance improvements that helps pinpoint
the areas that will provide the greatest impact.
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 25,000 service
and project-oriented organizations to chart their course to service excellence.

The Numbers Don’t Lie

The PS Maturity™ model helps executives compare and analyze their own performance so they can build
consensus around the actions to take, and where to start, while quantifying the benefits of change.
Analyzing the benchmark data by vertical market, geographic region and organization size gives PS
executives an accurate
comparison to their
Table 1: Five-year PS Key Performance Metrics
peers and the market at
large. Nearly 4,000 Key Performance Indicator (KPI) 2014 2015 2016 2017 2018
firms have completed
Annual PS revenue growth 10.0% 10.2% 9.0% 8.0% 9.7%
SPI’s benchmarking
surveys over the past Annual PS headcount growth 8.1% 7.8% 6.5% 9.3% 7.7%
twelve years. Percentage of billable personnel 75.1% 70.4% 74.6% 75.5% 72.8%

Change is constant in Employee Attrition 8.9% 12.9% 13.6% 12.4% 13.9%

professional services Annual revenue per consultant (k) $197 $198 $205 $196 $206
with each year bringing
Annual revenue per employee (k) $167 $157 $163 $159 $166
new geopolitical,
socioeconomic and Profit (EBITDA %) 13.2% 15.5% 14.2% 16.8% 18.5%

technology disruption. Source: SPI Research, February 2019

After all, without
disruption and change, professional services would not exist, because clients would not need expert
help to navigate new opportunities and landmines. Over the past twelve years of benchmarking, Service
Performance Insight (SPI Research) has seen great change in the marketplace, particularly in the ever-
growing adoption of integrated, cloud-based business applications which have helped firms wring ever
higher levels of productivity and profit out of this labor-based business.

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 2019 Professional Services Maturity™ Benchmark

A record number of respondents (622) completed this year’s benchmark survey. With growth in the
number of participants, data accuracy improves and enables us to expand coverage into more sub-
verticals and geographies.
This wealth of data means Figure 1: Annual PS Revenue Growth vs. Headcount Growth
the depth, breadth and
accuracy of the benchmark
continues to expand. This
year we have significantly
improved the statistical
depth and data validity for
architects and engineers,
accountancies and
marketing and advertising
firms. We also garnered
input from a host of new PS
segments such as VARS and
Managed Service providers.
Source: SPI Research, February 2019
Every year SPI Research has
worked to broaden the
survey to reach more geographic regions so that it truly represents a worldwide performance survey.
While we have not achieved all our goals, we are told this benchmark is the gold standard for the
consulting industry. It is used by well over 25,000 billable professional services organizations to
benchmark their operations and gain insight into ways they can improve.
Productivity
improvements are Figure 2: US Bureau of Labor Employment Projections (2010-2020)
critical in
professional
services. As the
global economy
picks up steam,
organizations in
every industry are
having to work
harder to achieve
higher
productivity,
without adding
substantial cost. Source: Bureau of Labor Statistics 2018
Headcount growth
is a key leading indicator for revenue growth. In 2017 for the first time, PS headcount growth exceeded
revenue growth. As we expected, this led to strong revenue growth in 2018 (9.7%). This year

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 2019 Professional Services Maturity™ Benchmark

headcount growth has fallen to a more sustainable level of 7.7%. We predict continued strong revenue
growth in 2019 but danger signs are starting to appear.

Rise of the Services Economy

The world has become

services driven. The Figure 3: Annual Revenue Growth by Geography
service sector is both
the largest and the
fastest growing
component of the U.S.
economy. Fifty years
ago, services
accounted for 60% of
U.S. output and
employment. Today,
the service sector's
share of the U.S.
economy has risen to
80%. Look under the
hood of almost any
industry and you will
find traditional Source: SPI Research, February 2019

healthcare, financial
services and
manufacturing
Figure 4: Annual Revenue Growth by PS Industry Segment
companies looking to
grow services as a
predictable and
profitable revenue
stream.
This unprecedented
growth in the services
economy is not without
its own set of
challenges as new
business models and
buying preferences
Source: SPI Research, February 2019
emerge. Service
providers are exploring
subscription, usage based and managed services pricing and billing models, hoping to secure annuity
clients and predictable revenue streams.

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 2019 Professional Services Maturity™ Benchmark

Although professional service industry growth continued, revenue growth slowed from its zenith of
10.2% in 2015 to 9.7% in 2018 (Figure 3). For the past three years, PS sector revenue growth has dipped
below 10%. Five-year average revenue growth now stands at 9.4%. The Americas and Asia Pacific
reported stronger year over year growth; growth slowed slightly in EMEA but was still strong.
Underlying top level year over year revenue growth, we see uneven sector performance (Figure 4) with
organizations focused on the cloud, security, IOT, analytics and artificial intelligence experiencing
significant growth while more traditional segments like networking are seeing consolidation and price
pressure. Now is the time for all PSOs to carefully evaluate their markets and positioning to ensure they
stay ahead of the curve and to seize emerging market opportunities before they become mainstream
and commoditized.

Profits Soar!

Overall PS sector net profit climbed to its highest ever reported ceiling of 18.5% (Figure 5). Buoyed by
cloud consulting net
profits of 26.2%, more Figure 5: Net Profit Comparison by Geographic Region
and more service
providers added cloud
consulting
competencies to grab
some of the fairy dust.
Independents had a
particularly good year
as they saw their net
profit grow from
15.1% in 2017 to
17.1% in 2018!
Source: SPI Research, February 2019
Embedded service
organizations (ESOs)
were not able to maintain the historic high they achieved in 2017 of 23.4% but 2018 earnings were still
strong at 22%.

Show Me the Money!

For anyone who wants to know how money is made in a labor-based business, you need to look no
further than at workforce productivity. Despite legions of time-saving devices and technology, no one
has yet found a way to make an hour longer than 60 minutes, nor have they discovered how to make a
day last more than 24 hours. But what the PS industry is finally discovering is the secret is to work
smarter not harder. This means PSOs are reducing the time and annoyance of administrative tasks like
entering time and business expenses or writing and continually updating project status reports. No
more endless resource scheduling meetings. No more entering and reentering reams of data into an
endless series of disconnected spreadsheets. Instead of getting on an airplane at the crack of dawn on a

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 2019 Professional Services Maturity™ Benchmark

Monday morning and returning tired and exhausted on a Friday night, consultants can now work
virtually from the comfort of home.

Figure 6: Growth, Profit and Utilization

Source: SPI Research, February 2019

As shown in Figure 6, PS growth and profit soared in 2018 but serious cracks in underlying workforce
productivity are starting to show. Reported billable utilization dipped to a new low of 69.7%. Even
more troubling is the fact that employee attrition has been climbing steadily since the recession and
now stands at 13.9%. Inefficiencies and overhead are starting to dampen productivity with the
percentage of billable employees dropping to 72.8% in 2018 compared to 75.4% in 2017. Even more
troubling are the number of wasted hours spent on non-productive meetings and administration.
Administration hours climbed to 157 – up by 25 hours from the 2017 total of 132. PS organizations must
take action now to turn around these troubling trends or revenue and profits will suffer in 2019.
Figure 7 shows the wide disparity in reported net profit for the five largest verticals represented in this
benchmark. All of these segments, with the exception of enterprise embedded software, have seen
their profits grow over the past three years. Clearly the fastest growing segment, embedded cloud
(Saas) PS, produces the best margins based on high demand and the ability to deliver remotely. With
more input from architect and engineering firms, along with a commensurate improvement in the
construction industry, their profit has improved nicely. In fact, four of these five PS sub-verticals
reported better year over year profit. Only embedded Software PS saw a decline as more and more
legacy clients move to more cost-effective cloud solutions.

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 2019 Professional Services Maturity™ Benchmark

Figure 7: Net Profit (EBITDA) by PS Industry Segment

Source: SPI Research, February 2019

Competition Intensifies

Despite a lot of good news and positive improvements in net profit, some issues demand consideration.
Across the benchmark, many of the client relationship metrics declined. Most troubling is a significant
deterioration in client referenceability. The percentage of reference clients dropped from 74.7% to
71.9%. Certainly, project overruns were a contributing factor as they climbed from 8.2% to 8.6% while
the percentage of projects delivered on time dropped precipitously to 76.9% from 79.7% the prior year.
On the positive side, the ratio of new client to existing client revenue increased from 24.2% to 29.7% in
2018 (Figure 8). In a global
market with new entrants Figure 8: Percentage of Total Revenue from New Logo Clients
springing up daily to challenge
the status quo, all PSOs must
improve their sales, marketing
and solution development
capabilities. They cannot rest on
their laurels as growth depends
on satisfying existing clients
while garnering new ones.
One of the proven success
formulas for aligning sales and
service delivery continues to be
integrated CRM and PSA
applications which coordinate
Source: SPI Research, February 2019
the entire customer lifecycle and

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shine a light on customer issues and

opportunities. A powerful competitive Figure 9: Bid-to-Win Ratio
metric is the Bid-to-Win ratio (Figure 9).
This KPI (Key Performance Indicator)
measures the number of winning bids or
proposals out of every 10 submitted.
It is certainly correlated with the size of the
sales pipeline and sales effectiveness.
Lower Bid-to-Win ratios portray
heightened competition but may also be a
symptom of underlying sales and
marketing issues. Strategies to improve
Bid-to-Win ratios should start with a
reexamination of market positioning and
service packaging. Aligning sales with Source: SPI Research, February 2019
service delivery is fundamental to ensure
sales is selling projects that can be effectively staffed and delivered and service delivery has visibility and
input to the sales pipeline to ensure expectations and requirements are properly set from the beginning.
Do target buyers know about your firm? Do current clients provide a rich source of referrals and repeat
business or are they lukewarm on the value you provide? What is the common element in the deals you
win? Lose? How can you improve your win ratio? Should you more carefully scrub your sales pipeline
to remove unreliable long shots?

You’re Hired!

In 2019 the war for talent

Figure 10: Employee Attrition by Geography
continues unabated. US
unemployment declined to
3.9%, the lowest it has been in
45 years. Unemployment is
even lower for jobs requiring a
bachelor’s degree or better, at
2.1%. To attract skilled talent,
firms are brandishing their
reputations as a great place to
work by offering not only more
money but also a host of other
benefits including job-sharing,
working from home, parental
leave and generous time-off Source: SPI Research, February 2019
policies including sabbaticals. In

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2018, headcount growth eased to a more sustainable rate of 7.7% from the zenith it reached of 9.2% in
2017. On the bad news front, the average time to recruit and ramp new hires grew to 117.3 days, up
from 113.0 days in 2017. Total attrition (both voluntary and involuntary) also increased from 12.2% to
13.9% (Figure 10). Attrition is undoubtedly one of the most vital metrics to watch, as the cost to replace
a valuable employee can be more than $150,000.

Information – more essential than ever before!

As competition and volatility intensify, information has become a competitive weapon to increase
performance and profit. Lack of an effective information infrastructure is no longer an option! SPI
Research has seen a gradual increase in the use of information technology to run finance and
accounting, sales and marketing, human resources, service delivery, and business planning and
reporting.
These solutions are core to the
success of each department, but Figure 11: Integrated Information Drives Performance Higher!

better serve the entire PSO when

they are integrated. Integrated
business solutions enable all
team members to have access to
one source of the truth,
expediting fact-based decisions
and real-time response to
opportunities and challenges.
Being able to visualize changes
and trends by client, employee,
service line and market brings
into focus problems and
facilitates investment in the
most-promising growth avenues.
While these core solutions help Source: SPI Research, February 2019
PSOs run the business, the
number and variety of ancillary applications has grown exponentially particularly in the areas of social,
remote service delivery, collaboration and knowledge management. These solutions help make
employees at all levels more productive, which ultimately impacts project margins and organizational
profitability. On the downside, the pace of technology change, overlap and interdependence has
become overwhelmingly complex, with shorter and shorter product release cycles. The abundance of
overlapping solutions has made the job of technology consultants and IT professionals ever harder as
the breadth and depth of knowledge they must possess has become almost crushing.

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2019 is going to be a good but turbulent year in PS

2018 began with a roar and ended with a whimper as the global stock market lost over 10% of its value
in December. 2019 has gotten off to a rocky start with saber rattling over global trade with China; the
looming reality of Brexit and intensifying protectionism. In the Professional Services sector, times are
still good, with plenty of interesting work and abundant client challenges. SPI Research sees a new
millennial workforce, nursed on technology and instant global communication, take charge. Knowledge
workers around the world are increasingly becoming more consultant-like with heightened expectations
for measurable work effort and output. But with all this change, younger employees are far less loyal
and more likely to frequently change employers than the baby boomers they are replacing. Life-work
balance and diversity are important considerations which are slowly making an impact of the
Professional Services sector however the industry remains solidly a young man’s game with 62% male
employees and an average age of 38.9 years.
Businesses and business models are being upended by a move to usage-based consumption,
subscription billing and managed services. Millennial and line of business buyers demand ease, access
and instant gratification. Yet the age-old professional services business model based on applying
specialized knowledge and skills to solve complex problems persists and thrives. Transformation is
coming slowly to this industry, with incremental improvements seen in productivity, knowledge capture
and repeatable frameworks; we are not yet seeing revolutionary changes. If anything, the world of
professional services is becoming more attractive, no longer so focused on basic “infrastructure and
plumbing” supplied by armies of developers. Employees are now able to focus on more meaningful
business processes and truly impactful transformation and change management.
The professional services market continues to grow. No let-up in demand is seen and clients seem
content to engage specialized service providers in traditional ways – focused on project outcomes but
still based on traditional time and materials pricing although subscription-based and managed service
contracts are gaining momentum. PS organizations must rise to the challenge by packaging and
productizing their services, making them easier to buy. The trick is being able to move quickly to multi-
element contracts and usage-based pricing without losing your shirt.
Technology ecosystems are emerging as preferred platforms as buyers seek to minimize complexity and
amplify application integration. Winners are coalescing around Amazon, Google, Microsoft or the
Salesforce platform so they can ride the waves these goliaths have created all while assuring new
customers of their ability to plug and play nicely with partner applications within the same ecosystem.
Service providers have coalesced by ecosystem while working hard to establish meaningful
differentiation.
Today, discussions of “brand” and “culture” come up in most professional services conversations
because establishing the firm as a fantastic place to work is the most important element in attracting
and retaining a high caliber workforce. The key to success is having the best talent available to capture
new opportunities. Top performers understand they must create a compelling vision of the future and
quickly hire and support employees to bring that vision into reality. Now is not the time for PSOs to rest

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 2019 Professional Services Maturity™ Benchmark

on old skills, competencies and systems, more than ever before they need to be bold and disciplined to
seize new solutions and technologies before they become mainstream.
The pace and magnitude of technology change at times seem insurmountable but somehow millions of
consultants find a way to stay abreast of this mounting complexity to make sense of it all for their
clients. New technologies continue to transform the professional services market, and nowhere is this
more evident than in the security, mobile, analytics and collaboration (SMAC) space. These solutions,
many of which are embedded in core business suites such as Enterprise Resource Planning (ERP or
Corporate Financial Management (CFM)); Client Relationship Management (CRM); Professional Services
Automation (PSA); and Human Capital Management (HCM); are becoming increasingly critical to the
success and growth in professional services. Professional Services is an employee driven market and
providing the best tools that provide the best insight underlies all performance improvements.

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2. The Professional Services Maturity™ Model

SPI Research has spent over a decade benchmarking varying levels of operational control or process
“maturity” to determine the characteristics and appropriate behaviors for Professional Services
Organizations based on their organizational lifecycle stage. The fundamental questions SPI Research
was seeking to answer when the PS Maturity™ Benchmark was first conceived remain our primary focus:
 What are the most important focus areas for professional services organizations (PSOs) as their
businesses mature?
 What is the optimum level of maturity or control at each phase of an organization’s lifecycle?
 Can diagnostic tools be built for assessing and determining the health of key business
processes?
 Are there key business characteristics and behaviors that spell the difference between success
and failure?
The original concept behind SPI Research’s PS Maturity Model™ was to investigate whether
increasing levels of standardization in operating processes and management controls improve
customer satisfaction and financial performance. The 2019 PS Maturity™ Benchmark
demonstrates that increasing levels of business process maturity do indeed result in significant
performance improvements (Table 2).
In fact, SPI Research found that
high levels of performance Table 2: Maturity Matters!
have far more to do with
Maturity Maturity Maturity
leadership focus, Key Performance Measurement Level 1-2 Level 3 Level 4-5
organizational alignment, Percentage of respondents 54.8% 24.9% 20.3%
effective business processes
Year-over-year change in PS revenue 7.0% 11.1% 14.7%
and disciplined execution than
Deal pipeline / qtr. bookings forecast 132% 196% 265%
"time in grade." Relatively
young and fast-growing Employee billable utilization 60.8% 76.0% 81.6%
organizations can and do Projects delivered on-time 69.8% 80.6% 85.9%
demonstrate surprisingly high Annual rev. per billable consultant (k) $114 $219 $275
levels of maturity and Annual revenue per employee (k) $101 $170 $231
performance excellence if their
PS EBITDA 6.5% 17.8% 24.6%
charters are clear.
Source: SPI Research, February 2019
Further improvements accrue
when their goals and measurements are aligned with their mission, and they make the investments they
need in talent and systems to provide visibility and appropriate levels of business control. Of course, it
certainly helps if they are also well-positioned within a fast-growing market.
The core tenet of the PS Maturity Model™ is service and project-oriented organizations achieve success
through the optimization of five Service Performance Pillars™:

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1. Leadership – Vision, Strategy and Culture

2. Client Relationships
3. Human Capital Alignment
4. Service Execution
5. Finance and Operations

Within each of the Service Performance Pillars™, SPI Research developed guidelines and key
performance maturity measurements. These guidelines cut across the five service dimensions (pillars)
to illustrate examples of business process maturity. This study measures the correlation between
process maturity, key performance measurements and service performance excellence.

Service Performance Pillars™

Twelve years ago, SPI Research

Figure 12: Service Performance Pillars™
developed a model that segments and
analyzes a PSO into five distinct areas of
performance that are both logical and
functional. We call the five
underpinning elements Service
Performance Pillars™ because they form
the foundation for all professional
services organizations (Figure 12):

1. LEADERSHIP - VISION,
STRATEGY AND CULTURE : (CEO)
a unique view of the future and the
role the service organization will
Source: SPI Research, February 2019
play in shaping it. A clear and
compelling strategy provides a focus for the organization and galvanizes action. Effective strategies
bring together target customers, their business problems, and how a solution solves those problems
differently, uniquely, or better than its competitors. For a service strategy to be effective, the role
and charter of the service organization must be defined, embraced, communicated and supported
throughout the company. Depending on whether the service strategy is to primarily support the
sale of products, or to drive service revenue and profit; service organization goals and
measurements will vary. Leadership skills and competencies must mature as the organization
matures. Culture is the unwritten customs, behaviors and beliefs that determine the “rules of the
game” for decision making, structure and power. The core leadership pillar processes include
setting strategy, business planning and management.

2. CLIENT RELATIONSHIPS : (Marketing and Sales) the ability to communicate effectively with
employees, partners and customers to generate and close business and win deals. Effective client
management involves developing a clear and compelling go-to-market strategy which defines target
buyers, their requirements and how our solution solves those challenges in a differentiated way.

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 2019 Professional Services Maturity™ Benchmark

This pillar encompasses all aspects of marketing, lead generation, quoting and selling solutions as
well as contract management and partnering. The core business processes performed in the client
relationships pillar include marketing, selling and the entire quote to cash business process.

3. HUMAN CAPITAL ALIGNMENT: (Human Resources) the ability to attract, hire, retain and
motivate a high-quality consulting staff. With changing workforce demographics, talent
management has increased in importance. High-caliber employees represent the essence, brand
and reputation of the firm. PSOs are starting to adopt hybrid on and off-site staffing models which
put increased pressure on customer-facing staff to develop client relationships and more carefully
define client requirements. Demands for career planning, skill development and flexible work
options have intensified. The core human capital management processes include recruiting, hiring,
training, compensation, performance and career management.

4. SERVICE EXECUTION : (Engagement/Delivery) the methodologies, processes and tools to

effectively schedule, deploy and measure the quality of the service delivery process. Service
execution involves several factors: from resource management, to delivering projects in a
predictable and acceptable time frame, to reducing cost while improving project quality and
harvesting knowledge. Processes include resource management, capacity planning, project planning
and quality control, knowledge management and methodology and tool development.

5. FINANCE AND OPERATIONS: (CFO) the ability to manage services profit and loss — to generate
revenue and profit while developing repeatable operating processes. The finance and operations
pillar focus on revenue, margin and cost and the financial, contractual and IT operating processes
and controls required to run a profitable and predictable business.

Professional Services Maturity™ Model Benchmark Levels

The model is built on the same

foundation as the Capability Figure 13: Services Maturity™ Model Levels
Maturity Model (CMM), which
has been adopted for software
development; but is specifically
targeted toward billable PSOs,
that either exclusively sell and
deliver professional services or
complement the sale of products
with services. Figure 13 depicts
maturity level progression and
outlines primary characteristics Source: SPI Research, February 2019
for each maturity level:
∆ LEVEL 1 — INITIATED “HEROIC”: (APPROXIMATELY 30% OF PSOS) at maturity Level 1,
processes are ad hoc and fluid. The business environment is chaotic and opportunistic, and the
focus for a PSO is primarily on new client acquisition and reference building. Often professional

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 2019 Professional Services Maturity™ Benchmark

service employees at this level are chameleons — able to provide presales support one day and
develop interfaces and product workarounds the next. Success depends on the competence and
heroics of people in the organization, and not on the use of proven processes, methods or tools.
Practices and procedures are informal, and quality is based on individual experience and aptitude.
Level 1 organizations are often characterized as “informal” and “heroic”.

∆ LEVEL 2 — PILOTED “FUNCTIONAL EXCELLENCE”: (APPROXIMATELY 25% OF PSOS) at

maturity level 2, processes have started to become repeatable. Best practices may be
demonstrated in discrete functional areas or geographies, but they are not yet documented and
codified for the entire organization. Basic processes have been established for the five Professional
Services Performance Pillars, but they are not yet universally embraced. Operational excellence
and best practices may be discerned within functions but not across functions. By Level 2
individual Functional Excellence should have emerged in key areas.

∆ LEVEL 3 — DEPLOYED “PROJECT EXCELLENCE”: (APPROXIMATELY 25% OF PSOS) at maturity

level 3, the PSO has created a set of standard processes and operating principles for all major
service performance pillars but renegades and “hold-outs” may still exist. Management has
established and started to enforce financial and quality objectives on a global basis. Processes have
been established to focus on effective execution and there is spotlight on alignment between and
across functions. By level 3 project delivery methodologies and quality measurements are in place
and enforced across the organization. Level 3 organizations should exhibit “Project Excellence”
with a consistent, repeatable project delivery methodology.

∆ LEVEL 4 — INSTITUTIONALIZED “PORTFOLIO EXCELLENCE”: (APPROXIMATELY 15% OF PSOS)

at maturity level 4, management uses precise measurements, metrics and controls, to effectively
manage the PSO. Each service performance pillar contains a detailed set of operating principles,
tools and measurements. Organizations at this level set quantitative and qualitative goals for
customer acquisition, retention and penetration, in addition to a complete set of financial and
quality operating controls and measurements. Processes are aligned to achieve leverage. The
portfolio is balanced with a focus on project selection and execution. Level 4 organizations should
exhibit “Portfolio Excellence”.

∆ LEVEL 5 — OPTIMIZED “COLLABORATIVE”: (APPROXIMATELY 5% OF PSOS) at maturity level 5

executives focus on continual improvement of all elements of the five performance pillars. A
disciplined, controlled process is in place to measure and optimize performance through both
incremental and innovative technological improvements. Quantitative process-improvement
objectives for the organization are established. They are continually revised to reflect changing
business objectives and used as criteria in managing process improvement. Initiatives are in place
to ensure quality, cost control and client acquisition. The rough edges between disciplines,
functions, and specialties have been smoothed to ensure unique problems can be addressed

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 2019 Professional Services Maturity™ Benchmark

quickly without excessive bureaucracy or functional silos. Level 5 organizations are visionary and
collaborative both internally and with clients and external business partners.
Over the past decade, over 20,000 PSOs have studied the PS Maturity Model ™ and now use the
concepts and key performance measurements to pinpoint their organization’s current maturity and
develop improvement plans to advance lagging areas.
SPI Research summarizes individual PSO Figure 14: Service Performance Pillar Maturity™
performance in a SPIder chart (Figure 14). The
maturity scorecard provides a measurement for
each organization in comparison to the
benchmark maturity definitions and peer
organizations. It provides an invaluable tool to
analyze current performance and prioritize future
improvement initiatives.
This graphical depiction of the Service
Performance Pillars™ by maturity level enables PS
executives to quickly scorecard their
Source: SPI Research, February 2019
organization’s performance and diagnose areas of
relative strength and weakness.

Building the Professional Services Maturity™ Model

With core benchmark information gleaned across all primary business functions, SPI Research built the
Professional Services Maturity™ Model that determines organizational maturity — by pillar — and
provides guidance to advance to the next level (Table 3).
Table 3: Performance Pillars Mapped Against Service

Level 1 Level 2 Level 3 Level 4 Level 5

Initiated Piloted Deployed Institutionalized Optimized
Initial strategy is to PS has become a PS is an important Service leads products. PS is critical to the
support product profit center but is revenue and margin PS is a vital part of the company. Service
sales and provide subordinate to source, but channel company. Solution strategy is clear.
reference product sales. conflict still exists. selling is a way of life. Complimentary goals
Leadership

customers while Strategy is to drive Services differentiate PS is included in all and measurements are
providing customer adoption products. Leadership strategy decisions. in place for all functions.
workarounds to and references development plans are Succession plans are in Leaders have global
complete immature profitably. Leaders in place. Leaders have place for critical vision and continually
products. Leaders focus on P&L and strong background & leadership roles focus on renewal &
are “doers”. client relationships. skills in all pillars. expansion.

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 2019 Professional Services Maturity™ Benchmark

Level 1 Level 2 Level 3 Level 4 Level 5

Initiated Piloted Deployed Institutionalized Optimized
Opportunistic. No Start to use Marketing, inside sales, CRM, PSA, ERP/CFM Executive relationships.
defined solution marketing to drive solution sales with integration provides Thought leadership.
sets or Go to leads. Multiple sales defined solution sets. 360-degree view of Brand building and
Market plan. models. Start CRM integrated with client relationships. awareness. High
Focus is on new investing in sales financials and PSA. Business process, customer satisfaction.
customers and training, CRM & Deal, pricing and vertical and horizontal Integrated sales,
Client Relationships

reference building. sales methodology. contract reviews. solutions. Vertical marketing and
Individual heroics, Start measuring Partner plan and client centers of partnering programs.
no consistent sales effectiveness scorecard. Tight excellence. Top client Consistent, high quality
sales, marketing or & client satisfaction. pricing and contract and partner programs. marketing, sales,
partnering plan or Start developing mgmt. controls. High Global contract and contract management
methodology. No partners and partner levels of customer pricing management. and pricing processes,
consistent programs. Some satisfaction. Key partner systems and
estimating, quoting level of proposal relationships. Strong measurements. High
or contract reviews and pricing customer reference quality references.
management control. programs.
processes. Ad hoc,
one-off projects.

Hire as needed. Begin forecasting Resource, skill and Business process and Continually staff and
Generalist skills. workload. Start career management. vertical skills in addition train to meet future
Chameleons, Jack developing job and Employee satisfaction to technical and project needs. Highly skilled,
Human Capital

of all Trades. skill descriptions & and engagement skills. Career ladder motivated workforce.
Alignment

Individual heroics. compensation plans. surveys. Training plans. and mentoring Outsource commodity
May perform Rudimentary career Aligned goals and programs. Training skills or peak demand.
presales as well as paths. Start measurements with investments to support Sophisticated variable
consulting delivery measuring employee compensation. Attrition career. Low attrition, on and off-shore
and project satisfaction. <15% high satisfaction workforce models.
management.

No scheduling. Skeleton PSA deployed for Integrated project and Integrated solutions.
Reactive. Ad hoc. methodology in resource and project resource management. Continual checks and
Heroic. Scheduling place. Centralized management. Effective scheduling. balances to assure
by spreadsheet. No resource mgmt. Collaborative portal. Using portfolio superior utilization and
Service Execution

consistent project Initiating project Earned Value Analysis. management. Global bill rates. Complete
delivery methods. mgmt. and technical Project dashboard. PMO. Global project visibility to global project
No project quality skills. Starting to Global Project dashboard. Global quality. Multi-disciplinary
controls or measure project Management Office, Knowledge resource management.
knowledge satisfaction and project quality reviews Management. Global
management. harvest knowledge. and measurements. resource management.
Effective change
management.

The PSO has been 5 to 15% margin. PS 15 to 25% margin. PS PS generates > 20% of > 30% margin.
Finance and Operations

created but is not becoming a profit operates as a tightly overall company Continuous improvement
yet profitable. center but still managed P&L. revenue & contributes > and enhancement.
Rudimentary time immature finance Standard methods for 30% margin. High profit. Integrated
& expense capture. and operating planning, resource Well-developed finance systems.
Limited financial processes. mgmt., time & expense and operations Global with disciplined
visibility and Investment in CFM mgmt., cost control & processes and controls. process controls and
control. and PSA to provide billing. In depth Systems have been optimization. Completely
Unpredictable financial visibility. knowledge of all costs implemented for CRM, integrated financial,

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 2019 Professional Services Maturity™ Benchmark

Level 1 Level 2 Level 3 Level 4 Level 5

Initiated Piloted Deployed Institutionalized Optimized
financial May not have real- at the employee, sub- PSA, CFM and BI. IT CRM, resource
performance. time visibility or BI. contractor & project integration and real- management, contracts
Rudimentary Standard Library of level. Processes in time visibility. Systems and pricing systems,
contract and risk Contracts and place for contract have been processes and controls.
management. Statements of Work. management, legal and implemented for
pricing decisions. contract management,
legal and pricing
decisions.

Source: SPI Research, February 2019

Why Maturity Matters

SPI Research believes wide support for the PS Maturity™ model is due to its holistic approach to
measuring performance. Maturity is determined through alignment and focus both within and across
functions. For example, although financial measurements are of primary importance, they are equally
weighted and correlated with leadership and sales and quality measurements to ensure organizations
improve across all dimensions, not just in terms of financial performance. However, if the organization
is profit-motivated (which most are), increasing maturity levels do show up in significant bottom-line
profit. Figure 15 highlights major key performance measurements by maturity level and should alone be
an important reason why PS executives should look deeper into using it to increase profits.
Figure 15: Professional Services Maturity™ Progression

Source: SPI Research, February 2019

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Pillar Importance and Organizational Maturity

The results and insights gained in the past twelve years have confirmed SPI Research’s original
hypothesis that service organizations must develop a balanced and holistic approach to improving all
aspects of their business as they mature. SPI Research has discovered that the emphasis on individual
service pillar performance shifts as organizations mature. Excellence in only one specific service
performance pillar does not create overall organizational success – rather it is the appropriate balance
and alignment within and across performance pillars, which leads to sustainable success.

Table 4 depicts the relative

service performance pillar Table 4: Service Pillar Importance by Organizational Maturity Level
importance by
Pillar Initiated Piloted Deploy. Inst. Opt.
organizational maturity
level. Many professional Leadership
◔ ◑ ◑ ● ●
● ◕ ◕ ◕ ●
services organizations are
Client Relationships
established without an
initial focus toward Human Capital Align.
◔ ◑ ◕ ● ●
◔ ◑ ◕ ● ●
optimizing performance.
Service Execution

◔ ◔ ◕ ● ●
PSOs begin with the goal of
establishing a client and Finance and Operations
reference base. They may Source: SPI Research, February 2019
be operated as a cost
center or as an adjunct to the product function to establish alpha and beta customers and to provide
early product feedback. Initially they often perform presales, training, quality assurance and service
delivery tasks. They hope to deliver services that are both profitable to them as well as valued by their
clients, but in reality, they take the position that “just about any deal is a good deal.” The emphasis at
Level 1 maturity is on building client references and recruiting highly skilled generalist consultants who
are experienced enough and flexible enough to perform heroic feats to ensure early customer success.

By Level 2, although primary focus is still to create reference customers, more emphasis is placed on
human capital alignment for recruiting and ramping skilled employees, partners and contractors.
Service execution focus is on developing repeatable project delivery methods and quality processes. At

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 2019 Professional Services Maturity™ Benchmark

these early stages, many embedded professional services organizations have a strong product-driven
focus and the role of the service organization is subordinate to products. Conflicts between service
profit, client success and driving product revenue are
often characteristic of Level 2 embedded service Figure 16: PS Performance Pillars – Core KPIs

organizations.

By Level 3 the organization must move toward a

more balanced focus on all elements of the business
by investing in systems, operating processes and
repeatable methods to sustain growth and ensure
quality. Level 3 maturity should be the aspirational
target of all PS organizations because it is at level 3
that an on-going, profitable and sustainable business
has emerged. At level 3 the charter of the PS
organization is clear. If the organization is an
embedded PS organization within a product company,
PS has a seat at the executive table and is seen as
adding value that transcends product implementation,
Source: SPI Research, February 2019
integration and customization. Increasingly,
embedded PS has become a critical component of ensuring customer adoption and may play a leading
role in driving product management direction and strategy. Independent Level 3 PSOs are financially
and operationally strong with a clear focus on targets markets and sustainable, repeatable business
processes and quality controls. They have built a compelling, differentiated portfolio which is brought to
life by specialized, knowledgeable consultants. At level 3, heroics and firefighting are no longer the
standard way of doing business as disciplined management systems, controls and integrated systems
ensure predictability and repeatability.

At Level 4 the organization has implemented structured business processes and utilizes integrated
information systems to assure there is “one view of the business”. Level 4 organizations are seen as
true industry leaders in their target markets. They have developed a unique and differentiated culture
which attracts industry-leading consultants and clients. More than average firms, Level 4 organizations
are extremely transparent. They typically have strong management controls and visibility into all facets
of the business by providing dynamic, real-time access to empowered team members. Level 4
organizations continually expand their horizons and boundaries – whether it is through geographic,
vertical market or technology platform expansion.

Finally, at Level 5 the organization is running very efficiently, and the focus is on continual improvement
and innovation. Level 5 firms are the Best-of-the-Best. They are excellent in all functional areas but
have transcended functional excellence with a collaborative, knowledge and intellectual property centric
focus. Very few firms achieve sustained Level 5 performance.

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 2019 Professional Services Maturity™ Benchmark

3. Survey Demographics

Professional Services is one of the fastest growing segments of the global economy due in large part to
the fact that companies in all other vertical industries are increasingly outsourcing and out-tasking their
non-core business functions, processes and technology to specialized service providers.
Today, the global professional services industry is made up of over 25 million firms with combined
annual revenues of more than $8 trillion. It is also highly fragmented as the top 500 largest firms (each
with more than 5,000 employees) account for less than 5 percent of that revenue. This finding has
positive implications for the growth potential of professional services firms: there is room in the market
for innovative and effective newcomers that can effectively harness skilled talent to provide specialized
insights and knowledge.
Firms in the professional service industry provide accounting, advertising and marketing, architectural,
management consulting, engineering, IT, legal, and research services. These companies provide the
knowledge and skills of their employees, typically on a project basis, where an individual or team is
responsible for the delivery of high value services to the client.
Each year SPI Research has expanded vertical market coverage to include additional specialized service
segments to depict the nuances and metrics which pertain to these sub-verticals. SPI’s coverage this
year includes: Value-Added Resellers (VARs); managed service providers and “other” which includes
healthcare; government contractors; and research and development organizations. This year the
benchmark also provides more in-depth analysis of the accounting, architecture, engineering and
marketing and advertising segments. The legal industry is the only major professional services market
which is not covered in this report as the requirements, processes and systems used by the legal
industry tend to be very specialized.
Unlike other industries, Professional Services is almost 100% a knowledge and people-based industry.
The developed regions of North America, Europe and Asia-Pacific are rich in this resource. Growth in
this segment depends on concentrated efforts to attract and deploy skilled talent in the most proven
efficient and profitable ways to sharpen the business performance of professional services firms.
For this benchmark, SPI Research surveyed 622 billable Professional Services Organizations (PSOs) from
October through December 2018. The following sections outline the key markets which comprise the
global professional services industry and breakdown the 2018 survey demographics in several key areas
(market, organization size, and geographic region) to help PS firms compare their individual results to
the benchmark.

The Global Services Market

According to the (IDC) Worldwide Semiannual Services Tracker worldwide revenues for IT and Business
Services totaled $506 billion in the first half of 2018; an increase of 4% year over year (in constant
currency).

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 2019 Professional Services Maturity™ Benchmark

On a global basis, the United States represents the largest IT and business service market with 51% of
the market. Western Europe
Table 5: IDC Worldwide Semiannual Services Tracker – First Half 2018
represents the second largest
market at 31.5% and Asia Pacific
Global Region 1H18 Revenue 1H18/1H17 Growth
represents 17% of the global
Americas $259.7 4.6%
services market. The U.S.
continued to experience strong Asia/Pacific $87.1 4.2%
growth of 4.3% while Western EMEA $159.3 3.1%
European growth stalled to 2.6% Total $506.1 4.0%
due to increased competition
Source: IDC Worldwide Semiannual Services Tracker 1H 2018
from low cost Indian service
providers and slowing overall GDP growth. China continued to grow faster than the market at 7.2% but
growth slowed from 9% two years ago as China’s overall economic growth slowed. Australia boasts a
robust services market, but growth slowed from 4.3% in 2017 to 3.8% in the first half of 2018.
"Steady growth in the services market is being driven by continued demand for digital solutions across
the regions," said Lisa Nagamine, research manager with IDC's Worldwide Semiannual Services Tracker.
"But during 2018, as well as most of 2017, it is really the Americas and cloud-related services that are
having the largest impact on revenue worldwide."
By sector, in the first half of 2018, project-oriented revenues grew by 5.2% to US$191 billion; 3.6%
growth for managed services and 2.7% for support services. Business consulting experienced the highest
growth of 7.5% closely followed by application development at 6.5%.
According to Gartner, who separately tracks IT spending (including Communications Services but
excluding Business Services and non-IT related Professional Services), Worldwide IT spending hit a
record high of $3.7 trillion in 2018 based on strong growth of 4.5%. Enterprise Software spending led
the surge with 9.9% growth, underscoring the shift to cloud-based “as a service” spending.
Table 6: Worldwide IT Spending Forecast (Billions of U.S. Dollars)

2017 2017 2018 2018 2019 2019

Spending Growth (%) Spending Growth (%) Spending Growth (%)
Data Center Systems 181 6.4 192 6.0 195 1.6
Enterprise Software 369 10.4 405 9.9 439 8.3
Devices 665 5.7 689 3.6 706 2.4
IT Services 931 4.1 987 5.9 1,034 4.7
Communications Services 1,392 1.0 1,425 2.4 1,442 1.2
All IT 3,539 3.9 3,699 4.5 3,816 3.2
Source: Gartner, 2018

Gartner says, “Cloud software will grow at more than 22 percent this year compared with 6 percent
growth for all other forms of software.” Going forward expect a significant spending surge for

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 2019 Professional Services Maturity™ Benchmark

cybersecurity software. The report goes on to say that IT service spending is being fueled by the cost
advantages of out tasking IT and business services along with service provider consolidation.

What’s Hot and What’s Not in IT

Based on a survey of 700 North American IT leaders conducted by TEK Systems, IT leaders report
information security (46
percent), cloud computing Table 7: IT Technology Impact Stack Ranking

(38 percent), business IT Technology Impact Ranking 2015 2016 2017

intelligence and big data
Security 1 (52%) 1 (47%) 1 (46%)
analytics (28 percent) are
having the biggest impact Cloud computing 5 (29%) 4 (26%) 2 (38%)
on their business (Table 7). Business intelligence / big data 2 (41%) 2 (31%) 3 (28%)
Networking has slipped
Digital marketing / customer experience - 7 (22%) 4 (26%)
from being viewed as the
third-most impactful area to Enterprise resource planning 4 (31%) 8 (20%) 5 (21%)
tenth position. Sixty-five Virtualization / software-defined networks 7 (21%) 6 (26%) 6 (21%)
percent of IT leaders expect Mobility 3 (36%) 5 (26%) 7 (19%)
to increase their spending
Digital transformation* - - 8 (18%)
on security in 2017. Cloud
represents another big Data center consolidation 6 (24%) 11 (13%) 9 (18%)
investment, with 3 in 5 IT Networking - 3 (30%) 10 (17%)
leaders expecting to
Internet of Things (IoT) 8 (16%) 9 (14%) 11 (14%)
increase spending. Digital
Consumerization of IT / BYOD 9 (13%) 10 (14%) 12 (8%)
marketing is also a big
growth area. Source: TEK Systems Annual IT Forecast, 2017

The North American Professional Services Market

SPI Research uses the North American Industry Classification System (NAICS) to analyze the U.S. services
market. The primary Professional Services designation is NAICS 54xx which defines PS sub-verticals as
“Those in this subsector engage in business processes where human capital is the major input. These
establishments provide the knowledge and skills of their employees, often on an assignment basis,
where an individual or team is responsible for the delivery of high value services to the client. The
individual industries of this subsector are defined based on the particular expertise, training and
credentials of the services provider (Table 8)”.
Table 8: Vertical PS Markets — the North American Industry Classification System

Code Market Description

5112 Software Software publishing, both public and private software companies. Total revenue is reported. PS
typically represents ~ 20% of revenues.
518 Data Services Data processing, hosting and related services

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 2019 Professional Services Maturity™ Benchmark

Code Market Description

5411 Legal This industry is comprised of legal practitioners known as lawyers or attorneys (i.e., counselors-at-law)
primarily engaged in the practice of law. Firms in this industry may provide a range of expertise or
specialize in specific areas of law, such as criminal law, corporate law, family and estate planning,
patent law, real estate law, or tax law.
5412 Accounting/ Tax This industry comprises establishments primarily engaged in providing services, such as auditing and
Prep/ Bookkeeping / accounting, designing accounting systems, preparing financial statements, developing budgets,
Payroll preparing tax returns, processing payrolls, bookkeeping, and billing. Accountants are certified to ensure
they have and maintain competency in their field.
5413 Architectural, This industry comprises establishments primarily engaged in planning and designing residential,
Engineering and institutional, leisure, commercial, and industrial buildings and structures by applying knowledge of
Related Services design, construction procedures, zoning regulations, building codes, and building materials.
5414 Specialized Design This industry group comprises establishments providing specialized design services (except
Services architectural, engineering, and computer systems design).
5415 Computer Systems (IT Consulting) – This industry comprises establishments primarily engaged in providing expertise in the
Design Services field of information technologies through one or more of the following activities: (1) writing, modifying,
Related Services testing, and supporting software to meet the needs of a particular customer; (2) planning and designing
computer systems that integrate computer hardware, software, and communication technologies; (3)
on-site management and operation of clients' computer systems and/or data processing facilities; and
(4) other professional and technical computer-related advice and services.
5416 Management (Management Consulting) – This industry comprises establishments primarily engaged in providing
Science and advice and assistance to businesses and other organizations on management issues, such as strategy
Technical Consulting and organizational planning; financial planning and budgeting; marketing objectives and policies; human
Services resource policies, practices, and planning; production scheduling; and control planning.
5417 Scientific Research This industry group comprises establishments engaged in conducting original investigation on a
and Develop. systematic basis to gain new knowledge (research) and/or the application of research findings or other
Services scientific knowledge for the creation of new or significantly improved products or processes
(experimental development). The industries within this industry group are defined on the basis of the
domain of research; that is, on the scientific expertise of the establishment.
5418 Advertising and (Marketing and Communications) – This industry comprises establishments primarily engaged in
Related Services creating advertising or public relations campaigns and placing advertising in periodicals, newspapers,
radio and television, or other media. These firms are organized to provide a full range of services (i.e.,
through in-house capabilities or subcontracting), including advice, creative services, account
management, production of advertising material, media planning, and buying (i.e., placing advertising).
5419 Other Professional, (Other PS) – This industry group comprises establishments engaged in professional, scientific, and
Scientific, Technical technical services not listed above.
Services
5613 Employment Staffing, temporary employment, placement and employment search services.
Services
Source: US Census and SPI Research, February 2019

Per the most recent US Census, combined professional, scientific, and technical services (NAICS 54xx)
revenues reached $2.9 trillion. In addition, substantial professional service revenue is generated by
software (NAICS 5112); Data Services (NAICS 518) and Employment Services (NAICS 5613). Including
these segments, the US professional service industry generated approximately $4.1 trillion in revenue in
2018 and employed 22.2 million US-based workers. Tables 9 and 10 provide a rollup of 2017 US Census
data for these NAICS codes. There are 178,072 firms in these market segments; only 76,445 42.9%)
employ more than 20 people the remaining 57% employ less than 20 people. In other words, the
industry is dominated by very small firms particularly in accounting; legal; management consulting and
staffing.

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 2019 Professional Services Maturity™ Benchmark

Table 9: 2018 NAICS Services Rollup (Firms)

Employees in % of total emp. in

Firms with over firms with over firms with over 20
NAICS Market Firms 20 employees 20 emp. emp.
5412 Accounting 16,880 3,253 451,605 48.5%
5418 Advertising/Marketing/PR 8,040 5,196 1,050,920 81.1%
5413 Architecture/Engineering 33,342 13,727 2,259,335 70.6%
5415 IT Consulting 14,696 14,044 2,813,675 82.4%
5411 Legal 27,626 9,326 1,050,035 52.3%
5191 Managed Services/Hosting 3,438 1,899 783,405 90.5%
5416 Management Consulting 32,054 14,466 2,515,955 61.4%
4234 PS within HW & Networking 4,108 2,379 838,355 91.4%
5112 PS within Software company 3,048 2,204 992,600 93.1%
5417 Research & Development 7,480 2,693 752,785 85.4%
5613 Staffing 22,720 5,674 2,609,315 91.9%
Other PS 4,640 1,584 219,495 31.1%
Total / Average 178,072 76,445 16,337,480
Source: US Census and SPI Research, February 2019

Table 10: 2018 NAICS Services Rollup (Employees and Revenue)

NAICS Market Employees Revenue (mm) Rev/Emp Rev/Consult

5412 Accounting 931,964 $150,974 $161,995 $267,515
5418 Advertising/Marketing/PR 1,296,126 $224,111 $172,908 $250,592
5413 Architecture/Engineering 3,198,556 $609,802 $190,649 $263,351
5415 IT Consulting 3,415,991 $763,861 $223,613 $300,211
5411 Legal 2,006,503 $266,641 $132,888 $147,654
5191 Managed Services/Hosting 865,414 $194,080 $224,263 $371,560
5416 Management Consulting 4,095,715 $683,053 $166,773 $224,379
4234 PS within HW & Networking 916,913 $407,691 $444,634 $702,765
5112 PS within Software company 1,066,639 $298,919 $280,244 $384,198
5417 Research & Development 881,203 $177,775 $201,741 $330,497
5613 Staffing 2,839,441 $309,472 $108,990 $163,485
Other PS 706,861 $97,194 $137,500 $219,846
Total / Average 22,221,326 $4,183,571 $188,268
Source: US Census and SPI Research, February 2019

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 2019 Professional Services Maturity™ Benchmark

The US market represents roughly 50% of global professional services revenue which leads to a global
revenue estimate of almost $8 trillion, providing employment for over 45 million professional service
workers. These figures exclude revenues and PS employees in telecommunications, financial services
and healthcare services.

The European Professional Services Market

Although the US economy rebounded much faster than the eurozone’s from the global economic crisis,
European GDP growth rates began to equal or exceed that of the US starting in 2017. But this positive
momentum was erased in 2018 with eurozone growth rates sliding far below the 3% GDP growth of the
US to 1.9%, the slowest growth in four years. While global headwinds, falling exports and rising oil
prices are partially to blame for slower European growth, reports have pointed to a growing skills
shortage which is holding the continent back. According to one report, “Over 70% of companies
engaged in professional, scientific or technical services and 67% of ICT companies admitted that skills
mismatches have a serious effect on their human resources policies.”
Two major segments make up the professional services market in Europe – professional, scientific and
technical professional services organizations and computer programming and consultancy organizations.
Europe boasts a strong and growing consulting market with the fastest growth occurring in technology-
oriented eastern European countries due to a burgeoning supply of well-educated and technically skilled
workers. Out of the 30 countries which comprise Europe, the largest producers of professional services
are also the largest consumers with Germany, the UK and France in the lead.
Figure 17: European Professional, Scientific and Technical Service Revenue and Employment

Source: Eurostat, 2015

According to Eurostat, Professional, Scientific and Technical services accounted for 9.2% of the EU
workforce and 18.6% of the total number of businesses in 2015. There were 3.9 million businesses in
Europe classified as professional, scientific and technical that employed 11.5 million people however the

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 2019 Professional Services Maturity™ Benchmark

vast majority of these businesses (49.7%) employed fewer than 10 people. These small consultancies
provided work for 6.1 million people. In total, both small and large organizations generated EUR 1.238
trillion in revenue. Within this sector, there are 726,000 management consultancies that employ 1.6
million people and generate EUR 189 billion in revenues (Figure 17).
In Europe additional industry segments which generate substantial professional services revenue include
information and communication services of which the computer programming and consultancy sector
employed 2.8 million people, or 47% of those employed in the sector as a whole in Europe. They
generated EUR 420 billion in revenue, which was 35% of the information and communication services
sector (Figure 18). All enterprise software companies include a component of professional services as
do independent IT consultancies which tend to specialize by software or hardware platform and/or
vertical industry.
Figure 18: European Computer Programming and Consultancy Services

Source: Eurostat, 2015

The Asia-Pacific Professional Services Market

An important contributor to the Asia-Pacific (APac) economy both in terms of employment and
productivity improvement, the professional services sector includes accounting, advertising and
marketing, architecture, human resources, engineering, IT, management, operations, legal, and scientific
research services. Across the Asia-Pacific region professional service sector employment growth and
revenue impact is strong and growing:
∆ India has long held a leading position in technology services with revenues in excess of $150
billion ($75 billion in IT services; $28 billion in BPM; $22 billion in research and development;
$17 billion in ecommerce: $14 billion in hardware and $6.5 billion in software services). India
employs over 3.7 million technology service workers; ~ 35% are women. (Source: NASSCOM)

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 2019 Professional Services Maturity™ Benchmark

∆ Spending on information technology (IT) products and services in Australia is forecast to reach
almost A$93 billion in 2019, an increase of 3.5 percent from 2018, slightly higher than the global
average growth rate of 3.2 percent. Source: Gartner, IT services represents the largest category of
IT spending in Australia. The IT service market is forecast to reach $34.4 billion in 2019, an
increase of 4.4 percent from 2018.
∆ Several regions including Singapore, the Philippines, Malaysia, New Zealand and Australia cite
professional services as their fastest growing economic sector.
∆ Over the past five years, the IT Services industry in China has grown by 7.7% to reach revenue of
$159B in 2018. Over the same timeframe, the number of businesses has grown by 1.7% and the
number of employees has grown by 2.9% to 1.8 million. (Source: IBIS)

Table 11: Australia IT Spending Forecast (Billion Australian Dollars)

2017 2017 2018 2018 2019 2019

Spending Growth (%) Spending Growth (%) Spending Growth (%)
Data Center Systems 2.7 2.5 2.9 5.0 3.0 2.3
Enterprise Software 13.3 8.1 14.4 8.3 15.9 10.4
Devices 12.1 3.6 12.0 -0.08 11.8 -1.6
IT Services 31.6 3.5 33.0 4.3 34.4 4.4
Communications Services 27.4 0.03 27.6 0.07 27.9 1.2
All IT 87.1 3.1 89.8 3.1 93.0 3.5
Source: Gartner, 2018

PS Maturity™ Benchmark Vertical Market Demographics

The 2019 PS Maturity™ benchmark is the most comprehensive

global study of the professional services industry as it is based on
622 participating organizations representing over 390,000
consultants (Figure 19). The percentage of completed surveys
representing the top 14 vertical market segments is as follows:
1. IT Consulting: Systems Integrators and developers – 24.9%,
155 firms representing ~ 135,000 consultants;
2. Architects and Engineers: Architects and engineers – 16.1%
representing 100 firms with ~ 26,000 architects and
engineers;
3. Software PS: Service divisions within software companies – 12.5%, representing 78 firms and ~
69,000 consultants;
4. Management Consulting: Management consultancies – 12.1% representing 75 firms and ~
29,000 consultants;
5. SaaS PS: Service divisions within software-as-a-service providers – 11.3% representing 70 firms
and ~ 23,000 consultants;

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 2019 Professional Services Maturity™ Benchmark

6. Marketing, Advertising and PR: Advertising, marketing, communication firms – 3.2%

representing 20 firms and ~ 10,000 consultants;
7. Accountancies: Accounting firms – 3.1% representing 19 firms with ~ 20,000 accountants and
auditors;
8. Value-Added Resellers: resell hardware, software and provide technology services, training and
support – 2.3% representing 14 firms with ~ 2,000 consultants;
9. Hardware (and Networking) PS: Service divisions within hardware and networking
manufacturers – 1.9% representing 11 firms with ~ 29,000 consultants;
10. Government Contracting: Firms providing professional services to Government agencies – 1.6%
representing 10 firms with ~ 6,000 consultants;
11. Managed Services: Provide hosting and managed and outsourced services – 1.4% representing
9 firms with ~ 1,000 consultants;
12. Manufacturing: Services divisions within manufacturers – 1.0% representing 6 firms with ~
6,000 consultants:
13. Healthcare/Medical/Pharma/Biotech: 0.8% representing 5 firms with ~ 2,000 project-based
professionals;
14. Other PS: business optimization, training – 2.4% representing 15 firms and ~ 8,000 consultants;
“Other PS” includes other types of PSOs such as legal, construction, staffing, R&D and
organizations that either did not squarely fit into other specific professional services verticals or
lacked enough observations worth analyzing.
Figure 19: Vertical Market Distribution

Source: SPI Research, February 2019

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 2019 Professional Services Maturity™ Benchmark

Table 12 shows participant demographics for the past twelve years. For the past four years, IT
consultancies have been the largest participating market, closely followed by PS within software firms.
Table 12: Number of Participating Firms by Vertical Market (2007 through 2017)

Market Type 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total
IT Consulting PSO 13 24 50 67 61 69 115 86 190 133 103 155 1,066
PS within Soft. ESO 34 66 89 57 56 45 45 47 89 57 45 78 708
Mgmt. Consult. PSO 2 12 22 22 31 34 24 27 68 46 45 75 408
Arch./Engr. PSO 0 0 4 6 7 8 6 10 50 35 153 100 379
Other PS PSO 2 13 30 22 13 31 21 24 13 46 49 62 326
PS within SaaS ESO 0 0 18 19 26 23 16 13 43 41 29 70 298
PS within HW/Net ESO 1 3 12 9 10 9 4 4 16 6 6 12 92
Advertising PSO 0 0 0 6 10 11 6 4 12 9 8 20 86
Accounting PSO 0 0 0 6 2 4 1 5 13 9 8 19 67
VAR ESO 0 0 0 0 0 0 0 0 14 14 4 14 46
Managed Services ESO 0 0 0 0 0 0 0 0 17 8 4 9 38
Res. & Dev. PSO 0 0 0 0 0 0 0 0 15 7 0 4 26
Staffing PSO 0 0 0 0 0 0 0 0 9 5 2 4 20
Total 52 118 225 214 216 234 238 220 549 416 456 622 3,560

Source: SPI Research, February 2019

According to this survey, the 68 firms headquartered in EMEA experienced the greatest growth followed
by APAC, with North America experiencing the least growth in both revenue and headcount. This select
group of 68 EMEA-headquartered firms reported a high percentage of billable employees, which means
lower management and non-billable overhead (Table 13). According to Equiteq, the Americas reported
the highest level of merger and acquisition activity with 1,193 deals. EMEA lagged behind with M&A
deal volume declining to 933 from 1,094 the prior year.
Table 13: Survey Participant Demographics by Organization Type and Geographic Region

Key Performance Indicator 2017 2018 ESO PSO Amer. EMEA APac
Surveys 456 622 193 429 516 68 38
Size of PS organization (employees) 347 625 676 602 588 269 1,773
Annual company revenue (mm) $127.9 $228.2 $351.9 $172.7 $234.7 $157.5 $269.0
Total PS revenue (mm) $57.1 $92.8 $89.3 $94.3 $86.2 $65.3 $228.4
YoY change in PS revenue 8.0% 9.7% 10.1% 9.5% 9.3% 11.8% 11.0%
YoY change in PS headcount 9.3% 7.7% 8.0% 7.6% 7.5% 8.8% 8.9%
% of employees billable 75.5% 72.8% 69.8% 74.2% 72.5% 74.0% 76.1%
M&A over the past three years 0.67 0.96 1.50 0.72 0.93 0.95 1.26
Source: SPI Research, February 2019

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 2019 Professional Services Maturity™ Benchmark

Figure 20: Regional Demographics

Source: SPI Research, February 2019

By organization size, the largest organizations grew the fastest and added significant PS headcount
(Table 14). The smallest organizations experienced the fewest mergers and acquisitions (as expected),
while the largest experienced the most; they also relied the most heavily on subcontractors to generate
incremental revenue. In the high-growth professional services world, mergers and acquisitions are
increasingly seen as one of the fastest ways to augment growth and to expand into hot new service and
technology segments. Increasingly, the largest firms are augmenting their capabilities in SMAC
(Security, Mobile, Analytics and the Cloud) while also investing in more strategic and industry-focused
practices.
Table 14: Survey Participant Demographics by Organization Size

Key Performance Indicator (KPI) Under 10 10 - 30 31 – 100 101 - 300 301 - 700 Over 700
Surveys 53 123 166 143 54 83
Size of PS organization (employees) 5 20 65 200 500 3,854
Annual company revenue (mm) $8.9 $38.5 $95.7 $166.1 $413.5 $907.0
Total professional services revenue (mm) $2.7 $6.7 $18.0 $40.8 $142.5 $485.8
Year-over-year change in PS revenue 8.0% 7.2% 9.7% 10.8% 10.6% 11.9%
Year-over-year change in PS headcount 3.4% 6.5% 7.8% 9.8% 6.8% 9.1%
% of employees billable or chargeable 78.1% 72.7% 73.8% 73.4% 67.9% 70.2%
% of PS revenue delivered by 3rd-parties 8.2% 12.3% 10.9% 10.2% 12.5% 16.7%
M&A over the past three years 0.23 0.17 0.54 0.85 1.75 3.06
Source: SPI Research, February 2019

Tables 15 and 16 further analyze the survey demographics by vertical market, highlighting the markets
surveyed. According to this year’s survey, VARs (Value-Added Resellers) reported the highest year over

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 2019 Professional Services Maturity™ Benchmark

year PS revenue growth at 17.9%. They were followed by accountancies at 12.4% and IT consultancies
at 11.1%.
In 2017, PS industry hiring reached an all-time high with a 9.7% increase in headcount. In 2017, for the
first time, we saw PS headcount growth exceed revenue growth. All of this hiring led to ebullient PS
revenue growth of 9.7% in 2018 as all those new employees contributed to a surge in revenue. In 2018
we saw a return to more standard incremental hiring with 7.7% headcount growth. These figures
portend strong but slightly dampened PS revenue growth in 2019, particularly in Europe where the
economy is experiencing a slowdown.
Table 15: Survey Participant Demographics by Vertical Market

IT Arch./ Mgmt. Software SaaS

Key Performance Indicator (KPI) Consult. Engr. Consult. PS PS
Surveys 156 100 75 78 70
Size of PS organization (employees) 872 1,048 386 883 330
Annual company revenue (mm) $269.9 $179.9 $78.9 $439.5 $212.6
Total professional services revenue (mm) $145.2 $176.3 $53.3 $104.6 $57.4
Year-over-year change in PS revenue 11.1% 12.4% 10.4% 9.1% 10.3%
Year-over-year change in PS headcount 9.3% 11.2% 7.7% 7.5% 7.6%
% of employees billable or chargeable 73.9% 65.0% 77.6% 71.6% 67.7%
% of PS revenue delivered by 3rd-parties 13.6% 12.8% 10.3% 10.7% 8.3%
M&A over the past three years 0.92 0.87 0.42 1.86 1.37
Source: SPI Research, February 2019

Table 16: Survey Participant Demographics by Vertical Market

Advertise / Hardware Other

Key Performance Indicator (KPI) Mktg / PR Acct. VAR PS PS
Surveys 20 19 14 11 79
Size of PS organization (employees) 523 1,048 142 2,493 589
Annual company revenue (mm) $112.6 $179.9 $267.9 $786.1 $250.4
Total professional services revenue (mm) $42.7 $176.3 $46.8 $212.5 $73.1
Year-over-year change in PS revenue 9.4% 12.4% 17.9% 8.8% 8.9%
Year-over-year change in PS headcount 4.4% 11.2% 15.4% 6.6% 7.1%
% of employees billable or chargeable 68.5% 65.0% 68.9% 65.9% 71.0%
% of PS revenue delivered by 3rd-parties 10.6% 12.8% 9.6% 12.8% 12.6%
M&A over the past three years 1.18 0.87 1.11 1.68 1.15
Source: SPI Research, February 2019

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Type of Work Sold

SPI Research analyzes the type of work sold, (Table 17). Technology and IT consulting represent over
one-third of all the work sold by both independents and ESOs. This year we saw a significant shift in the
type of work sold by embedded PS organizations. ESOs are no longer just selling implementation,
integration and customization on either a time and materials or fixed priced basis; now those services,
just like software, are being sold “as a service”. ESO subscription revenue surged from 6.5% to 16.3%.
This business model shift heightens the need for PSA or project-based accounting solutions. Providers
must not only track labor and utilization costs but also ensure those costs are within committed
subscription cost levels. Additionally, systems must now support complex multi-element contracts and
billing.
In Europe, and Asia, the percentage of technology consulting was significantly higher than business or
management consulting. As the North American technology services market matures, service providers
are shifting their focus to add business process optimization. Expect the same shifts to occur in EMEA
and Asia Pacific as the business matures giving way to a higher percentage of multi-dimensional
consultancies.
Table 17: Type of Work Sold by Organization Type and Geographic Region

Key Performance Indicator (KPI) 2017 2018 ESO PSO Amer. EMEA APac
Business / management consulting 27.4% 24.7% 16.2% 28.5% 25.3% 22.9% 20.4%
Technology or IT consulting 31.9% 34.7% 37.4% 33.6% 32.0% 49.4% 45.2%
Subscription services 2.7% 7.6% 16.3% 3.6% 7.8% 7.6% 4.7%
Managed services 10.4% 9.5% 12.2% 8.3% 10.0% 7.1% 7.4%
Staff augmentation 4.3% 5.2% 4.3% 5.6% 5.0% 5.3% 7.9%
Hardware, software or equipment 3.2% 4.3% 7.9% 2.6% 4.1% 3.8% 6.8%
Other 20.1% 14.0% 5.6% 17.8% 15.8% 3.9% 7.7%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

Table 18: Type of Work Sold by Organization Size

Key Performance Indicator (KPI) Under 10 10 - 30 31 – 100 101 - 300 301 - 700 Over 700
Business / management consulting 46.4% 20.7% 30.1% 21.3% 16.0% 17.6%
Technology or IT consulting 22.1% 31.5% 35.1% 38.0% 43.0% 35.8%
Subscription services 7.0% 7.1% 5.1% 8.5% 9.8% 10.5%
Managed services 6.6% 8.7% 8.2% 9.1% 10.7% 15.1%
Staff augmentation 4.6% 4.1% 5.6% 4.9% 5.1% 7.1%
Hardware, software or equipment 2.6% 3.2% 3.5% 5.3% 3.0% 7.5%
Other 10.8% 24.8% 12.3% 12.9% 12.4% 6.4%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

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The breakdown of services sold becomes even more interesting as organizations are parsed by size.
Smaller firms tend to sell more business or management consulting than the larger firms as the vast
majority of management consultancies are quite small. Technology consulting lends itself to economies
of scale whereas expert strategic or operational management consulting relies on specific domain
knowledge and expertise which is not easily amplified across large project teams.

PSO Type
Many of the concepts and uses of professional services described in this report also exist within product-
driven organizations. Thus, SPI Research uses the term “embedded service organization” (ESO) to
describe the rapidly expanding market for service organizations within product companies. Within
professional services, the fastest growing segment is software and IT services (Figure 21).
Figure 21: Independent vs. Embedded Survey Orgs Surveyed (2007 – 2017)

Source: SPI Research, February 2019

There are more than 25,000 software, hardware, IT and Managed Services companies in the United
States; more than 99 percent are small and medium-sized firms (i.e., under 500 employees). This total
includes software publishers, suppliers of custom computer programming services, computer systems
design firms, and Managed Services providers. This segment of the PS industry draws on a highly
educated and skilled US-based workforce of over 5.4 million people.
SPI Research analyzes billable PSOs in several ways with a focus on two macro segments – independents
and embedded PS organizations:

Independent Professional Services Organizations (PSOs): Independent PSOs sell, deliver, and
invoice for professional services to external clients. Clients hire systems integrators, IT consultancies
(SIs) and Value-Added Resellers (VARs) to implement or integrate technology based on their strategic
competence or specialized industry or product knowledge. Clients hire management consultancies to
provide strategic insight, guidance, facilitation and coaching. Independent PSOs typically provide
expertise, knowledge, skills and business practices that are more specialized than those found within
internal organizations. In this study a majority of the independent PSOs were IT consultancies, Systems
Integrators (SIs) or VARs, with the remainder representing Management Consultancies (MCs),

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Accountants, Marketing and Advertising and Architects and Engineers. Healthcare services including
staffing; management consulting; technology and business process consulting represents one of the
fastest growing sectors as the healthcare industry is forced to automate and improve patient reporting.
The participating PSOs represented a broad spectrum from some of the largest independent service
providers in the world to extremely small, independent regional and specialty service providers. The
vast majority of responding independent PSO’s are privately held.
Embedded Services Organizations (ESOs): ESOs operate much like PSOs; however, they are part of a
product-driven organization. The majority of ESO participants focus exclusively on their company’s own
technology but many of the largest ESOs like IBM and HP services provide global IT consulting, managed
services and outsourcing not associated with their company’s products. For the small to mid-size ESOs,
their primary charter is to successfully implement their company’s products. Increasingly the charter of
embedded PS has expanded to include client adoption with a focus on reducing time to value. While
they are focused on professional service revenue and profit, they are often asked to perform non-
billable presales, proof of concept and customer satisfaction services at little to no charge. They enable
external clients but must also support internal sales, support and engineering constituencies. At
maturity levels 1 and 2, their primary focus is on project delivery and building a reference base. For
ESOs, lead generation, marketing and sales are primarily provided by the product sales organization
however as they mature, many are starting to develop their own “sales selling service” organizations. In
this survey a majority of the ESOs were part of independent software and cloud vendors (ISVs). The
embedded PS organizations in this study provide PS for some of the largest and best-known cloud
vendors. Overtime the charter for embedded cloud PS has shifted from a cost center to a profit center.
Cloud PS organizations are now measured both implementation, packaged subscription services, churn
and recurring revenue. Almost all legacy on-premise software providers are moving to the cloud. SPI
Research shows both on-premise and SaaS results.
SPI Research uses this segmentation because independent consultancies must fund sales, marketing and
back-office operations for finance, operations, facilities, IT and recruiting in a way that embedded
organizations generally do not. Independents incur a higher cost of operation than captive (embedded)
organizations do. However, the following chapters
will demonstrate independent PSOs generally outperform their embedded counterparts because their
sole focus is on delivering high-quality services at a profit. Independents generally are focused on client
delight and service revenue and profit growth, versus embedded where the goals of delivering profitable
services may be subordinate to customer product adoption and driving incremental product sales.

Organization Size
The average size organization in the Professional Services Maturity™ Benchmark increased to 625 this
year compared to 347 last year. This year’s survey is based on firms who employee almost 400,000
consultants worldwide making it the most comprehensive study of the Professional Service industry.
Figure 22 highlights survey distribution by PS headcount. The largest percentage of firms have between
31 and 100 employees, which has been the case for several years now. Embedded services
organizations average 676 PS employees whereas independents averaged 602. Firms headquartered in
EMEA averaged 269 PS employees; the Americas averaged 588 and Asia-Pacific averaged 1,773 PS
employees per firm. Software PS organizations averaged 883 PS employees, highlighting the importance

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of embedded PS within these organizations.

IT consultancies (872) and Management Figure 22: Organization Size
consultancies (386) also had a substantial PS
workforce. Architect and engineering firms
averaged 258 employees.

Headquarters Location
SPI Research works with professional services
organizations from around the world and
encourages them to participate in the
benchmark survey. Survey participation from
firms headquartered outside of North
America, (Europe, Middle East, Africa (EMEA)
and Asia-Pacific (APac)) represented almost
20%. (Figure 23).
It is important to note that regardless of Source: SPI Research, February 2019
where the organization has its headquarters,
a significant number of employees may
Figure 23: Headquarters Location – Region
reside outside of the headquarters location.
This is especially true for larger
organizations. Therefore, the benchmark
does reflect global organizations with a
worldwide PS workforce.

Source: SPI Research, February 2019

Total Company Revenue

In this survey, many of the PS organizations are part of a larger enterprise that also sells a variety of
other products and services. Many of the independent professional service providers also sell products
or the responding group is an individual practice within a larger firm. Many technology service
organizations have multiple lines of business which may include management consulting, managed
services, outsourcing and staffing. Therefore, it is important to note total annual company revenue. In

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this year’s survey the average organization Figure 24: Total Company Revenue
generated $228 million in total revenue
including $93 million in PS revenue (Figure
24). The percentage of total revenue
produced by PS represented 40.6% this year.
The percentage of overall PS revenue
contribution has been steadily increasing,
reflecting the importance of the new
“everything as a service” economy.

Source: SPI Research, February 2019

Total PS Revenue
The global PS market is primarily comprised of firms with less than $50 million in revenue, but SPI
Research works especially hard to survey larger professional services providers to better understand the
dynamics impacting their business and how they can improve organizational performance.
Embedded PSOs averaged $89.3 million in PS
revenue and the independents averaged Figure 25: Total Professional Services Revenue
$94.3million. The average across all 622
participants was $92.8 Million compared to $57
million in 2017; $86 million in 2016 and $81
million in 2015. In this year’s survey firms
headquartered in the Americas produced $86M
compared to $65M for EMEA and $228M for
APac headquartered firms.

Year over year change in PS Revenue

For the past five years, PS annual revenue
growth has averaged 9.4%. In 2018 annual PS
revenue growth climbed to 9.7%; up
significantly from 2017 revenue growth of 8%.
Interestingly, almost all PS subsegments Source: SPI Research, February 2019

reported strong revenue growth. The slowest growth was reported by architects and engineers and
managed service providers at 6.1%. 47% of the firms grew revenues by over 10% (Figure 26). 33% of
the firms grew revenues by less than 5% and 20% grew revenues by 5 to 10%.

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 2019 Professional Services Maturity™ Benchmark

Independent providers averaged 9.5%

revenue growth whereas embedded service Figure 26: Year-over-Year Change in PS Revenue
providers grew at 10.1%. Firms with more
than 700 employees grew the fastest at
11.9%. Firms with fewer than 100 employees
experienced slower revenue growth than firms
with over 100 employees who reported
greater than 10% growth. This is an important
metric to watch as growth in the sector has
entered a new phase of less than 10% year
over year revenue growth, leading to greater
consolidation and potentially price erosion.
The professional services market can absorb
growth rates of 5% to 10% through efficiency
gains and better management of external
subcontractors without significant increases in
hiring. However, when growth rates rise Source: SPI Research, February 2019

above 10%, professional services organizations

must add full-time employees.

Year-over-year change in PS Headcount

2017 saw a surge in headcount growth which
tapered off slightly in 2018. Typically, headcount Figure 27: Year-over-Year Change in PS Headcount
growth trails revenue growth by approximately
3 percentage points. Greater headcount growth
than revenue growth appears to be a one-time
anomaly as we saw the spread between
headcount (7.7%) and revenue growth (9.7%)
return to normal in 2018 (Figure 27). Despite
hiring increases we have not seen significant
wage inflation.
The Asia-Pacific region showed the largest
increase in headcount at 8.9%, followed by
EMEA at 8.8%. The Americas grew headcount at
7.5%. All of these figures are significantly lower
than in 2017.
Source: SPI Research, February 2019

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Percentage of Employees Billable or Chargeable

SPI Research found the percentage of billable
Figure 28: Percentage of Employees Billable
employees grew from 74.6% in 2016 to 75.5% in
2017 but declined in 2018 to 72.8% (Figure 28).
PSOs have worked hard to eliminate non-
revenue producing positions but the span of
management control has remained fairly
constant at 1:10. Independents reported 74.2%
billable employees compared to 69.8% for
ESOs. The Asia-Pacific region reported 76.1% of
their employees billable; EMEA 74% and
Americas 72.5%. The smallest organizations
(under 10 employees) reported the highest
billable percentage (78.1%). By vertical,
management consultancies and architects and
engineers reported the highest billable
percentage (77%).
Source: SPI Research, February 2019
Excessive non-billable headcount creates a top-
heavy organization or is a symptom of poor sales and marketing effectiveness and/or poor systems. But
as in all things PS, there is a delicate balance that must be maintained. Non-billable headcount and time
is a necessary component of leadership and developing infrastructure, systems and tools which support
growth, consistency and quality.

Percentage of PS Revenue Delivered by Figure 29: Percentage of PS Rev. Delivered by 3rd-parties

Third Parties
Figure 29 shows the distribution of survey
responses in terms of the amount of revenue
generated by third-party resources. The
average percent of PS revenue generated by
subcontractors was 11.7%, down from 12.6%
in 2017. ESOs used a third-party workforce to
generate 10.3% of revenue, whereas
independents reported 12.3%. APac used a
third-party workforce 10.9% of the time; the
Americas 11.4%. Hardware and networking
providers used the most outside
subcontractors at 12.8%; research and
development organizations the least at 4.4%.
Source: SPI Research, February 2019
Subcontractors use grows proportionately
with organization size.

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Mergers and Acquisitions over the Past Three Years

Six years ago, SPI Research began tracking
the number of mergers and acquisitions Figure 30: Three-year Mergers & Acquisitions
organizations have been involved in (either
as the acquirer or acquired). According to
this benchmark, M&A activity fell from
1.02 mergers and acquisitions in 2016 to
0.96 in 2018 (Figure 30). ESOs led the way
with an average of 1.5 mergers and
acquisitions per firm; independents
averaged 0.72. M&A activity was most
prevalent in APAC, with an average of 1.26,
compared to EMEA and the Americas, with
0.95 and 0.93 respectively.
Understandably, the largest firms in the
sample had the most M&A activity. Those
organizations with over 700 employees
averaged 3.06, compared to those with
Source: SPI Research, February 2019
under 10 employees at 0.23. In PS,
mergers and acquisitions are fueled by industry consolidation and talent shortages. For larger
organizations, acquisitions are the preferred method of growing new lines of business and
competencies. By vertical, Software, SaaS, Hardware and Marketing and Advertising organizations
reported the most activity.
Table 19: Consulting Sector Merger and Acquisition Activity and
Please refer to Equiteq’s Knowledge Deal Multiples
Economy Global M&A Report 2018 for an
overview of consulting M&A activity Deal Public
2017
Value Deals
including deal structure and revenue and Demographic Number
Revenue EBITDA
EBITDA multiples. According to Equiteq, of Deals
Multiples Multiples
(consulting industry merger and
Management Consulting 1.0X 11.6X 863
acquisition specialists) 2,502 acquisitions
occurred across the global consulting IT Consulting .9X 9.1X 635
industry in 2017. North American firms Media 1.6X 8.1X 551
led the buying frenzy with 1,193 deals; Engineering 0.6X 9.9X 192
followed by Europe with 933 deals and HR 0.5X 6.8X 261
Asia-Pacific with 285. Average deal
Total 2,502
values, shown as a multiple of trailing
Source: Equiteq 2018 Global Consulting M&A Report
twelve-month revenues, reached 1.4X in
North America while deal values were .9X in Europe and 1.4X in Asia-Pacific. The big consulting and
advertising organizations were the most prolific acquirers. IT and Human Resource consultancies

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 2019 Professional Services Maturity™ Benchmark

experienced the sharpest increase in deal value however Media firms continue to fetch the highest
multiples.
Mergers and acquisitions can provide a viable PS growth formula as they bring new clients, ideas, skills
and competencies. But deal structure is very important to ensure that the rainmakers, visionaries and
subject matter experts who founded and grew the firm stay and contribute after the acquisition. A key
ingredient of acquisition retention is to move quickly to a common business application infrastructure to
ensure all employees have visibility to the business and how they can contribute. Another best practice
in people-based businesses is to move quickly to consolidate finance, operations and human resources
as these important functions can drive standardization in measurements, finance, reporting, job profiles
and compensation. Typical consulting leader earn outs are three years to ensure the firm’s leaders and
visionaries stay on to ease the transition.

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4. Best-of-the-Best

SPI Research annually

conducts in-depth analysis of Table 20: Best-of-the-Best Performance Advantage
the top 5% of PS Maturity™
benchmark participants to Top 30 All
uncover the reasons for their Measurement Firms Others Advantage
superlative performance. The EBITDA 26.5% 17.6% 51%
leading (according to the PS Size of PS Organization (employees) 441 635 -30%
Maturity™ model)
Year over year revenue growth 14.5% 9.4% 54%
organizations have been
named “Best-of-the-Best” Year over year PS headcount growth 11.0% 7.5% 46%

after a careful audit of their Average revenue per project (k) $278 $145 91%
survey responses and in-depth Annual revenue per employee (k) $213 $163 31%
interviews with their lead Projects delivered on-time 88.2% 76.3% 16%
service executive. Reference clients 84.0% 71.3% 18%
In this year's benchmark, SPI Source: SPI Research, February 2019
Research names the top 30
firms, each scoring 20 or above (out of 25) on the PS Maturity™ Model. The following sections highlight
some of the findings comparing the “best” preforming organizations to the rest of the survey
participants.

Introducing the 2019 Best-of-the-Best Service Organizations

Acorio – Ellen Daley – CEO

Acorio is a cloud consultancy on a mission to deliver on ServiceNow’s promise,
with inspiration, guidance and unparalleled expertise
throughout your entire Service Management journey.
Please tell us about your firm's top accomplishments in 2018.
We’re so honored to report that this has been another breakout
year for Acorio. Among a host of highlights: We placed on the Inc
5000 list (#1740) for the first time, were named the #1 Best Place to
Work in Boston for the second year in a row (this time for mid-sized
companies), achieved recognition as one of the top 5 globally
certified ServiceNow Partners alongside household global consulting
brands, and, finally, were named to the prestigious Best-of-the-Best
Professional Services list by SPI. For us, that is a humbling achievement, particularly given it all happened
while Acorio grew nearly 75% year/year.

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Behind the scenes, all of this growth was based on a strategic combination of strengthening key
processes and pivoting new strategies.
For a services company, our strength begins and ends with our people. This year we continued to invest
in ours with a minimum of 80 hours of training per employee, adding both online and in-person
consultative skills and train-the-trainer workshops to enhance our consultant’s abilities. Additionally, we
rolled out a new learning system, Litmos, in 2018. This system tracks certifications and learning paths
and provides real-time visibility for staffing projects and goals. This year, we also drove enhanced
manager engagement through a newly established Manager and Leadership program.
As a 100% ServiceNow exclusive consulting Partner, we also took 2018 to revamp our alignment with
their own approach. In doing so, we established five new practice areas, each with a Practice Lead,
certification and training paths.
Please tell us why your firm is a great place to work.
Beyond the "corporate" layer we try to make our culture an environment where people can bring their
whole selves to work every day. We formed two unique monthly team meetings: The Vibe group, which
includes employee representatives from across the organization (we count participation as part of their
billable hours) to continuously formulate and test employee experience programs; and the Culture Club,
a come-one, come-all meeting that allows team members to share how things are going and offer ideas
for improvement.
Many companies espouse a lot of management ideology. Our company practices (not just preaches) its
mantra, “There is no ‘Them’, there is only ‘Us’”. While not earth-shattering, our leadership and company
hold the belief that (inevitably) structured organizations who own the imperfect burden of
communication of strategy, direct results in typical human reactions that don’t propel the company
forward. That is, ‘Why are THEY making that decision?’. ‘THEY don’t understand’, ‘if THEY really talked to
customers’. This ‘THEY’ concept disempowers people rather than holding them accountable.
We work hard to stem human nature and ask that individuals in the organization don’t use ‘THEY’.
Instead we foster a community of shared responsibility where we expect employees to step up and
voice their thoughts, mitigating the ambiguous ‘They’. There is only Us, and we are all swimming in the
same direction. Keeping everyone positive and walking in the same direction not only drives the
company forward but takes energy away from unproductive actions and funnels them into customer
and innovative activity.
Please tell us about the top challenges your firm is facing in 2019.
ServiceNow continues to grow, and we have our positioned ourselves to do the same. As we scale
however, effective resource distribution and project staffing will be a top challenge. ServiceNow is an
expansive technology and our consultants need to be at the top of their field… often in many fields. In
2019, we will need to optimize all our consulting skills to take advantage of the expanding platform,
while also aligning with consultant availability and pipeline demand.

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Culture has always been a top priority for Acorio. As we scale on a global level, we will need further
focus on our employee engagement and communication, to ensure our distributed and virtual workers
feel valued, and continue to bring their whole, best selves to our team and our clients on a daily basis.

Cherwell – Rick Toth – America’s Professional Services Leader

Cherwell empowers organizations to improve service experiences and
automate workflows using data that stretches across contexts and
business units. The result is meaningful and measurable digital service
transformation, delivered faster.
Please tell us about your firm’s top accomplishments in 2018.
∆ Investment firm KKR made an investment of $172 million in
Cherwell, a historic amount for a Colorado Springs-based
company.
∆ Named a Leader by the 2018 Forrester Wave for the Enterprise
Service Management Category.
∆ Named a Challenger in the 2018 Gartner Magic Quadrant for Enterprise Service Management.
∆ We opened our eighth office and first international R&D center in Dundee, Scotland in July
2018.
Please tell us why your firm is a great place to work.

Cherwell’s vision is to create meaningful and measurable digital service transformation, delivered faster.
We’ve created an intuitive, flexible software platform to automate service experiences across the
enterprise and make work easier for small to mid-sized organizations across all industries. Service is at
the core of all we do, both with our products and customers. We offer our employees unlimited PTO,
work from home options for flexibility, fully stocked snacks in our offices, and office environments that
are conducive for collaboration and innovation.

Additionally, we have a community program called Cherwell Cares, in which we organize multiple
volunteer events and allow our employees 8 hours of PTO a year to volunteer for a cause they’re
passionate about. Our employees exemplify a constant desire to do good for each other and the
community. Our teams are backed by dedicated, customer-centric teammates who fully embody our
core values of heart, humility, honesty, and hunger in everything they do. Below, some of our
teammates say it best on why Cherwell is a great place to work.

“My favorite thing about the Cherwell culture is the people. I am fortunate to be surrounded by smart,
talented people who provide a great work environment and unlimited learning opportunities.” – Jessica Bell,
Software QA Manager.

“Cherwell culture means having the freedom to be yourself, and having the space to bring your whole self to
the organization. I’m responsible for ensuring that our global Cherwell events take into account the values
and experiences we’re creating for such diverse groups of people so that they feel welcome and know that
they are an important part of our community.” – Ida Pennymon, Senior Manager of Global Events.

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“When you spend half your waking hours on the job, it’s that much more important to be surrounded by
people you respect, admire, and draw positive energy from—and when I power down my computer at the end
of the day, all that goodness flows into the other areas of my life.” – Debra Brandt, Marketing Director.

Please tell us about the top challenges your firm is facing in 2019.
We are a fast-growing company in a fast growing space and in the midst of transition from Founder-led
to outside C-Level leadership. Our challenges are to scale quickly and effectively, onboard many new
clients, while maintaining our dedication to existing customers. With our new CEO Sam Gilliland now
setting the course, new strategy and processes are settling in that will help us tackle these challenges.
We are confident that 2019 will be a pivotal year for us as we continue to grow.

Claremont – John Cronshaw – Head of Operations

Claremont is the UK’s leading independent provider of Oracle
E-Business Suite and Oracle Cloud Applications, all supported
by our first-class managed services.
Please tell us about your firm’s top accomplishments in
2018.
During 2018, Claremont has re-positioned itself to be more
focused upon fully outsourced Managed Services solutions. This
business change has been accomplished successfully, ensuring
that we remain profitable and have significant annuity stability,
are still on track to meet our long-term business objectives, and
have carried our employees with us on this journey (maintaining our Investors In People Gold
accreditation). Additionally, we continue to be recognised externally for the quality of our delivery,
achieving three UK Oracle Partner of the Year awards.
Please tell us why your firm is a great place to work.
Claremont lives by its core values, and we constantly measure and check ourselves against these, which
include delivery excellence, focus on customer service and being creative and innovative. Claremont is
therefore a company that people aspire to work for; and is a place where our employees are able to be
happy and grow. This is validated by Claremont maintaining our Investors In People Gold award during
2018, as well as the very low employee staff turnover rate that is maintained year after year.
Please tell us about the top challenges your firm is facing in 2019.
The market place we are working in (Oracle Professional Services) is very mature in the UK. Claremont’s
challenge in 2019 is to raise brand awareness both within and outside current geographies and markets,
and identify partners who share Claremont’s vision and values, to allow us to realise our ambition for
growth.

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Gimmal – David Quackenbush – CEO

Since 2002, Gimmal has been helping organizations of all sizes implement better information
governance and manage content effectively.
Please tell us about your firm’s top accomplishments in
2018.
∆ Completed the transition from a services-only
consulting business to a product-led consulting model.
∆ Re-aligned our services team to strengthen our focus on
client success.
∆ Combined our support organization with our services
team.
Please tell us why your firm is a great place to work.
∆ Gimmal is a great place to work because the team has
created a culture of accountability. Our rally cry for
2019 is “Own the Outcome”. This represents the belief
that everyone in our company has a role to play in our success.
∆ We are also doing more things to have a fun and provide a flexible work environment that
improves the at work life for our team.
Please tell us about the top challenges your firm is facing in 2019.
∆ Our number one challenge is growing the business at the pace we need to get to the next level.
∆ We also need to expand the overall knowledge of our markets and our products.
∆ Continue to hire and develop a high performing team.

IFS | Aerospace & Defense – Laura Cline – VP of Services

IFS is a globally recognized provider of both enterprise-wide and best-
of-breed software solutions designed specifically for the global
aerospace and defense market, including airline and fleet operators,
A&D manufacturers, defense in-service support organizations and
independent Maintenance, Repair and Overhaul (MRO) providers.

Please tell us about your firm’s top accomplishments in 2018.

∆ Met or exceeded key business targets for the year while
transforming the former Mxi technologies into the Global
Aerospace and Defense business unit for IFS
∆ Expanded our consulting resource pool with the addition of 30
global resources in Sri Lanka
∆ Kicked off 2 new multi-year projects for airline clients
∆ Began subcontracting local consulting resources to other IFS region-led projects

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∆ Invested in new internal tools to accelerate implementations and data migration

∆ Consulted to other IFS professional services groups on the adoption of Professional Services best
practices
∆ Rolled out a new rewards and recognition program (Kudos) that allows for us now to be able to
recognize our people globally

Please tell us why your firm is a great place to work

∆ Co-workers in Consulting share a genuine interest and passion for the Aerospace and Defense
industries as well as a commitment to make our clients successful in transforming their
businesses
∆ We provide opportunities to travel the world and to build lasting relationships with customers
from different cultures.
∆ We group our consultants into functional pools led by dedicated resource managers. Resource
Managers provide guidance and develop the skills and careers of their people. For our
consultants, this had led to high rates of utilization as well as high levels of employee
engagement
∆ With our new business unit within IFS we now provide opportunities for people to work and
build new relationships with consultants from other countries and in other industries across the
globe
∆ We continue to build strong relationship with universities to build the growth capability of our
co-ops, co-ops often return for repeat terms
∆ Ongoing commitment on giving back to the community (Food Bank, Community Harvest, Habitat
for Humanity, Blood Donor); company provides 2 paid days to support volunteer initiatives
Please tell us about the top challenges your firm is facing in 2019
∆ Manage successful projects that are now being led by Global offices and partners within the
Aerospace & Defense market. Adapt to a new decentralized, matrix type of organization
∆ Integrate Professional Services best practices into new global operational processes
∆ Support a global governance structure
∆ Resource and Skill Management for a broader global pool of resources (2000+)
∆ Implement a partner training program enabling them to deliver successful projects to our
clients.

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 2019 Professional Services Maturity™ Benchmark

Kell Partners - Tompkins Spann – COO

We help organizations go faster and further with Salesforce.
We’ve been at this since 2009 and we’re proud to work exclusively
with nonprofits and the education community.
Please tell us about your firm’s top accomplishments in 2018.
KELL Partners has been a firm focused on Salesforce CRM since we
started in 2009. We now have served more than 1,200 clients since
we began, delivering more than 165,000 hours of contracted
services. In 2018, KELL acquired another firm, Balance Digital
Marketing, which had been successfully delivering services for
Marketing Automation using the Marketing Cloud suite of products
from Salesforce since 2012. By joining forces, we now have a dedicated CRM Practice and a dedicated
Marketing Cloud Practice, helping our clients implement the Salesforce solutions for CRM and Marketing
Automation.
Without a doubt, the merger of our two firms has been our single greatest accomplishment of 2018. By
every measure it has been a success. We have integrated our teams, our processes, our systems, our
billing and most importantly, our cultures. We are now one firm, focused on helping nonprofits and
educational institutions and seeing a tremendous response from our market.
Also, in 2018 KELL reached a significant milestone with our largest client, Multiple Sclerosis Canada.
After nearly two years of work, staff changes on both sides and thousands of hours of work, we have
launched MS Canada on Salesforce with great success and satisfaction, helping this amazing
organization achieve significant improvements in their operations, efficiency and constituent
relationships. In 2019 we will be developing a comprehensive case study to detail this successful project.
An internal initiative from 2018 to highlight was the introduction of KELL Playbooks. A Playbook is a
collection of “Plays” our team has curated to solve common client requirements. At KELL we have some
amazing staff with incredible ingenuity, but like many firms we had not always succeeded in sharing and
documenting the solutions used for the benefit of our larger team. Playbooks solve this gap in our
institutional memory, providing new and existing staff with a set of plays they can confidently apply to
future clients, along with detailed documentation, re-usable components and comprehensive guides for
client success.
Please tell us why your firm is a great place to work.
Each year we survey all staff to provide anonymous feedback across a wide variety of topics. From our
2018 survey, here are just a few of the unaltered answers we received in response to the question, “The
best thing KELL has going for it is...”
∆ Great company culture and smart/hard-working/collaborative team
∆ The community of folks and the level of support from management during challenging
situations.

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∆ The non-proscriptive environment by which staff are permitted/encouraged to work. In most

areas, resources are provided, and guidance given, but each person is left to decide or deliver
the best fit approach/work as they see necessary.
∆ The company culture. It's really a fantastic place to work- I feel very supported as an employee
and love the flexibility that KELL provides. Additionally, I think we have a great culture of
genuinely wanting to do well by our clients.
Please tell us about the top challenges your firm is facing in 2019.
As KELL grows and evolves, the tension between billable utilization and efficiency increases, exacerbated
by the perpetual need to retain top talent with higher compensation. We are constantly seeking to
increase our efficiency, deliver more value-based services vs. pure technical “hands on the keyboard”
services and we want to provide our amazing team with a career path that offers growth and new
challenges.

Kinsmen Group –Brian Sallade – CEO

To provide our customers the perfect experience by applying
our passion for engineering information management to help
them make better decisions, reduce risks, get higher returns on
their assets, and improve safety.
Please tell us about your firm’s top accomplishments in
2018.
∆ Successfully delivered 30 projects, on time and on
budget;
∆ Achieved ISO 9001:2015 certification;
∆ Attended several industry events as speakers;
∆ Received excellent customer feedback from large projects, also resulting in reference selling to
other large opportunities;
∆ Almost doubled in size and managed the onboarding of many new people, while maintaining
high profitability and customer satisfaction.
Please tell us why your firm is a great place to work.
∆ Our team members have skills and experience that support complete trust, reliability, openness
and accountability throughout the organization;
∆ Management support is always available – down to the smallest projects;
∆ We reward our employees for accomplishments and customer service;
∆ We provide flexible working, supportive of family life and actively encourage the ‘KIN’ (family)
aspect;
∆ We encourage each other at all times as we learn from our mistakes and openly work to resolve
them;
∆ We all thrive on success and good customer feedback;
∆ Simply put, we care.

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Please tell us about the top challenges your firm is facing in 2019.
∆ Continued move to cloud by our customers requires new skills;
∆ Changing face of large projects – we drive a more agile approach to realize benefits faster;
∆ Finding new markets to expand our offerings;
∆ Consideration of global economic risks;
∆ Maintaining high growth rate requires further investment in people and processes.

OneSource Virtual – Eric Olson – VP of Professional Services

Founded in 2008, OneSource Virtual is a pioneer of Business
Process as a Service (BPaaS) and supports the automated
delivery of solutions exclusively for Workday.
Please tell us about your firm’s top accomplishments in
2018.
∆ Net Promoter Score of 22 in 2018 for Professional
Services, up from 12 in 2017
∆ Outpacing competition on Raven Intel with the most
reviews and an overall satisfaction of 4.3 out of 5.0 for
PS
∆ Increased efficiency through functional area alignment
∆ Adopted a swarming approach to issue resolution; this focus and transparency reduced
escalations
∆ Early partner with Workday on deploying Learning with instant high quality (we now implement
every HCM module)
∆ Financials practice is thriving, with 7 full platform deployment projects in 2018 (including 2 LEs),
with 3 of them going live during the year
∆ UK practice grew above plan, from 5% to 20% of PS portfolio; most UK payroll implementations
∆ Our Canadian practice grew to 8.4% of our North American PS revenue
∆ 108 go-lives affecting 229,414 employees
Please tell us why your firm is a great place to work.
∆ Leadership is highly accessible; no one is more than 3 positions from the CEO
∆ We are on a winning team where things can change rapidly because we’re nimble and
transparent; everyone is empowered to fix what’s broken
∆ We promote from within (90+%) due to job satisfaction and employee strengths
∆ We see a variety of projects, allowing for a wide range of experiences
∆ Employees are recognized both formally and informally for hard work and reflecting our
company’s values
∆ OSV reinvests in people in a variety of ways: Town Halls/Manager meetings, lunch and learns,
training and certifications, holiday parties/dinners, weekly popcorn socials

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∆ A large component of our PS team works from home, requiring that we take measures to bring
people in via video, bring remote employees in for projects, and hold purposeful teaming events
when at the customer site
Please tell us about the top challenges your firm is facing in 2019.
∆ Ongoing war for talent in a high demand market due to Workday’s growth; with high demand
comes increasing costs
∆ Being more efficient in delivering projects, reducing time, continuity of quality moving from
build to production
∆ Falling cost of Launch; with a limited number of deals, it’s challenging to maintain same
revenues while growing business overall (our high attach rate for BPaaS services keeps this in
the plus column for us)
∆ Continue to align across our core businesses and introduce customers early to every stage of
their relationship with OSV

Pariveda Solutions – Kerry Stover – COO

Pariveda Solutions is a technology strategy and solutions firm
focused on developing exceptional people to solve our clients’
most complex and valuable business problems. We are
multifaceted problem solvers who provide strategic consulting
services and custom application development solutions for
mobility, cloud computing, data, portals, collaboration, CRM,
custom software and enterprise integration.
Please tell us about your firm’s top accomplishments in
2018.
∆ Celebrated our 15-year anniversary in October 2018
∆ Launched new divisions for software offerings and alumni relations
∆ Implemented Holacracy company-wide
∆ Promoted our first VP who had joined us as a college hire
Please tell us why your firm is a great place to work
∆ Dedicated to growing the individual towards their highest potential
∆ Transparent career path and promotion review cycle
∆ Mentorship program that provides the insight, motivation and direction to move forward in
one’s career
∆ ESOP (Employee Stock Ownership Plan) which instills an ownership mentality in our people
Please tell us about the top challenges your firm is facing in 2019.
∆ Expanding into Toronto, our first international office
∆ Growing and diffusing new service lines across offices
∆ Nurturing culture at our new scale
∆ Maturing our use of Holacracy

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Pathfinders Advertising – Kelly Ball – Vice President

We strive to be the most responsive advertising agency you’ll
ever work with. Responsive to deadlines. Responsive to needs.
Responsive to business goals, hopes, and dreams.
Please tell us about your firm’s top accomplishments in 2018.
∆ 15% increase in revenue
∆ Implemented new project management (Mavenlink) and
accounting (QuickBooks) systems
∆ Had 100% client retention
∆ Met all new business acquisition goals
Please tell us why your firm is a great place to work.
∆ Caring leadership
∆ We focus on the why not the what. We are committed to having amazing people and solid
processes. Keeping our focus there ensures we deliver business results.
Please tell us about the top challenges your firm is facing in 2019.
∆ Hiring – being able to find enough of the right people to meet our current demand
∆ Vigilance – making sure the entire organization is as vigilant about adopting and utilizing our
new systems
∆ Staying true to our roots – while we continue to grow, we can’t lose sight of the things that have
helped us be successful for decades.

Relationship One - Tim Soulen – COO

At Relationship One, we empower organizations to modernize

their marketing through strategy, technology and data.

Please tell us about your firm’s top accomplishments in

2018.
Maintaining our culture during rapid growth and evolution. We
reached a particularly challenging company size requiring
significant changes to our organizational structure and business
processes to support our continued growth. With strong
leadership from our management team - and "all-in" support
from our employees - we successfully evolved the company, positioning us for continued success,
without losing who we are.

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Please tell us why your firm is a great place to work.

From the start, we have been an employee-centric company. We focus on taking great care of our
employees so they, in turn, can take great care of our customers. We have the full range of large
company benefits plus Universal PTO (no hard caps on PTO), profit sharing, company shares, and
flexible/remote work schedules. We are open and transparent with minimal layers of management, so
everyone has ready access to the information and support they need to be successful. We
operationalized work-life balance, structuring the business to be successful while supporting relatively
low billable targets (for our industry) while allocating hundreds of hours a year to each employee for
professional development so they continue to be the best in the business. This focus shows as we have
won multiples best-places-to-work awards.
Please tell us about the top challenges your firm is facing in 2019.
2019 will be another big growth year for us, both within our current offerings as well as through
expansion into new areas. Our industry is still relatively young so finding the right talent will be
challenging. There's a limited pool of people with the technical expertise we need and not all of them
are the right fit for a professional services organization. Successful recruiting and vetting to ensure we
hire the right people the first time will be critical to our success.

RevGen Partners – Jason Hansen President

We help clients navigate today's disruptive business environment
and create a path to thrive with consulting services that span
analytics and insights, customer experience, and digital
enablement.
Please tell us about your firm’s top accomplishments in 2018.
In 2018 we celebrated our 10th birthday! We continued on a steady
growth trajectory through sales to existing accounts – including our
very first client – and the most new clients we’ve ever added in one
year. We increased our market awareness and expanded our geographic footprint with strategic hires to
support clients across the country. And we launched an innovation challenge internally to inspire what’s
next for our clients’ future.
Please tell us why your firm is a great place to work.
We do challenging work that makes an impact on the business of our clients, and we do it with great
people. We are a values-driven business which enables us to attract and retain both employees and
clients who are aligned with our values - respect, integrity, stewardship, enjoyment. That all fits into our
why statement: we believe in empowering people – employees, clients, and those within our
communities – so that we may all aspire to be more. Giving back through in-kind work, volunteering,
and financial contributions is in our DNA.

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Please tell us about the top challenges your firm is facing in 2019.
We are focused on two challenges in 2019: (1) growing market awareness beyond who we are to what
we do and the value we deliver, and (2) hiring the right people to support our growth without
compromising on our commitment to our values.

Social Solutions – Brandon Schumaker – Financial Analyst

Nonprofits are an integral resource, providing services and programs
that meet societal demands. For over 15 years, our mission has been to
empower these nonprofits with resources and tools that help them
measure and accelerate the progress they bring to the world.
Please tell us about your firm’s top accomplishments in 2018.
Social Solutions built out fields and reports in FinancialForce that allowed
us to forecast live revenue for the month based on timecards submitted
which also enabled us to give an accurate backlog value at any moment.
Instead of reacting to these numbers at the end of the month, we are
now able to be proactive day-to-day and to course correct if needed.
Please tell us why your firm is a great place to work.
Our clients help make the world a better place. They are all non-profit organizations that are looking to
serve their mission within their community and our software helps them. Although finance is not
directly involved with our clients, our organization takes pride in knowing we help make their jobs easier
and provide them the ability to measure their organization’s impact. Our employees also get one day a
quarter to volunteer within our community to help provide more of a direct impact.
Please tell us about the top challenges your firm is facing in 2019.
We can currently tell how revenue and backlog look at any moment, but we don't yet have a way to
accurately view how those items are going to look next week/month/quarter. We're looking at a way to
forecast these items based on assignments and opportunities to ensure we can hit our targets from both
a bottoms-up and top-down point of view.

Superior Controls - Allen Schweitzer – CFO

Superior Controls is widely recognized as the leading full-service
automation and control systems integrator for pharmaceutical and
biopharmaceutical projects.
Please tell us about your firm’s top accomplishments in 2018.
∆ Business expansion with the opening and staffing of 2
satellite offices
∆ Successful migration of entire company (coast-to-coast) to
one ERP platform

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∆ Recruited, trained and deployed 30+ new engineers

Please tell us why your firm is a great place to work.
∆ Proprietary training modules allow engineers to develop and utilize additional skill sets
∆ Career advancement opportunities – engineer=>senior automation engineer=>project manager
∆ Encourage active participation in several industry associations
∆ Numerous company-sponsored events for employees and their families
Please tell us about the top challenges your firm is facing in 2019.
Recruiting and retaining top engineering talent

ThinkAhead LLC - Paul Bostjancic, Director of Service

Delivery, Ahead LLC
AHEAD is a consulting company that helps enterprises transform
how and where they run applications and infrastructure. From
strategy, to implementation, to ongoing managed services, we
create tailored cloud solutions for enterprises at all stages of the
cloud journey.
“AHEAD is honored to be recognized by Service Performance Insight
as one of the Best-of-the-Best Services organizations in the industry.
Not only do we approach every project with a deep expertise, but
strive to provide every customer with an exceptional experience. Customer satisfaction and dedication
to service excellence is in the fabric of AHEAD and its employees and has been since day one. Receiving
this award is a testimony to our efforts and our accomplishments.”

Thinkmax – Marc Beliveau – President

Thinkmax designs and deploys innovative technological solutions
supported by ongoing expert consulting services. We excel at
identifying issues, developing strategies, analysis and diagnostics,
training, and implementing optimization solutions.
Please tell us about your firm’s top accomplishments in 2018.
∆ Growth of 45% year over year in 2018
∆ Microsoft Dynamics Inner Circle Member for the 3rd year in a
row (top 1% of all partners)
∆ Deployed new organizational structure to align to company growth
∆ Significant investments in building a new service line: Digital Solutions
Please tell us why your firm is a great place to work.
Thinkmax knows the importance of recruiting and developing the best talent that will bring success to
every project. We have put in place attract and retain strategies that have helped reduce our turnover
rate below industry averages:

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∆ Implementation of the People leader role

∆ Helping employees achieve their career goals
∆ Guide and advise employees in their career development and training plans
∆ Manage the well-being of employees
∆ Implementing an organizational structure that gives more opportunities for employees to
advance within the organization
∆ Development and implementation of an on-boarding plan for new employees
Thinkmax values team work and collaboration and we provide employees with multiple occasions to
connect with their peers whether it be with our weekly gatherings, quarterly Thinkmax summits or
annual team building event.
An undeniable factor in evaluating a place of work is employee involvement in not only the success of
the company, but also their involvement in creating and managing social events that will help them
connect even more with their peers. Thinkmax employees have been instrumental in the success of our
sports teams (hockey, soccer and basketball teams) as well as the annual golf tournament and weekly
summer cocktail hour.
Throughout every initiative Thinkmax values are reflected and they have become the driving force for
our employees: authenticity, integrity, ingenuity, team spirit, excellence.
Please tell us about the top challenges your firm is facing in 2019.
∆ Attracting and developing talent in line with our growth objectives and market demand
∆ Managing change in rolling out our new organizational structure
∆ Investing in new markets and services

TopStep Consulting – Ron Breaux – President and CEO

TOP Step Consulting improves business efficiency and

productivity for Professional Service operations by providing
consulting and implementation services for Professional
Services Automation software. TOP Step Consulting is a nine-
time Best-of-the-Best winner.

Please tell us about your firm’s top accomplishments in

2018.
∆ Successfully transitioned to new ownership from Jodi
Cicci to Ron Breaux.
∆ Continued focus on a single PSA solution with all related integrations.
∆ Grew the revenue for PSA services 117% in 2018 over 2017. Beat our target revenue for 2018
by 10%!!!
∆ Named in 2018 one of top NetSuite top partners in Insight Success magazine.
∆ Named as one of the 10 PSA Solution Providers in 2018 by CIO Review.

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∆ Named Best-of-the-Best by SPI Research in 2018 for the 9th straight year.
Please tell us why your firm is a great place to work.
∆ Team members enjoy solving customer problems – happy customers / happy team!
∆ Always new things to learn with every customer and every challenge
∆ Strong sense of team – if someone needs help or coverage or backup, we’re always willing to
jump in and help.
∆ Flexible schedules and working from home.
∆ Internal training on a bi-weekly basis (brunch n learns).
Please tell us about the top challenges your firm is facing in 2019.
Continuing to grow our PSA consulting business focused on NetSuite PSA tools. In addition to Alliance
Partnership with Oracle NetSuite, we have also become a Solution Provider partner to Oracle NetSuite
as of 2019. With our new Solution Provider partnership, we are developing a license selling practice
within TOP Step that will provide recurring revenue income which will enable us to continue to invest in
the company and our employees. As we continually add new team members, maintaining customer
focus and high-quality work standards that continuously have set TOP Step apart. Continue to grow our
brand through consistent marketing and a focused public messaging via our website and social media.
Take care of and promote our team members which are the reason for TOP Step's success.

Tquila ANZ – Jo Masters – CEO

Tquila ANZ has one of the most talented Salesforce.com
consulting teams in the region. Headquartered in Sydney, with
teams in Brisbane, Queensland and Melbourne, Victoria, we
have helped a multitude of companies define, develop, deploy
and evolve their Salesforce investments.
Please tell us about your firm’s top accomplishments in 2018.
2018 was an excellent year for Tquila ANZ as we continued to
cement strong foundations for continued growth.
Summary of highlights:
∆ Salesforce Platinum Consulting Partner for third
consecutive year
∆ 181 Salesforce Certifications across their entire cloud platform: Sales Cloud; Service Cloud; CPQ
& Billing; Community Cloud; Marketing Cloud; Pardot Cloud; Einstein Analytics
∆ 200+ Projects delivered to our installed base which is now approaching 300
∆ 10 out of 10 Salesforce Customer Satisfaction Rating
∆ Impressive YoY Revenue growth – 70.52%
∆ Created and rolled out a Grad program to assist with the skills shortage in our market place and
to improve margins

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∆ Set up a leadership program TLC (Tquila Learning Centre) to ensure we invest in current and up
and coming leaders -teaching leadership and consulting skills to set us apart from our
competition
∆ Strong growth in our focus industries: Healthcare (Consumer Directed Care; MRD; Government)
∆ Improved internal systems to better service our employees and our customers through the
rollout of best-in-breed collaboration tools including: Confluence; Jira; Conga; Kimble; Pardot
Cloud for marketing and customer engagement as well as our Human Resources and Finance
Systems.
∆ Successfully deployed the first Salesforce CPQ implementation in Australia and the Asia Pacific
region
∆ Recipient of prestigious industry awards including:
o CRN 2018 Impact Awards Finalist – Digital Transformation – CPQ Implementation at
Ansarada
o ARN 2018 Innovation Awards Finalist – Partner/Customer Value – Teys Australia
o Formed key alliances with Telstra; KPMG; PwC; Datacom; ATG; Tryzens; Conga
o CEO invited to be a member of the Telstra Advisory Board
o Tquila ANZ invited to participate in the Salesforce Worldwide Summit – one of only 70
partners invited worldwide
Please tell us why your firm is a great place to work.
Core to Tquila’s growth is the ability to attract and retain top talent and this is being achieved across the
organisation. The CEO’s dedication, loyalty and commitment to her team are second to none. She drives
them to do their best and delivery excellence is now truly ingrained in the company’s DNA.
The environment we foster is conducive to collaboration and teamwork. We believe in a team built on
diversity and inclusion and women are actively encouraged to step into challenging roles whilst
mentoring and coaching them to succeed. Today, women represent 32% of Tquila’s headcount holding
roles across all levels of the organisation. Out of a Leadership Team of eight, six are women; others are
performing key roles as Functional Consultants, Project Managers, and Developers working with our
customers to deliver successful business outcomes.
Our 71-strong staff represent over 10 countries as their places of birth allowing us to enjoy diverse
cultures and customs and providing an excellent opportunity to balance work with fun. Diwali, Festival
of Light, is a recent example celebrated with traditional costumes, food and stories about family
traditions. This is all part of the investment in Tquila’s “Employee Experience” initiative.
The Employee Experience Program consists of eight key components: Leadership; Equality, Diversity
and Inclusion; Personal Growth and Development; Onboarding and Induction; Wellbeing and Health;
Technical and Process Improvement; Work Environment and Reward and Recognition. Each program
component has been designed to provide our staff with the best working environment, one where they
can define their personal and career aspirations, excel in their jobs, and ultimately make a difference.

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Tquila Learning Centre was launched in 2018 as part of the Personal Growth and Development
program designed to introduce a structured learning program to allow enablement on multiple fronts
for Tquila to grow in maturity and capability.
Tquila is working closely with Salesforce in the rollout of the “Workforce for Women” initiative to
enable women facing disadvantage. The successful candidates will be trained, mentored and coached so
that they may acquire the skills needed in a professional services environment.
Tquila started its Graduate Program late in 2017 under Professional Services. This year the program has
seen its numbers grow to five Graduates. New graduates have now been recruited for 2019.
As we grow, we are also formalising community activities so that, as a socially responsible company, we
may give back to those in need and contribute to the betterment of our environment.
Please tell us about the top challenges your firm is facing in 2019.
The biggest challenge Tquila faces in 2019 is the ability to acquire and retain talent with the skill sets and
capabilities required to address the opportunity that the Salesforce Ecosystem is opening. We are
addressing this challenge with our Grad program. The strategic partnerships we have forged and the
programs we have rolled out across all areas of the company are a testament to the Tquila’s vision for
the future whilst staying true to our values and our mission of solving customers’ business problems and
helping them with their businesses’ transformations.

Pillar Performance

The following sections highlight the results of this year’s Best-of-the-best professional services
organizations (PSOs) and compares their results with the rest of the survey participants.

Demographics
Table 21 compares the 30 best-of-
Table 21: Best-of-the-Best Comparison – Demographics
the-best performing PSOs to the
other 592 in this year's survey.
Key Performance Indicator (KPI) Best Rest ▲
Best-of-the-Best organizations tend
to be more specialized than the Number of firms 30 592

average firm in the benchmark. Size of PS organization (employees) 441 635 -30%
This year’s top performers are Annual company revenue (mm) $171.7 $231.2 -26%
slightly smaller than average firms, Total professional services revenue (mm) $94.0 $92.7 1%
with 441 PS employees compared Year-over-year change in PS revenue 14.5% 9.4% 54%
to 635 for the rest. This year’s
Year-over-year change in PS headcount 11.0% 7.5% 46%
Best-of-the-Best are dominated by
% of employees billable or chargeable 81.0% 72.4% 12%
North American headquartered
firms with 27 of 30 based in North % of PS revenue delivered by 3rd-parties 8.7% 11.8% -26%
America; 2 in Western Europe and M&A over the past three years 1.12 0.95 18%
1 based in Australia. Seven are Source: SPI Research, February 2019
embedded PS organizations within

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 2019 Professional Services Maturity™ Benchmark

fast-growing cloud and enterprise software companies. Ten are IT consultancies specializing in
enterprise-class solutions for complex IT problems; most include high-growth cloud implementation,
migration, integration and transformation. They serve a wide variety of industries with specialized
expertise and deep domain knowledge. Three each Management consultancies and Architecture and
Engineering firms made the list this year while, for the first time, two Marketing and Advertising firms
and one Government Contractor numbered in the Best-of-the-Best.
This year’s Best-of-the-Best are characterized by high growth, profit, and high levels of client
satisfaction. Every year we find the best firms are also the fastest growing. On average, they grew year
over year PS revenue by 14.5%; 54% more than the revenue growth of average firms (9.4%). Year-
over-year employee headcount growth was also impressive at 11%. For these fast-growing firms their
top challenge is finding and growing the talent they need to sustain their dynamic growth while
maintaining a culture of excellence.
The Best featured a much higher percentage of billable employees, and depend slightly less on third-
party resources, preferring to recruit and deploy their own talented resources without heavily relying on
subcontractors which translated to higher levels of both employee and client satisfaction.
Eight of this year’s top performers augmented their organic growth with acquisitions or were acquired
by larger firms. Two firms (both are PS organizations within hot cloud software companies) participated
in over five acquisitions as their companies consolidated their market dominance. Top-performing firms
were able to use their own transformation and change management capabilities to quickly integrate and
take advantage of acquisitions as a catalyst for growth.

Leadership
The leading firms are highly
Table 22: Best-of-the-Best Comparison – Leadership Pillar (1 to 5 Scale)
specialized. They concentrate
on specific high-growth
Key Performance Indicator (KPI) Best Rest ▲
technology or IT segments or
vertical industries. The Well understood vision, mission and strategy 4.60 3.80 21%
executives of top-performing Confidence in PS leadership 4.67 4.01 16%
firms are seasoned Ease of getting things done 4.63 3.76 23%
professionals – often with a Goals and measurements in alignment 4.60 3.74 23%
track record of founding and
Employees have confidence in PSO's future 4.63 3.91 19%
growing multiple prior
Effectively communicates w/employees 4.43 3.78 17%
consulting organizations.
Embraces change - nimble and flexible 4.50 3.80 18%
Leaders at the best firms
Innovation focused 4.40 3.74 18%
foster a work environment
that is fair and well-managed Source: SPI Research, February 2019

with ample rewards and

career progression. Because employees understand and share in the success of these organizations, the
atmosphere is one of collaboration and loyalty.

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 2019 Professional Services Maturity™ Benchmark

A recurring theme from this year’s leaders is their strong sense of community. The leaders of the top
firms are seen as visionaries within the markets they serve, they see their role as one of truly helping
improve the lives of their clients and employees. They select clients and projects because they share the
same values, whether it is a love of transformational change or desire to make a difference through
leading edge programs. Their sense of pride and commitment comes through in the organizations they
have developed.
Leaders discussed the importance of building a unique, employee-centric culture which in turn becomes
a source of competitive differentiation. In today’s competitive talent market establishing a strong
reputation as a great place to work and grow is paramount to building brand awareness and success.
While each leader discussed the importance of client success, they also discussed the importance of
creating engaged employees to carry on the culture and position the firm for the future. A key area of
differentiation is that top firms significantly invest in employee development. On average, they provide
12.7 days of employee training compared to 8.5 days for average firms.
Table 23 compares the leadership metrics of the highest performing organizations with the remainder of
the survey. The two highest differential scores are alignment of goals and measurement with corporate
strategy and ease of getting things done. Leading PSOs cultivate egalitarian, non-hierarchical, flat
organizations in which all employees are vested in the success of the firm as well as their own well-
being. Their focus on innovation means they strive to continually stay ahead of the pack, investing in
new technologies and ideas long before they become mainstream. Their clarity of purpose provides a
powerful foundation for their unique cultures which support and accelerate market differentiation, in
turn leading to strong
employee confidence in the Table 23: Best-of-the-Best Comparison – Client Relationships Pillar
future.
Key Performance Indicator (KPI) Best Rest ▲
Client Relationships Total annual number of active clients 2,166 1,328 63%
Many of this year’s Best-of- Revenue from current clients - Existing services 49.4% 53.1% -7%
the-Best do not employ Revenue from current clients - New services 14.8% 17.5% -15%
traditional solution sales
Revenue from new logo clients - Existing services 19.4% 17.6% 10%
people. The independent IT
Revenue from new logo clients - New services 16.4% 11.9% 38%
and management
consultancies depend on their Bid-to-Win ratio (per 10 bids) 5.97 4.86 23%
regional practice leaders to be Deal pipeline relative to qtr. bookings forecast 290% 175% 65%
the chief rainmakers in their Sales cycle (days: qualified lead to contract sign.) 97 88 -9%
region or domain. Although Average service discount given 6.3% 6.7% 6%
practice leaders are charged
Solution development effectiveness 3.90 3.62 8%
with developing a book of
Service sales effectiveness 3.90 3.51 11%
business, they are also
charged with personal Service marketing effectiveness 3.50 3.24 8%
billability goals to ensure they Percentage of referenceable clients 84.0% 71.3% 18%
continue to be recognized Source: SPI Research, February 2019
experts in their field.

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Independent Best-of-the-Best firms expect their practice leaders to be consultants first, able to truly add
value to client relationships. Repeat business and referrals are the primary source of new business, a
strong testimony to superlative client relationships and results. Their percentage of reference clients is
84% compared to only 71% for average firms.
The embedded PSOs primarily rely on the product sales force. They have forged a strong partnership
with product sales and have built sales tools and service packages to guide and shape consulting
engagements. These service packages enable the product sales force to position and quote services,
leading to higher product and service attach rates. PS is regarded as a significant and growing source of
top-line company revenue, not a necessary evil. In many cases, their lead services executive is also
responsible for global support, professional services and account management with the title of Chief
Customer Success officer, acknowledging the important role services plays in ensuring client success. A
relatively new set of metrics has emerged for embedded PS, focused on customer adoption. The cloud
PSOs measure not only the number of licenses, seats and recurring revenue but also the depth of client
adoption and engagement by building dashboards and scorecards which depict client usage, adoption
and churn.
Almost all this year’s Best-of-the-Best rely on CRM applications to improve their sales and marketing
effectiveness. 22 of the top 30 use Salesforce.com as their CRM. Several firms credited the tight
integration between their CRM and PSA applications as a catalyst in building collaboration between
sales and service delivery. They have instituted consistent sales processes and bid reviews to ensure
they are focused on the type of projects they are most likely to win and to maintain pricing and contract
terms within guidelines. Because they are the premium supplier in their well-defined markets, they
often do not have to compete for business. They are chosen based on referrals, their demonstrated
competence, and high levels of customer satisfaction. When they do compete, they are far more likely
to win as their win ratio is 59% compared to 48% for average firms.
Survey results revealed the percentage of revenue from new clients was 35.8% for Best-of-the-Best
firms compared to 29.5% for average organizations. New client expansion is a key ingredient of their
high growth and profitability. Leaders give higher marks for sales, marketing and solution development
effectiveness. Interviews revealed leaders do not have the schism between sales and service delivery
which is so apparent in many PSOs. Sales and delivery collaboration produced higher win ratios, larger
sales pipelines and more reference customers.

Human Capital Alignment

Talent is a primary focus and hot topic for all service firms. In an increasingly competitive talent market,
top performing firms are becoming laser-focused on their employment brand. Organizations are
embracing technology to help reinvent the workplace with knowledge-sharing, team-building,
transparency and collaboration at the core of their continuous learning cultures.
Table 24 compares Human Capital Alignment pillar key performance indicators between the Best-of-the-
Best organizations and the remainder. The table shows more employees would recommend their firm
as a great place to work; they receive higher levels of training investment and are more likely to

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understand and take

advantage of career Table 24: Best-of-the-Best Comparison – Human Capital Alignment Pillar
advancement opportunities.
They also are paid more plus Key Performance Indicator (KPI) Best Rest ▲

they receive a host of Percentage of workforce that is male 58.3% 62.2% -6%
additional benefits including Employee annual attrition - voluntary 8.8% 8.5% -4%
family leave; sabbaticals; top Employee annual attrition - involuntary 6.2% 5.4% -15%
notch medical coverage;
Recommend company to friends/family (1 to5) 4.83 4.39 10%
employee ownership; spouse
Management to employee ratio 10.33 10.33 0%
inclusion in company trips and
time and money investments Days to recruit and hire for standard positions 65.0 59.6 -9%
in giving back to their Days for a new hire to become productive 59.0 57.4 -3%
communities. Guaranteed annual training days / employee 12.67 8.62 47%
Talent is a primary focus and Well-understood career path (1 to 5 scale) 4.10 3.23 27%
hot topic for all service firms. Employee billable utilization 74.5% 69.4% 7%
In an increasingly competitive Annual fully loaded cost per consultant (k) $140 $121 -16%
talent market, top performing
Source: SPI Research, February 2019
firms are becoming laser-
focused on their employment brand. Organizations are embracing technology to help reinvent the
workplace with knowledge-sharing, team-building, transparency and collaboration at the core of their
continuous learning cultures. Glassdoor reports more than half of the highest paying jobs in the U.S. are
in IT consulting roles.
Each top firm emphasized the importance of culture. Culture goes way beyond establishing a mission
statement – it must be unique and inspiring to attract the type of consultants and clients the firm can
best serve. Many of this year’s Best-of-the-Best have also been recognized as “Best Places to Work” by
other publications. Innovative employee engagement programs include: annual company retreats;
generous healthcare and parental leave policies; flexible work schedules; health and wellness programs;
significant investments in employee training and career development and a consistent focus on fun,
team-building, collaboration and communication.
Top performing firms place a premium on high quality recruiting and on-boarding programs resulting in
faster recruiting and ramping times combined with higher billable utilization. They hire “A” players.
They invest a lot in them and expect a lot from them. Billable utilization targets of the best firms
average 75% or higher compared to 70% for average firms. This means top performing consultants bill
100 more hours per year than those at average firms. According to Best Place to Work research, a key
determinant of consultant dissatisfaction is not excessive work hours but having to deal with
bureaucracy, meetings and time-wasting activities.
The leading firms use a variety of innovative recruiting strategies – from establishing strong partnerships
with local universities, to attracting more senior consultants from their competitors. Just as in selling,
referrals are a key source of new hires because the best and brightest invite their friends to join them.
Once on board, the best firms offer new hire orientation and on-boarding programs which include

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shadowing and mentoring to quickly bring new hires up to speed. Leading firms have discovered they
simply cannot rely on stealing top talent from their competitors – they need to grow their own. Several
firms recruit from local universities (MIS and Engineering) and then invest over 90 days in teaching new
hires both the industry and technology. This strategy, although initially expensive, results in qualified
consultants who can hit the ground running after their on-boarding program has been completed.
Other fascinating recruiting strategies include personality testing for cultural fit, communication and
organizational skills in addition to technical knowledge. Several firms are starting specialized programs
to attract and groom the next generation of female consultants. In an industry dominated by males,
savvy firms realize the vast potential from attracting and growing a diverse workforce.
Top firms also invest in helping consultants build their own networks and communities – they encourage
their young consultants to build strong college and network ties… to serve these communities with their
talents but also as a source of recruiting and business referrals. With young millennial consultants,
continuous learning is a perquisite which means top firms understand employee career and knowledge
aspirations and ensure top performers are assigned to the projects, clients and geographies they are
most interested in.
Just finding talent is not enough. This year’s Best-of-the-Best firms focused on ramping and employee
training to develop a qualified workforce. Some create rotational assignments to give their employees
greater exposure to other technologies and clients. Employees who are continually learning and
expanding their knowledge base tend to stay with their employer. When the work is not challenging or
interesting, morale suffers, and attrition rises. Several of the smaller firms are 100% virtual – in other
words, they don’t invest in
expensive facilities but keep Table 25: Best-of-the-Best Comparison – Service Execution Pillar
morale high with in-person
weekly and quarterly meetings Key Performance Indicator (KPI) Best Rest ▲
to enhance communication Average project staffing time (days) 8.28 9.18 10%
and team-building.
Number of projects delivered per year 554 890 -38%

Service Execution Average revenue per project (k) $278 $145 91%
Concurrent projects managed by PM 5.92 6.04 -2%
Table 25 compares service
execution metrics between Average project staff (people) 5.08 4.31 18%
the Best-of-the-Best Average project duration (months) 6.08 5.69 7%
organizations and the Projects delivered on-time 88.2% 76.3% 16%
remainder. High quality Projects canceled 1.8% 2.1% 14%
service execution is what
Average project overrun 5.4% 8.8% 38%
really sets top performing
Use a standardized delivery methodology 72.7% 65.7% 11%
PSOs apart. They tend to be
highly disciplined in all facets Project margin for time & materials projects 50.0% 34.0% 47%
of service execution. The table Project margin for fixed price projects 50.5% 33.4% 51%
points out the leaders are able Average project margin — subs, offshore 34.7% 25.1% 38%
to staff projects faster because Source: SPI Research, February 2019
most of them rely on a

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commercial PSA application. They deliver projects with quality and integrity and are far more likely to
use a standardized delivery methodology which results in more projects delivered on-time, fewer
project overruns and fewer project cancellations. Because the Best firms deploy the best consultants
and effectively use PSA to exceed client expectations, every facet of their projects are more profitable.
They make a lot more money on both time and materials and fixed price projects; but they also excel in
the judicious use of subcontractors, only using the best outside resources while ensuring they make
margin on them. Leaders focus on all aspects of quality service delivery, with higher marks for resource
management, estimating; change control processes and knowledge management processes.
Because almost every leader relies on a PSA application they can build and reinforce project delivery
standards which result in precision execution and high levels of quality, productivity and profitability.
They credit their PSA with improving resource, project management, time and expense capture and
billing, leading to higher levels of billable utilization and on-time project completion. This year’s Best-of-
the-Best were uniform in their commitment to developing standardized methodologies. In addition to
repeatable processes and templates, they are focused on measuring quality and client satisfaction.
Most estimates, proposals and changes go through a rigorous evaluation to ensure proper risk
management and margin analysis.

Finance and Operations

Despite their altruism and spirit of giving back to their employees and communities, the Best-of-the-Best
know how to make money;
Table 26: Best-of-the-Best Comparison – Finance & Operations Pillar
they are focused on financial
success as a means of growth. Key Performance Indicator (KPI) Best Rest ▲
The Professional Services
EBITDA 26.5% 17.6% 51%
Maturity Model™ scoring
over-weights financial success; Annual revenue per billable consultant (k) $251 $203 24%
meaning the leaders in this Annual revenue per employee (k) $213 $163 31%
survey were much more Quarterly revenue target in backlog 57.8% 43.8% 32%
profitable than their peers.
Percent of annual revenue target achieved 100.3% 93.3% 7%
Table 26 shows the enviable
financial results from this Percent of annual margin target achieved 100.0% 89.7% 11%
year’s Best-of-the-Best. Revenue leakage 3.38% 4.35% 22%
They produced significantly % of inv. redone due to error/client rejections 3.1% 2.2% -41%
more net profit (26.5% Days sales outstanding (DSO) 45.3 46.4 2%
compared to 17.6%) than
Quarterly non-billable expense per employee $1,900 $1,586 -20%
average firms in the
benchmark. This high level of % of billable work is written off 2.20% 2.89% 24%
profitability is derived from Executive real-time wide visibility 4.43 3.50 27%
more revenue per employee,
Source: SPI Research, February 2019
project and consultant. The

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 2019 Professional Services Maturity™ Benchmark

Best-of-the-Best can be characterized as running a very tight financial ship as they are appropriately
metrics driven and have real-time visibility to all facets of the business.
They are frugal with non-essential expense. In particular, they refrain from overspending on fancy
offices and non-billable travel, preferring to invest in the skill and career development of their
employees. The Best-of-the-Best make money on every aspect of the business with high subcontractor
margins (34.7%); high time and materials project margins (50.0%); and higher fixed price project margins
(50.5%). The leaders enter each quarter with significantly more revenue in backlog (57.8%), which
creates greater financial stability and predictability. They are much more likely to have achieved both
their annual revenue and margin targets which shows they are running a well-planned and predictable
business.

The Best-of-the-Best PSOs Use and Integrate PS Applications

All this year’s top performers
have deployed a commercial Table 27: Best-of-the-Best Comparison – Business Applications
finance and accounting
Solution Best Rest Delta
solution which is partially
integrated with their PSA Corporate financial management solution (CFM) 100.0% 95.0% 5%
application for billing and Satisfaction with financial solution 4.27 3.82 12%
revenue recognition. Table 27 Commercial CRM solution 86.2% 83.4% 3%
depicts the level of
Satisfaction with CRM solution 4.33 4.01 8%
commercial business
Commercial PSA 96.4% 75.2% 28%
application use and
integration for top performing Satisfaction with PSA solution 4.36 3.82 14%
organizations versus the rest. PSA is integrated with CFM 57.4% 56.9% 1%
In all dominant business Level of CRM and PSA Integration 55.2% 49.6% 11%
applications categories, top Commercial HCM solution 80.0% 60.1% 33%
performers invest more in
Satisfaction with HCM solution 3.84 3.63 6%
business applications and do a
HCM is integrated with CFM 34.8% 32.0% 9%
better job of integrating them.
Because they use these Use a commercial BI solution 70.0% 45.6% 53%
applications to run the Satisfaction with BI solution 4.12 3.72 11%
business, they are much more BI is integrated 43.5% 40.0% 9%
satisfied with the application Use a commercial KM solution 83.3% 56.8% 47%
infrastructure.
Satisfaction with KM solution 4.15 3.63 14%
On the financial side of the Remote service delivery tool 96.6% 71.5% 35%
business, they rely on Deltek; Satisfaction with RSD solution 4.00 3.79 6%
NetSuite; Microsoft Dynamics;
Social networking tool 96.7% 87.4% 11%
QuickBooks; FinancialForce;
Satisfaction with social networking tool 4.28 3.88 10%
Workday and Sage/Intacct. 22
use Salesforce as their CRM. Source: SPI Research, February 2019

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Other popular CRM solutions include Deltek; Microsoft and NetSuite. One of the secrets to success of
the Best is that a much higher percentage of them use a commercial PSA. The PSA solutions used are:
Deltek; NetSuite/OpenAir; Projector PSA; FinancialForce PSA; Kimble; Microsoft Dynamics; Mavenlink
and Workday.

Best-of-the-Best Conclusions

Each year it is inspiring to meet with leaders of the Best-of-the-Best organizations. They are justifiably
proud of the unique Professional Services organizations they have built, but their pride is focused on
their employees and client results, not on themselves. An area that sets the leaders apart is their in-
depth knowledge of their markets and solutions. They understand and have visibility to all aspects of
the business.
More than average firms, they are truly passionate about building an exceptional organization, not just
for today, but for decades to come. They are willing to honestly look at themselves and the business
and make changes to ensure they continue to be the premium firm. Their sterling reputation for
delivering high quality results is a key ingredient in their success as most often new business comes from
referrals.
A few of this year’s Best-of-the-Best have been winners’ year-after-year, both throughout the great
recession and now again when the consulting market is hot. The independents have aligned themselves
with the latest and greatest technologies. They are constantly reinventing themselves to ensure they
are on the cutting edge of the best technology solutions for their markets. The leaders of the embedded
PSOs have a seat at the executive table – PS is seen as a critical element of the business and a major
source of revenue, profit and client product adoption.
Excellence is within the grasp of all PS organizations – but it takes hard work, determination and
constant vigilance. Service Performance Insight finds it gratifying that leading organizations rely on the
PS Maturity™ benchmark to guide their investments and performance. “You get what you measure” so
reference the superlative results of this year’s Best-of-the-Best to build your own organizations for the
future!

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 2019 Professional Services Maturity™ Benchmark

5. Professional Services Business Applications

In a business climate driven by technology, disruption and skilled talent shortages, professional services
organizations must themselves become technology-enabled. In the past, PS technology use was
confined to operations and service execution, it now has become mandatory, extending virtual
workspaces, enhancing collaboration and knowledge sharing, providing the basis for effective recruiting,
hiring and employee engagement and furnishing the tools for planning, budgeting, forecasting and
analyzing. Top performing services organizations have deployed integrated business applications across
all aspects of the business, giving them unprecedented visibility and control to see and take advantage
of business changes in real-time.
Technology understanding and use, has become a strategic imperative to exploit globalization and drive
market growth. Barriers to entry are being lowered as faster, nimbler, more technology-savvy firms
seize top clients and markets. In this climate, new entrants focused on niches, specific functions and
underserved constituents can quickly grow and make an impact on larger, more entrenched players. At
the same time, consultants are demanding easy-to-use, contextual, socially aware systems which mimic
the applications they use in their personal lives. Mobile is no longer a nice to have, it has become a
strategic imperative to reach an increasingly global and virtual client base and workforce.
The growth engine of the world’s economy has shifted from manufacturing to project-based, people-
centric 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.
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.
As the world economy has shifted to a new “as a service” mindset, service-oriented firms are
increasingly bundling hardware, software, intellectual property and consulting into “subscription-based”
or “managed services” bundles. Today’s accounting, CRM and PSA systems must support a whole new
range of contracting, pricing, staffing and billing models. In this area the new breed of cloud-based
project-based ERP vendors excel as they were not only born in the cloud but so too were their
technology-intense early adopter clients. They have built in support for multi-element contracts and
subscription billing from the get-go.

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 2019 Professional Services Maturity™ Benchmark

This chapter provides PS executives and software application providers insight into the level of market
adoption, integration and satisfaction with core Professional Services business applications from this
year’s benchmark survey. This study is not intended to be an overall application market adoption
survey. The solutions highlighted in this chapter help PSOs optimize operational effectiveness through
increased visibility, streamlined business processes and cost management.

Primary Professional Services Business Applications

The primary business

applications used by Figure 31: Core Professional Services Business Applications

Professional Services
organizations are:
 Corporate Financial
Management (CFM)
or Enterprise
Resource Planning
(ERP): The
fundamental
solution required to
accurately collect
and report financial
transactions.
 Client Relationship
Management
(CRM): The
Source: SPI Research, February 2019
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.
Both embedded and independent professional services organizations require similar functionality. The
service industry’s use of technology has typically lagged the manufacturing sector, but the global size,
complexity and growth of today’s service businesses has accentuated the need for specialized
applications along with the demand for real-time information.

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 2019 Professional Services Maturity™ Benchmark

Quote to Cash

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. The power of modern business applications is
that they provide workflow, rules, alerts, approvals and reporting that 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 manufacturing-oriented applications, to handle projects and resources.
Now, Project-Based ERP and Professional Services Automation (PSA) solutions provide modules that
support essential business processes, including the critical “quote-to-cash” process (Figure 32).
Figure 32: Primary business processes span multiple departments

Source: SPI Research, February 2019

PSA solutions are designed to integrate core business processes across the organization so that each
department has a clear understanding of their roles and measurements and how they impact the
organization’s overall 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 quality completion of
project-based work, results tend to improve.
Figure 33 shows Figure 33: Quote-to-cash process
quote-to-cash is a
series of interrelated
processes supported
by client relationship
management (CRM),
PSA and enterprise
resource planning
Source: SPI Research, February 2019
(ERP) modules. To
optimize these fundamental business processes, executives rely on the integration of essential business

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 2019 Professional Services Maturity™ Benchmark

applications to provide visibility, transparency and control. 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 integrating best of breed applications together or purchasing an integrated suite
of applications.

PS Solution Adoption

In this year’s survey, commercial adoption increased in every category. The abundance of high quality,
affordable cloud-based solutions has enabled greater numbers of PSOs to adopt commercial business
applications, yet a surprisingly
Table 28: Commercial Solution Adoption
large number of firms still rely
on antiquated homegrown
Solution 2016 2017 2018
applications and spreadsheets.
Corporate Financial Management (CFM) 91.4% 95.1% 96.6%
Cloud-based applications are
Social Networking (SN) 87.8% 87.8% 87.9%
outselling non-cloud by a
factor of ten-to-one. Cloud Client Relationship Management (CRM) 84.8% 76.5% 83.5%
solutions are especially Professional Services Automation (PSA) 80.0% 67.3% 76.2%
important in the professional
Remote Service Delivery (RSD) 80.6% 66.8% 72.8%
services sector, as today’s
virtual consulting Human Capital Management (HCM) 54.4% 55.9% 61.2%
organizations may have skilled Knowledge Management (KM) 57.4% 45.0% 58.2%
employees located across the Business Intelligence (BI) 45.8% 37.3% 47.0%
globe, not collocated in
Source: SPI Research, February 2019
physical offices. The cloud has
enabled PS executives and workers at all levels greater mobile access to the information they need to
improve visibility and management control of resources and projects.
Social networking has now moved to become the number two most-used solution, edging out CRM.
CRM adoption surpassed PSA adoption six years ago, when cloud-based CRM applications, primarily
from Salesforce.com, became the standard. CRM usage is often misleading as firms may only purchase a
limited number of sales seats whereas they require PSA functionality (and licenses) for all billable
members of the organization. More and more firms are also investing in Marketing Automation to
generate leads, track prospects and build the brand.
This year we saw a significant jump in commercial PSA adoption from 67.3% to 76.2%. SPI’s
benchmarking studies show the undeniable impact PSA has on all aspects of service execution. Effective
resource management manifests in better staff retention, higher levels of billable utilization and
significant improvements in on-time, on-budget project delivery. Time and expense capture and billing
simply cannot be managed effectively with antiquated spreadsheets.
Human Capital Management (HCM) applications have experienced the greatest growth in PS adoption
in recent years. As new cloud-based, powerful HCM applications have come to market expect to see
adoption continue to rise to equal or even surpass PSA. It only makes sense that people, the crown

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 2019 Professional Services Maturity™ Benchmark

jewels of the consulting profession, will benefit from applications which empower employees to manage
their own skill and career development. Further, HCM solutions provide benefits in improved recruiting
and learning management which can be significant as the average PSO spends more than 2% of total
revenue on recruiting and another 1 to 2% on training. HCM applications are starting to provide
powerful learning management platforms so employees have a single system of record to enhance skills.
Remote service delivery and collaboration tools have become prevalent, enabling consultants to work
on client projects and machines from anywhere. These powerful tools have ushered in the wave of
virtual project delivery which has radically improved consulting productivity. Interestingly, knowledge
management still lags other application areas despite the productivity and quality improvements it
provides. A plethora of open-source knowledge and collaboration solutions are starting to encroach on
Microsoft’s SharePoint as the dominant knowledge management tool. Stand-alone BI applications are
losing market-share across the PS industry because new Artificial Intelligence, Reporting and Analytic
functionality is now built into core business applications, overcoming the need to buy a standalone
Business Intelligence solution.
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.
Figure 34 compares the adoption of commercial solutions versus homegrown, and organizations that
still rely on spreadsheets. The table shows less than 3% of the organizations surveyed do not have a
formal CFM or accounting solution, meaning they probably use Excel and email to run the business.
Figure 34: Commercial Solution Adoption

Source: SPI Research, February 2019

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 2019 Professional Services Maturity™ Benchmark

Table 29 compares business solution adoption and satisfaction along with the level of financial
management (ERP) integration. The Americas usage of ERP surpasses that of EMEA and APAC. Recently
European and Asia Pacific headquartered firms have made big investments in PSA with their usage of
PSA now surpassing the Americas. Understandably, application satisfaction is highly correlated with
usage. Typically, application satisfaction improves as business applications become more widely
adopted. CRM satisfaction surpassed all other solutions this year. HCM continues to receive the lowest
overall satisfaction ratings. Effective HCM usage requires effective talent management processes and
leadership training and development, unfortunately the role of human resources has not yet become
strategic for many consultancies.
Table 29: Business Application Use by Organization Type and Geographic Region

Key Performance Indicator (KPI) 2018 ESO PSO Americas EMEA APac
Commercial CFM solution used 96.6% 98.4% 95.7% 96.8% 95.5% 94.7%
Satisfaction with CFM solution 3.84 3.72 3.90 3.82 3.90 3.97
Commercial CRM solution 83.5% 94.6% 78.3% 81.9% 93.0% 89.5%
Satisfaction with CRM solution 4.02 4.17 3.95 4.01 4.07 4.11
CRM is integrated with CFM 47.4% 54.2% 43.8% 48.1% 48.2% 38.9%
Commercial PSA solution 76.2% 88.4% 70.6% 74.7% 87.7% 76.3%
Satisfaction with PSA solution 3.85 3.86 3.85 3.84 3.85 4.06
PSA is integrated with CFM 56.9% 56.1% 57.4% 58.3% 54.5% 45.7%
Commercial HCM solution 61.2% 70.0% 57.2% 63.6% 47.5% 52.6%
Satisfaction with HCM solution 3.64 3.58 3.67 3.63 3.70 3.72
HCM is integrated with CFM 32.2% 33.3% 31.5% 33.2% 18.1% 38.0%
Commercial BI solution 47.0% 63.4% 39.4% 45.9% 48.4% 57.9%
Satisfaction with BI solution 3.74 3.76 3.74 3.72 3.71 4.04
BI is integrated with CFM 40.2% 46.8% 36.2% 42.4% 25.8% 35.0%
Commercial KM solution 58.2% 79.5% 48.6% 55.4% 70.0% 73.7%
Satisfaction with KM solution 3.67 3.79 3.59 3.62 3.73 4.00
Comm. Remote Service Delivery tool 72.8% 81.9% 68.7% 72.2% 75.4% 76.3%
Satisfaction with RSD solution 3.80 3.82 3.79 3.76 3.87 4.10
Commercial Social Networking tool 87.9% 89.9% 87.0% 87.4% 92.1% 86.8%
Sat. with Social Networking tool 3.90 3.90 3.90 3.89 3.84 4.15
CRM / PSA integration 49.9% 62.4% 44.0% 49.4% 53.1% 51.3%
Source: SPI Research, February 2019

The level of solution adoption is much higher within embedded PS organizations. Table 29 shows CRM is
significantly more prevalent in embedded service organizations than in independents (PSOs), but this is
to be expected because embedded service organizations (ESOs) tend to be larger and have a strong

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product-oriented sales force who are responsible for bringing services into deals. Product companies
tend to value and invest more in IT than independent service providers.

As one might expect, Table 30 shows higher levels of solution adoption as organizations expand. And for
the most part, greater solution integration with core financials also increases as organizations get larger.
Even with the proliferation of affordable and easy-to-use cloud solutions, the smallest organizations will
always lag in their adoption rates. SPI Research has seen adoption increase in all size organizations. This
figure highlights the importance professional services organizations have placed on building a strong
financial application infrastructure to enhance visibility and management control resulting in higher
productivity and profit.
Table 30: Business Application Use by Organization Size

Key Performance Indicator (KPI) Under 10 10 - 30 31 - 100 101 - 300 301 - 700 Over 700
Commercial CFM solution used 73.1% 98.3% 96.9% 100.0% 100.0% 100.0%
Satisfaction with CFM solution 3.73 3.91 3.78 3.87 3.78 3.97
Commercial CRM solution 68.0% 69.0% 86.0% 88.7% 94.0% 93.7%
Satisfaction with CRM solution 3.72 3.97 4.00 4.07 4.06 4.21
CRM is integrated 32.5% 34.6% 45.0% 52.7% 63.3% 58.1%
Commercial PSA solution 36.5% 69.7% 78.5% 82.4% 90.6% 86.6%
Satisfaction with PSA solution 3.78 3.88 3.85 3.85 3.80 4.13
PSA is integrated 30.6% 46.1% 57.0% 63.4% 73.4% 75.0%
Commercial HCM solution 13.7% 42.5% 66.0% 72.9% 79.2% 77.5%
Satisfaction with HCM solution 3.22 3.58 3.74 3.62 3.58 3.75
HCM is integrated 23.8% 18.3% 21.7% 33.3% 50.0% 55.6%
Commercial BI solution 26.0% 29.6% 42.0% 55.3% 58.8% 73.7%
Satisfaction with BI solution 3.58 3.78 3.75 3.61 3.92 4.04
BI is integrated 22.9% 21.9% 41.0% 41.3% 54.7% 51.9%
Commercial KM solution 44.0% 50.5% 60.8% 56.1% 60.4% 74.7%
Satisfaction with KM solution 3.69 3.67 3.65 3.71 3.46 3.63
Comm. Remote Service Delivery tool 56.0% 63.6% 78.1% 78.6% 76.9% 74.0%
Satisfaction with RSD solution 4.24 3.93 3.76 3.70 3.71 3.73
Commercial Social Networking tool 82.7% 86.8% 89.9% 93.0% 90.6% 78.8%
Sat. with Social Networking tool 3.81 4.00 3.88 3.80 3.98 4.07
CRM / PSA integration 22.5% 38.3% 51.9% 53.6% 64.8% 58.3%
Source: SPI Research, February 2019

Table 31 shows embedded services organizations (Software/SaaS/Hardware PS) have higher adoption
rates than independents in all categories. Generally, these organizations are part of a larger technology-
focused product organization, larger organizations tend to rely more heavily on business applications to

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improve performance. Architects and Engineers and Management Consultancies reported lower levels
of application usage across most categories. This is clearly an improvement area for these segments.

Table 31: Business Application Use by Vertical Service Market

Mgmt. Software
Key Performance Indicator (KPI) IT Consult Arch./ Engr. SaaS
Consult PS
Commercial CFM solution used 98.1% 99.0% 81.1% 100.0% 95.7%
Satisfaction with CFM solution 3.93 4.02 3.78 3.54 3.71
Commercial CRM solution 90.6% 55.4% 80.6% 94.7% 97.1%
Satisfaction with CRM solution 4.24 3.49 4.06 4.07 4.26
CRM is integrated 47.3% 40.7% 37.1% 53.9% 59.3%
Commercial PSA solution 85.0% 53.2% 66.2% 83.1% 92.9%
Satisfaction with PSA solution 4.00 3.76 3.89 3.78 3.90
PSA is integrated 56.3% 69.8% 52.0% 56.4% 50.8%
Commercial HCM solution 60.7% 47.8% 51.4% 72.6% 73.0%
Satisfaction with HCM solution 3.67 3.79 3.55 3.43 3.65
HCM is integrated 34.3% 27.4% 18.5% 39.0% 22.7%
Commercial BI solution 47.0% 19.2% 42.9% 58.0% 65.6%
Satisfaction with BI solution 3.83 3.85 3.69 3.61 3.91
BI is integrated 33.9% 45.6% 30.6% 44.2% 42.3%
Commercial KM solution 65.3% 19.5% 55.7% 80.0% 85.7%
Satisfaction with KM solution 3.68 3.50 3.44 3.78 3.90
Comm. Remote Service Delivery tool 78.8% 59.1% 67.6% 80.0% 79.4%
Satisfaction with RSD solution 3.85 3.80 3.86 3.62 4.10
Commercial Social Networking tool 88.2% 83.0% 91.7% 84.9% 95.2%
Sat. with Social Networking tool 4.00 3.75 3.97 3.85 4.05
CRM / PSA integration 59.7% 22.9% 43.8% 55.9% 71.0%
Source: SPI Research, February 2019

Table 32 shows marketing and advertising; accountancies; VARs; hardware PSOs and all other segments
rely on CFM applications with 100% adoption reported.

Table 32: Business Application Use by Vertical Service Market Continued

Hardware
Key Performance Indicator (KPI) MarCom Account VAR Other PS
PS
Commercial CFM solution used 100.0% 100.0% 100.0% 100.0% 100.0%
Satisfaction with CFM solution 4.18 3.44 3.79 4.00 3.88
Commercial CRM solution 76.5% 72.2% 100.0% 100.0% 82.6%

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 2019 Professional Services Maturity™ Benchmark

Hardware
Key Performance Indicator (KPI) MarCom Account VAR Other PS
PS
Satisfaction with CRM solution 3.81 3.81 4.36 4.11 3.72
CRM is integrated 35.7% 60.0% 60.7% 45.0% 42.4%
Commercial PSA solution 85.0% 63.2% 100.0% 88.9% 69.3%
Satisfaction with PSA solution 3.89 3.27 4.00 4.00 3.68
PSA is integrated 53.1% 58.3% 71.4% 55.6% 54.2%
Commercial HCM solution 58.8% 57.9% 57.1% 60.0% 68.9%
Satisfaction with HCM solution 3.75 4.00 3.55 3.75 3.65
HCM is integrated 36.4% 36.4% 27.3% 50.0% 41.7%
Commercial BI solution 29.4% 52.6% 71.4% 70.0% 48.5%
Satisfaction with BI solution 3.55 3.62 4.20 4.14 3.44
BI is integrated 30.0% 38.5% 90.0% 58.3% 38.5%
Commercial KM solution 37.5% 29.4% 57.1% 90.0% 54.3%
Satisfaction with KM solution 4.00 3.43 3.56 3.89 3.48
Comm. Remote Service Delivery tool 77.8% 46.7% 100.0% 70.0% 69.3%
Satisfaction with RSD solution 3.83 3.44 3.93 3.63 3.58
Commercial Social Networking tool 93.8% 73.7% 92.9% 77.8% 89.2%
Sat. with Social Networking tool 4.14 3.38 3.85 3.38 3.83
CRM / PSA integration 42.1% 36.1% 75.0% 50.0% 42.2%
Source: SPI Research, February 2019

Solution Satisfaction

Table 33 shows application Table 33: Solution Satisfaction

satisfaction (1: very
dissatisfied to 5: very Solution 2016 2017 2018
satisfied). Satisfaction with
Client Relationship Management (CRM) 3.90 3.87 4.02
CRM tops the list followed by
Social Networking 3.80 3.77 3.90
Social Networking and PSA.
Satisfaction levels are Professional Services Automation (PSA) 3.80 3.89 3.85
relatively low for BI, Corporate Financial Management (CFM) 3.67 3.95 3.84
Knowledge Management and
Remote Service Delivery and Collaboration 3.79 3.83 3.80
Human Capital Management.
Human Capital Management Business Intelligence (BI) 3.49 3.86 3.74
received the lowest Knowledge Management (KM) 3.51 3.80 3.67
satisfaction ratings because Human Capital Management (HCM) 3.36 3.59 3.64
these applications have for the
Source: SPI Research, February 2019

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 2019 Professional Services Maturity™ Benchmark

most part remained standalone with limited integration with either CFM or PSA.

Corporate Financial Management (CFM)

Corporate Financial Management (CFM) [Finance and Accounting,
(ERP or SRP)], is the primary application required to accurately
collect, bill and report financial transactions. CFM collects and
manages all financial information (expenses, invoices, etc.) to
provide management reporting and visibility into total service
revenue, cost and profitability. Project-driven, human capital
intense businesses like professional services have unique financial
management requirements including support for complex contract
types and billing arrangements. Revenue recognition is also
complex and must conform to local accounting and taxation rules
while providing support for multicurrency, multilingual
transactions for global firms. Seamless integration between the
system of record (PSA) for managing resources and projects and
the financial management solution for payroll, expense
management, invoicing, revenue recognition and project
accounting is critical.
Project- and service-based extensions to enterprise ERP
applications started to appear in the late 1990’s at the same time stand-alone Professional Service
Automation (PSA) solutions supporting resource scheduling and time capture and billing became
available. Over the past twenty 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 subscriptions, time and materials,
work-in-process, deliverables-based or percentage completion are important project-based ERP
extensions. Architects, Engineers and Government Contractors require purchasing modules and cost-
plus accounting for materials and labor pricing.
This year’s survey included responses from 112 FinancialForce and 108 Deltek Financials clients;
catapulting these solutions to the most-used CFM solution at 19% and 18% respectively. As we see every
year, QuickBooks is the leading financial solution for small and medium sized PSOs with 16% (95 firms)
of survey respondents using it. QuickBooks market-share is expected to decline as cost-effective low-
end solutions come to market with the project accounting and resource management functionality
required by PS firms (Figure 35).

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 2019 Professional Services Maturity™ Benchmark

Figure 35: Corporate Financial Management (CFM) Solution Used

Source: SPI Research, February 2019

Client Relationship Management (CRM)

CRM supports the management of client relationships and is
designed to improve sales and marketing effectiveness. CRM
automates lead, contact and campaign management, sales
pipeline, territory and contract management. Many CRM
applications also provide powerful call center functionality for
issue management; call handling; trouble ticketing and problem
resolution. CRM allows PSOs to track clients through the
engagement (bid to bill) lifecycle, and to specifically target
customer segments and offers by understanding details of the
relationship. CRM supports analysis by client, geography and
portfolio.
Figure 36 shows Salesforce.com dominance once again with use by 50% of the organizations surveyed.
Deltek’s integrated CRM, part of its project-based CFM portfolio, moved into second place with 7%
adoption. NetSuite’s CRM, part of its CFM suite, and Microsoft Dynamics CRM are also prevalent.

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 2019 Professional Services Maturity™ Benchmark

Figure 36: Client Relationship Management (CRM) Solution Used

Source: SPI Research, February 2019

Table 34 compares organizations using CRM to those who do not. 16% of the organizations surveyed do
not use any type of CRM Table 34: Impact – Client Relationship Management (CRM) Use
solution. As the table shows,
CRM benefits organizations in CRM CRM Not
terms of growth. CRM users Key Performance Indicator (KPI) Used Used ▲
experienced significantly Survey responses (commercial CRM) 486 96
greater revenue and Year-over-year change in PS revenue 10.5% 5.5% 92%
headcount growth. They have
% new client revenue 29.9% 18.8% 59%
larger sales pipelines, more
Deal pipeline / quarterly bookings forecast 188% 146% 29%
revenue from new clients and
many more active clients and Quarterly revenue target in backlog 45.2% 39.0% 16%
projects. CRM users report Annual revenue per billable consultant (k) $208 $192 9%
larger, more profitable Annual revenue per employee (k) $168 $157 7%
projects. Improved sales Project margin 36.1% 33.0% 9%
effectiveness leads to a more
Source: SPI Research, February 2019
efficient use of resources
down the line. Profitability is clearly enhanced when CRM is integrated with PSA and the CFM
application.

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 2019 Professional Services Maturity™ Benchmark

Table 35 further depicts CRM

impact, comparing those Table 35: Impact – Commercial CRM Integration
organizations not using CRM
at all to those organizations CRM Not Used, Not Used,
Key Performance Indicator (KPI) Used Integrated Integrated
using standalone CRM, and
then to organizations using Survey responses (commercial CRM) 96 173 311
CRM integrated to the core Year-over-year change in PS revenue 5.5% 8.7% 11.0%
financial solution. This table Year-over-year change in PS headcount 3.6% 6.3% 9.5%
highlights the benefits New clients 18.8% 24.4% 32.3%
organizations receive as they
Deal pipeline / quarterly bookings forecast 146% 184% 186%
move from no CRM to
Annual revenue per billable consultant (k) $192 $200 $207
nonintegrated CRM to
integrated CRM. While these Annual revenue per employee (k) $157 $164 $166
benefits might not be Source: SPI Research, February 2019
revolutionary, they do
underscore greater visibility and improved alignment between sales and service delivery. These benefits
are amplified as organizations grow.

Professional Services Automation (PSA)

Professional Services Automation 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 including the demand forecast. It helps
manage service delivery by overseeing opportunities, staffing,
project management, and collaboration. PSA is typically the
system of record for resource skills, competencies and preferences
with integration to the employee and contractor database. It is
used to collect time and expense by project and resource down to
the task level, so it is the system of record for resource utilization
and project cost and estimating.
Most PSA applications now offer billing modules with some level of
revenue recognition by type of billing method – time and materials, work in process or fixed price. They
also support accurate time and expense capture. PSA extensions for the construction industry include
modules for material costs and procurement. Although PSA is still focused on enabling project- and
services-driven organizations to better plan, staff, execute and collect all relevant information related to
projects, it has become much more than that. It has become the core solution for business planning with
a view of the best projects, best clients, best services and best people to translate the business plan into
reality.
This year adoption of a commercial PSA expanded 13% from 67.6% to 76.2%. PSA satisfaction remained
relatively unchanged year over year with a satisfaction rating of 3.85 out of 5 (77%).

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 2019 Professional Services Maturity™ Benchmark

Figure 37: Professional Services Automation (PSA) Solution Used

Source: SPI Research, February 2019

Figure 37 shows FinancialForce garnered first place this year as the most adopted PSA solution with
approximately 32% (195 firms) of the survey. Deltek is the second-most prevalent solution with 8% (46
firms). Projector is third with 7% (42 firms). Kimble is fourth with 5% (30 firms). NetSuite is fifth with 4%
(26 firms). Mavenlink is sixth with 3% (18 firms). Tenrox/Upland is seventh with 2% (14 firms). None
(19.3% or 120 firms) and other (7.6% or 46 firms) are still two of the most prevalent answers.
Interestingly, the average size of the organizations that do not use a PSA is quite large at 275 PS
employees. As the PSA market has matured, we see solution providers coalescing by ecosystem.
FinancialForce, Kimble, Mavenlink and Krow are part of the Salesforce ecosystem and AppExchange.
Tenrox, Microsoft Dynamics, Timelog and UNIT4/Assistance PSA are focused on the Microsoft platform.
Table 36 compares PSOs using PSA solutions to those that do not. The results in this table are very
powerful. Professional Table 36: Impact – Professional Services Automation (PSA) Use
Services Automation solutions
continue to drive significant PSA PSA Not
operational performance Key Performance Indicator (KPI) Used Used ▲
benefits, yielding higher Survey responses (commercial CRM) 461 144
revenue and profit for Year-over-year change in PS revenue 10.8% 6.4% 69%
professional services
New client % of total revenue 30.0% 21.4% 40%
organizations. The use of PSA
Employee billable utilization 70.7% 66.2% 7%
is on the rise due to the need
to better manage projects and Use a standardized delivery methodology 66.8% 63.2% 6%
resources, especially in more Annual revenue per billable consultant (k) $207 $200 4%
technical disciplines, as it has Project margin 36.0% 33.4% 8%
become increasingly difficult Source: SPI Research, February 2019
to find, hire, retain and deploy

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 2019 Professional Services Maturity™ Benchmark

talent. PSA solutions help match the right resources, with the right skills at the right time to the right
projects. PSA solutions yield several core benefits to PSOs, but most executives only need to look to
the 7% increase in billable utilization as the reason to select PSA. Just start to multiply what a 7%
improvement in utilization means to revenue improvements. For a 100-person PS organization, 7%
translates to 14,000 more billable hours per year. With average bill rates of $200 per hour, the PSO can
produce $2.8M in incremental revenue! Almost all key metrics improve with PSA adoption. As shown in
the table these systems pay for themselves with substantially higher project margins.
Table 37 highlights the benefit Table 37: Impact – Commercial PSA Integration
of integrated PSA versus
standalone PSA. Again, the PSA Not Used, Not Used,
results demonstrate Key Performance Indicator (KPI) Used Integrated Integrated
integrated PSA enables Survey responses (commercial CRM) 144 129 346
organizations to operate at Year-over-year change in PS revenue 6.4% 8.7% 11.6%
higher levels of efficiency.
Year-over-year change in PS headcount 4.8% 7.2% 9.5%
Perhaps most notable in this
Deal pipeline / quarterly bookings forecast 156% 173% 194%
table is the increase billable
utilization as PSOs move from Quarterly revenue target in backlog 41.8% 42.3% 46.5%
spreadsheets to PSA to Employee billable utilization 66.2% 67.8% 71.3%
integrated PSA. Executive real-time wide visibility 3.53 3.54 3.61
Because the delivery of Project margin 33.4% 36.6% 36.4%
services is where PSOs make Source: SPI Research, February 2019
their money, and because PSA
is the primary application used by project managers and others responsible for services delivery, it is
easy to understand why the operational and financial benefits are so significant. SPI Research has
always recommended organizations with more than 20 employees utilize PSA. With the affordable
cloud-based solutions now available, PSA should also be considered by smaller organizations.

Human Capital Management (HCM)

Human Capital Management (HCM) solutions (also known as
talent management solutions) give employers the tools to
effectively recruit, hire, onboard, train, evaluate and compensate
employees. By tracking performance, skills and career
progression, HCM helps companies create and maintain a high-
performance workforce. Key software modules include payroll,
recruiting, employee learning, skills tracking, compensation,
performance management, policy compliance, and succession
planning — each of which help organizations manage personnel
growth and development.
HCM benefits the PSO by maintaining a database of skills, benefits and pay rate information that is used
for resource scheduling, recruiting and performance and career management. Effective HCM solutions

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provide rich applications that allow consultants to manage their own careers and skill development
(training) and bid on the projects of greatest interest for them.
Figure 38 shows that HCM has made significant strides in PS adoption. Five years ago, HCM was used by
less than one-third of PSOs – now it is used by 57% of them although “none” still has top market share
at 26% (207 firms). HCM prevalence among the largest PSOs is significant. The average size of the PS
organization using HCM is 841 consultants compared to 326 for non-users. New cloud-based solutions
offer power and flexibility, helping companies manage employees from recruitment and hiring through
training to retirement.
Figure 38: Human Capital Management (HCM) Solution Used

Source: SPI Research, February 2019

Of the solutions highlighted in this year’s benchmark, ADP, FinancialForce (now partnering with ADP for
HCM) and Workday are leaders. NetSuite/Oracle/Taleo; Deltek; SAP/Successfactors and Ultimate are not
far behind. HCM usage will continue to grow within service-centric organizations as talent is their most
valuable asset. Most of the solutions found in this benchmark are provided by financial solution
providers, who generally offer integration with other applications in their suites.
Table 38 highlights the significant benefits of HCM by comparing those organizations who use it versus
those who do not. The table highlights HCM is critical for large organizations. Key improvements show
up in faster growth, larger pipelines, stronger backlog and higher per person revenue yields. HCM has a
powerful impact on net profit with average profits of 22%. Higher billable utilization occurs because the
right people with the right skills are available to do the work. Larger management span of control
reduces the cost of non-billable management and enhances the bottom-line. HCM solutions provide
greater visibility into employee skills, preferences, training and career potential. It helps ensure
equitable compensation is an integral component of pay for performance and reward systems.

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Talent management is central to PS performance as the skills and attitudes of the consulting workforce
provide tangible evidence of
Table 38: Impact – Human Capital Management (HCM) Use
consulting value. And with
better management of HCM HCM Not
personnel, PSOs can ensure Key Performance Indicator (KPI) Used Used ▲
talent is on staff and available Survey responses (commercial CRM) 356 226
when needed, which helps the Number of PS employees 841 326 158%
organization grow faster.
Year-over-year change in PS revenue 10.8% 8.0% 35%
HCM solutions, in conjunction
Year-over-year change in PS headcount 8.8% 6.0% 47%
with PSA, drive greater billable
utilization, which results in Deal pipeline / quarterly bookings forecast 195% 165% 18%
higher revenue per employee Quarterly revenue target in backlog 46.7% 40.8% 14%
and profitability. Most of the Annual revenue per billable consultant (k) $211 $197 7%
new breed of cloud-based Profit (EBITDA %) 20.2% 16.5% 22%
HCM applications offer mobile
Source: SPI Research, February 2019
access from anywhere, making
it easy for employees to keep
their profiles and time-off Table 39: Impact – Commercial HCM Integration
requests up-to-date. Several
HCM vendors are adding rich HCM Not Used, Not Used,
Key Performance Indicator (KPI) Used Integrated Integrated
predictive analytics, providing
Survey responses (commercial CRM) 226 226 168
visibility into levels of
employee engagement to spot Size of PS organization (employees) 326 478 1,134
employees who are likely to Year-over-year change in PS revenue 8.0% 10.2% 11.1%
quit. Their recruiting tools are New client % of total revenue 25.0% 27.7% 29.4%
very powerful with out-of-the- Employee billable utilization 68.0% 69.4% 71.2%
box integration to all the top
Project duration (man-months) 22.6 24.8 42.6
job sites.
Projects delivered on-time 77.1% 77.3% 77.6%
Business Intelligence (BI) Percent of annual revenue target achieved 92.7% 93.7% 94.9%

Business Intelligence Profit (EBITDA %) 16.5% 19.6% 21.3%

integrates information from Source: SPI Research, February 2019

core business applications to

improve strategic analysis, demand and capacity planning, budgeting, forecasting and financial planning.
BI solutions continue to increase adoption in PSOs, whether they are offered as stand-along tools or part
of the business applications themselves for reporting and analysis. As professional services
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. It also is an important
solution for annual planning, as PS executives try to uncover areas where additional growth and profit
can be extracted.

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Just as we have seen in all other categories, the legacy Business

Intelligence stalwarts are being challenged and eclipsed by hungry
new born-in-the-cloud contenders like Snowflake, Tableau and
Looker. At the same time every major software provider is looking
to add Artificial Intelligence and Data Analytics to their platforms.
The winners will be those that combine power with ease of use
and the ability to easily integrate and transverse vast amounts of
data across platforms.

Figure 39: Business Intelligence (BI) Solution Used

Source: SPI Research, February 2019

Figure 39 shows relatively low adoption levels of Business Intelligence in this year's survey, similar to
those in the past. None,
Table 40: Impact – Business Intelligence (BI) Use
Other, Microsoft and
homegrown are the most
BI BI Not
prevalent BI solutions. Of the Key Performance Indicator (KPI) Used Used ▲
application suite providers,
Survey responses (commercial CRM) 262 296
IBM/Cognos/ SPSS,
Size of PS organization (employees) 1,023 295 247%
SAP/Business Objects and
Workday/Adaptive Insights Year-over-year change in PS revenue 10.9% 8.9% 22%
each have a wide following. Year-over-year change in PS headcount 8.4% 7.3% 16%
New client % of total revenue 29.3% 26.8% 9%
The results in this table
highlight some of the core Bid-to-win ratio (per 10 bids) 5.09 4.84 5%
benefits organizations have Project margin 36.6% 34.9% 5%
achieved that use BI solutions. EBITDA 19.9% 17.1% 16%
While each improvement is
Source: SPI Research, February 2019
impressive, growth in both

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revenues and headcount stand

out. The fact is BI is a strategic Table 41: Impact – Commercial BI Integration
solution that helps PSOs plan,
BI Not Used, Not Used,
budget and forecast the
Key Performance Indicator (KPI) Used Integrated Integrated
business. Its powerful “what
Survey responses (commercial CRM) 296 147 170
if” analysis tools help PSOs
model capacity and resource Size of PS organization (employees) 295 517 1,133
plans to achieve optimal Year-over-year change in PS revenue 8.9% 9.5% 11.6%
results. Year-over-year change in PS headcount 7.3% 8.0% 9.4%
New client % of total revenue 26.8% 28.2% 30.6%
Bid-to-win ratio (per 10 bids) 4.84 4.89 5.05
Deal pipeline / quarterly bookings forecast 170% 184% 201%
Project margin 34.9% 35.7% 37.0%
Source: SPI Research, February 2019

Knowledge Management (KM)

Knowledge Management should be a core application for all PSOs as knowledge, unique intellectual
property, methods and tools are the primary source of service provider differentiation. Unfortunately,
42% of the organizations surveyed reported they do not use a knowledge management application.
As the workforce becomes more global and intellectual property more valuable, it becomes increasingly
important to have shared processes, procedures and templates. SPI Research sees Knowledge
Management as a key source of differentiation, consistency and quality. With the advent of inexpensive
cloud-based knowledge management applications we expect significant investment in this area.
Figure 40: Knowledge Management (KM) Solution Used

Source: SPI Research, February 2019

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Figure 40 shows Microsoft’s

SharePoint continues as the Table 42: Impact – Knowledge Management (KM) Use
market leader with 16% of the
firms in this survey. KM KM Not
Key Performance Indicator (KPI) Used Used ▲
Salesforce.com is the second
most prevalent KM Survey responses (commercial CRM) 330 237

application, with 15% of the Size of PS organization (employees) 852 367 132%
market. Year-over-year change in PS revenue 10.5% 8.9% 18%

Table 42 compares PSOs using Year-over-year change in PS headcount 8.5% 6.9% 22%
knowledge management Annual revenue per billable consultant (k) $210 $198 6%
solutions to those that do not. Annual revenue per employee (k) $167 $162 3%
In this year’s survey the Project margin 37.4% 33.1% 13%
organizations using Knowledge
Profit (EBITDA %) 19.1% 17.7% 8%
Management were larger.
Source: SPI Research, February 2019
Organizations using KM tend
to be more efficient in all aspects of their business, especially in the sale and delivery of services. KM
also contributed to higher revenues per consultant and employee along with improved margins.

Remote Service Delivery and Collaboration Tools

Like Knowledge Management (KM), Remote Service Delivery and collaboration tools have become
increasingly important for virtual project delivery, communication and collaboration. They provide a
platform for consultants and clients to work together, regardless of physical location.
Figure 41: Remote Service Delivery and Collaboration Tool Used

Source: SPI Research, February 2019

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Professional services
consultants utilize these Table 43: Impact – Remote Service Delivery and Collaboration Tools Use
technologies to serve remote
clients virtually. In the past RSD RSD Not
Key Performance Indicator (KPI) Used Used ▲
consultants, could only serve
one client at a time, with Survey responses (commercial CRM) 415 155
expensive and time- Year-over-year change in PS revenue 10.6% 7.8% 36%
consuming travel the norm. Year-over-year change in PS headcount 8.4% 6.3% 34%
Advances over the past years % of employees billable or chargeable 73.2% 71.5% 2%
have added video, recording,
Projects delivered on-time 77.8% 75.0% 4%
editing, polling and white-
Project overrun 8.5% 8.8% 3%
boarding functionality,
meaning team members can Use a standardized delivery methodology 67.8% 60.6% 12%
now see each other (if desired) Project margin 35.9% 34.9% 3%
along with sharing information Source: SPI Research, February 2019
and computer screens.
Figure 41 shows results similar to past years. Microsoft, WebEx and Citrix lead in adoption. Microsoft
with the purchase of Skype and LiveMeeting, has greatly enhanced its remote service delivery
capabilities. Given their relatively low cost and ease of deployment, remote service delivery tools
should be on the “must have” list for PSOs of any size.

Social Networking
Social Networking tools are being relied on, now more than ever, as organizations work both internally
and externally to find, hire, communicate and market to the best people. Social media has become
essential to help professional services organizations build their brand through thought leadership and
market outreach.
Figure 42: Social Networking (SN) Solution Used

Source: SPI Research, February 2019

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LinkedIn has become an

essential networking and Table 44: Impact – Social Networking (SN) Use
recruiting tool for PSOs. In
fact, LinkedIn has morphed SN SN Not
Key Performance Indicator (KPI) Used Used ▲
into the defacto news channel
for many PS executives with its Survey responses (commercial CRM) 516 71
rich news feed and articles. In Year-over-year change in PS revenue 10.3% 6.2% 65%
PS, Facebook runs a distant Year-over-year change in PS headcount 8.1% 5.3% 54%
second as most business Projects delivered on-time 77.4% 74.2% 4%
professionals do not want to
Project overrun 8.6% 9.2% 7%
intermingle the personal lives
Annual revenue per billable consultant (k) $206 $190 8%
with business. Chatter,
Yammer and Twitter are all Annual revenue per employee (k) $167 $147 13%
widely used as well but the EBITDA 18.8% 18.6% 1%
powerful collaboration Source: SPI Research, February 2019
capabilities of these platforms
is now becoming an essential element of most business applications so there is a limit to how many
social networking tools make sense in a PS environment.

Application Integration
While the core business solutions support individual departments in their efforts to become more
productive and profitable, as these solutions are integrated with the core financial management
solution (ERP) they create additional insight and value (Figure 43). For instance, CRM integrated with
CFM provides sales executives with the insight necessary to develop a pricing strategy, supporting the
highest probability of winning the bid with maximum profitability. Without this integration, it would be
much more difficult to conduct
this type of analysis. Today’s Figure 43: Success depends on inter-departmental cooperation
PSOs simply cannot operate with
functional silos as the lines
between sales, delivery and
finance become blurred.
It is also important for
applications to communicate
with each other. PSA, integrated
with CRM, provides visibility from
the sales pipeline to the resource
schedule, ensuring the right
resources are available when
Source: SPI Research, February 2019
needed. With integrated HCM,
human resources, recruiting and resource management all benefit from visibility into in-demand skills,
consultant preferences and career aspirations.

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Table 45 shows higher levels

of integration in this year’s Table 45: Solution Integration with Core Financials
benchmark. SPI Research
Solution 2016 2017 2018
believes integration between
CRM, PSA and core financials Professional Services Automation (PSA) 53.5% 62.5% 56.9%
is an essential ingredient in Client Relationship Management (CRM) 39.7% 41.3% 47.7%
superlative performance. Business Intelligence (BI) 42.4% 50.0% 40.2%
Integration provides visibility Human Capital Management (HCM) 34.9% 35.9% 32.2%
to all parts of the organization
and helps break down Source: SPI Research, February 2019

organizational silos.
Achieving client delight and profit in professional services requires tight coordination between demand
and supply which can only be achieved through integrated business applications. Many firms that have
worked with SPI Research over the past several years have concentrated on application integration as
they have learned its benefits and worked with their vendors to ensure the integration happens.
PSOs are waking up to the necessity of coordinating sales with service delivery. This integration
improves customer satisfaction and defines quality execution. Typically, application suites, such as
Deltek, FinancialForce.com, Microsoft, NetSuite, Workday and SAP offer out-of-the-box integration
between their core business solutions making a 360-degree view of clients and projects possible.

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6. Leadership Pillar

Growth, growth and more growth. Each year SPI Research

finds a direct correlation between growth and success in
Professional services. Given that the PS industry is built on the
application of unique knowledge and domain expertise it is
sometimes hard to understand why the growth dynamic is so
important. But… it is. In professional services and the wider
world of technology, leading firms create dominant market
positions. There is a compounding effect of how customers make decisions, the networks and
ecosystems that are created, and the ability to scale as a firm that means there is a significant advantage
for the companies that grow the fastest. By establishing market-leading positions, premium PS firms
win the best deals and turn those deals into wildly satisfied clients who continue to buy and provide
referrals. They become known as innovators in their markets. They produce tangible results and harvest
the knowledge gained to do an even better job the next time. They build a culture which embodies their
values which further attracts prospective consultants and clients who identify with those attributes.
But growth comes with a price. The unique knowledge, vision and passion that a consulting leader
brings to founding a hot new firm must be nurtured and continuously kindled within new employees.
The leader must simultaneously learn to let go and grow at the same time. Micro-managing does not
work in PS, cultivating a reputation and repeatable skills, competencies and processes does. Most
independent consulting firms can easily grow from 20 to 50 consultants, but after that things get more
interesting. This is when firms must move from heroic to repeatable and founders must move from
doers and fire fighters who wear all the hats to leaders and visionaries. The leaders who can’t make this
transition must have the courage to bring in new talent who can take the firm to the next level.
As professional services organizations grow, leadership challenges intensify. SPI’s research into this
topic over the past twelve years has shown a powerful correlation between financial success and
confidence in leadership. In small organizations, leadership by walking around works just fine. But as
the organization grows in size; scope and complexity; geographic dispersion, communication and
alignment become issues. PSOs must implement policies to ensure communication, collaboration and
alignment do not suffer with expansion. Systems and processes must be implemented to provide real-
time visibility and management control.
Leadership development, succession planning and funding growth are big challenges for independent
PSOs. Many consider mergers and acquisitions to augment organic growth. Employee ownership is a
viable option as the founder nears retirement. A chief concern is “How best to monetize value while
building a firm for the future?” Table 46 shows the Leadership Maturity model and the optimal
leadership style for each level of maturity.

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Table 46: The Leadership Maturity Model

Level 1 Level 2 Level 3 Level 4 Level 5

Initiated Piloted Deployed Institutionalized Optimized
Initial strategy is to PS has become a PS is an important Service leads products. PS is critical to the
support product profit center but is revenue and margin PS is a vital part of the company. Service
sales and provide subordinate to source, but channel company. Solution strategy is clear.
reference product sales. conflict still exists. selling is a way of life. Complimentary goals
customers while Strategy is to drive Services differentiate PS is included in all and measurements are
providing customer adoption products. Leadership strategy decisions. in place for all functions.
Leadership

workarounds to and references development plans are Succession plans are in Leaders have global
complete immature profitably. Leaders in place. Leaders have place for critical vision and continually
products. Leaders focus on P&L and strong background & leadership roles focus on renewal &
are “doers”. client skills in all pillars. expansion.
relationships.

The Entrepreneur. The Generalist. The General Manager. The Strategist. By the The Leadership Team.
Leaders are The emerging PS By the deployed stage, institutionalized phase, As the PS organization
“doers”. In small leader must start the PS leader must start the PS leader has matures, the leader
companies, PS to focus on HR, to focus on setting vision developed a strong becomes more strategic
Leadership Styles by Maturity Stage

leaders are Finance and and strategy and forging leadership team and and able to effectively
technically Operations while strong partnerships with institutionalized communicate and
competent and nurturing close clients and the cross- operating processes in inspire. All functional
directly perform relationships with functional leadership all five service areas have strong,
engagement clients and team. The PS leader performance pillars. His sustainable operating
activities in addition partners. At this must exhibit strong primary focus is processes. His focus is
to recruiting and stage, setting operational and process strategy, business on ensuring alignment
ramping new strategic vision management skills. He planning and within the organization
consultants. and strategy are must have a strong establishing strategic while continually forging
Typically, they less important background in sales, partnerships and new business
possess stronger than strong finance and operations. alliances. At this stage, partnerships. The
technical than operational Focus at this stage is on he must “lead”, “inspire” leadership team
business or management recruiting strong and “communicate”. He constantly focuses on
leadership skills. skills. functional leaders to must be able to attract innovation and
scale the organization. and retain high quality operational excellence.
functional leaders.

Source: SPI Research, February 2019

Leadership challenges are much the same but also very different in embedded PSOs. These
organizations exist to ensure the successful implementation and adoption of the company’s products.
They are not given the latitude to develop services for services sake, but rather must serve the best
interests of the company’s products, even if those interests undermine PS productivity and profitability.
In embedded PSOs the primary leadership challenge is one of charter conflict and forging cross-
functional relationships. Embedded PS executives are tasked with developing a high-quality consulting
business, but consulting is subordinate to product proliferation and adoption. A new, more strategic
role is emerging to drive client adoption and optimization. This role requires significantly greater
alignment with sales, support and product development so collaboration and team-building skills are
paramount.

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The Leadership Index

It is impossible to work in Professional Services and conclude that leadership does not matter. Most of
us intuitively understand leadership’s importance, but few studies have been able to quantify its benefit.
This study does just that. SPI Research has developed a Leadership index that focuses on the most
important aspects of leadership to measure its impact. You will be as astounded as we were to discover
that great or poor leadership permeates every facet of PSO performance!
For several years, SPI Research has asked a series of questions regarding various aspects of professional
services vision, strategy and leadership including confidence, clarity and alignment. Strategic decisions
set the direction and tone for the PSO and affect all functions because vision and strategy determine
goals and objectives, the types of clients to pursue, the types of services to offer and the
interrelationship between functions.
The leadership questions have evolved into eight core questions that examine how various dimensions
of leadership impact performance. The questions ask, “please rate the following aspects of your
organization in terms of how well it operates (1: not well - 5: very well)”:
1. The vision, mission and strategy of the PSO is well understood and clearly communicated
2. Employees have confidence in PS leadership
3. It is easy to get things done within the PS organization
4. Goals and measurements are in alignment for the service organization
5. Employees have confidence in the future of the PS organization
6. The organization effectively communicates with employees
7. The organization embraces change, it is nimble and flexible
8. The organization focuses on innovation and is able to rapidly take advantage of changing market
conditions
SPI Research created a “Leadership Index” by ranking the aggregate leadership scores for all eight
questions by survey participant. The minimum score for the leadership index would be eight, if the
survey participant stated “1 - not well” for each of the eight questions. The maximum would be 40, if
the participant stated “5 - very well”, for each question.
As statisticians, a perfect day is when a key performance measurement clearly correlates with most
measures of performance. Well, the dimensions of leadership are one of those perfect statistics. As the
leadership dimensions improve, so do all major key performance metrics (Table 47). One might expect
“Confidence in Leadership” and “Confidence in the Future” to improve along with clarity of vision and
strategy but the truly remarkable finding around leadership is that all the major operational metrics –
revenue per person, utilization, project margin and on-time project completion improve as well. It is
amazing how strategic clarity permeates all aspects of operational performance. If the strategy is clear
and compelling, people-based organizations will find a way to accomplish it.
With strong leadership, employees understand what’s required of them, and can go about conducting
their daily business with confidence their work supports corporate objectives. Strong leadership helps
employees get on the same page, working toward a common goal. Happy employees are more
productive and deliver higher levels of client satisfaction and profitability.

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The table depicts the percentage of survey respondents by overall leadership index rating compared to
key operational
measurements. As Table 47: Impact Based on Leadership Maturity Scores
shown in the table,
effective leadership Key Performance Indicator (KPI) 8 - 25 26 - 30 31 - 35 36 - 40
has a powerful impact Percentage of respondents 20.9% 15.5% 38.8% 24.8%
on all aspects of Year-over-year change in PS revenue 6.9% 6.1% 10.9% 12.3%
performance. % of employees billable or chargeable 67.3% 68.2% 73.2% 78.9%
More than any other Deal pipeline / quarterly bookings forecast 155% 175% 191% 199%
factor, good, or poor Bid-to-Win ratio (per 10 bids) 4.17 4.82 4.89 5.57
leadership impacts all
Percentage of referenceable clients 64.1% 68.6% 71.4% 78.9%
facets of the business
Consultant Ramp time (days) 139 116 114 110
driving stronger
growth, higher billable Recommend company to friends/family (5 pt.) 3.61 4.07 4.57 4.91
utilization, better on- Well-understood career path for all employees 2.55 2.87 3.37 3.87
time project delivery, Employee billable utilization 64.1% 65.9% 70.1% 73.5%
more winning Projects delivered on-time 68.3% 72.8% 75.8% 85.4%
proposals and higher
Use a standardized delivery methodology 59.5% 60.9% 65.8% 71.3%
levels of customer
Annual revenue per billable consultant (k) $195 $206 $216 $212
satisfaction. The
reverse is also true. Annual revenue per employee (k) $149 $163 $175 $179
Poor leaders can Profit (EBITDA %) 18.7% 16.7% 19.0% 19.4%
sabotage cross- Source: SPI Research, February 2019
functional alignment,
leading to organizational alienation, functional silos and chaos. Leaders who are not able to transition
to more strategic roles can create heroic, reactive organizations characterized by fire-fighting, in-fighting
and burnout. Many top-performing organizations have reported adding SPI’s leadership questions to
their employee surveys to help them measure and quantify employee confidence in leadership.

Leadership Issues

When things go wrong, it most often starts at the top and then cascades downward throughout the
organization, ultimately showing up in poor financial performance. Eliminating the root causes of
dysfunction and inefficiency go a long way toward driving organizational success. The most common
leadership issues facing PSOs include:

 Unclear strategy – lack of clarity around target markets, target clients and why we win. Inability
to capitalize on market opportunities due to lack of alignment, lack of employee engagement or
leadership and cultural issues. No leverage to drive repeat sales, limited competitive
differentiation, poor sales, marketing and service delivery execution.

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 Lack of alignment – unclear service charters – particularly a problem for embedded service
organizations – with conflict between driving revenue and margin versus helping the overall
company achieve its objectives of market expansion and client adoption.
 Silos – exist in all companies – they usually occur in the choppy waters between groups or
functions where responsibility and accountability are blurry. A classic example… who is
responsible for driving new service revenues – is it sales or delivery? How can disconnected
processes and poor handoffs be improved?
 Reactive not proactive – because the organization lacks real-time visibility into all facets of the
business, leaders must rely on past business performance rather than being able to spot trends
and take advantage of them in real-time. Running the business by spreadsheet makes
administration overly burdensome with endless rounds of manual spreadsheet inputs.
Managers have no ability to analyze and recalibrate to take advantage of changing market
conditions leading to missed targets and a demoralized workforce.
 Skills imbalance – the logical extension of organizational silos… where all parties are not aligned
… not selling what we can deliver or not being able to deliver what has been sold. Not enough
or too many people with the right skills, excessive non-billable headcount, sub-par utilization,
difficulty in recruiting, ramping, retaining and inability to quickly, easily staff projects.
 Immature processes – disparate or poor systems and tools. Inconsistent project methods; lack
of tools and intellectual property leading to low repeatability and inability to drive efficiency and
reuse.
 Poor quality and customer satisfaction – Failed projects, cost overruns, difficulty securing
references. No quality review processes and/or poor project visibility into budget to actuals.
 Poor financial performance – All of the above factors – lack of strategic clarity, poor alignment,
silos, and of out-of-date information contribute to reactive, rearview mirror business forecasting
and planning. The net result is revenue and margin below targets, poor forecasting accuracy,
unpredictability and high levels of risk.

Corporate Culture

When organizational culture is strong — employees do things because they believe it is the right thing to
do and feel they will be rewarded for their actions. However, if the leadership team lacks integrity or
squelches diversity, cultures can morph into “cults”, “cliques”, “castes” and “insider clubs”. The positive
aspect of organizational culture is that the unwritten code of behavior helps team members prioritize
activities and make decisions. The negative aspects of culture come from unbalanced forms of power
which exclude individuals and teams from decision-making. Employees who challenge group norms are
often rejected or seen as a negative influence by the rest of the group, because they upset the status
quo.
∆ Creative: In a creative culture, the primary driver is self-expression. Leaders (like Steve Jobs of
Apple) focus on creative brilliance and celebrate individuals and teams who “break the mold” by
discovering new innovations. The organization structure is fluid and typically based on self-
organizing work teams with collaborative project groups. Creative cultures foster an
environment where discontinuous innovation is possible, for example, Apple moving from PCs
to the wildly successful iPod. The unbalanced form of creative cultures are “cults”, fashioned

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after a dynamic and visionary leader who can inspire the team to “drink the Koolaid”
regardless of the consequences. The favored function is research and development.
∆ Competitive: In competitive cultures, the primary driver is personal and team achievement,
often defined as “winning”. Leaders (like Larry Ellison of Oracle) are focused on “beating the
competition” and often create quarterly “competitive hit lists” to squash the competitive enemy
of the month. Individual knowledge and “killer instincts” are prized. Individual achievement is
celebrated above teamwork. Competitive cultures and leaders focus intently on “management
dashboards” showing competitive trends and market-share gains. The organization structure is
typically based on “tiger teams” tasked to achieve specific, measurable goals. The unbalanced
form of a competitive culture is winning at any cost. Overly competitive cultures often blur the
line between “competing” and “cheating” with personal value based on unnatural competitive
wins and compensation (like the Russian Olympic team). Overly competitive cultures may
form “cliques” organized around sales superstars. Favored functions are sales and product
development.
∆ Controlled: In controlled cultures, the primary driver is order and alignment. Leaders (like Lou
Gerstner of IBM) tend to create hierarchical reporting structures where power and authority are
vested at the top. Operational excellence is valued based on quarterly improvement metrics
and benchmarks. The organization focuses intently on creating annual and quarterly business
plans and key performance measurements. Negative aspects of controlled cultures can be
excessive bureaucracy, red tape and too many rules. The unbalanced form of a controlled
culture is represented by “castes” where individual competency and achievement are
relegated to a backseat in favor of maintaining order and the status quo. Favored functions
are finance and manufacturing.
∆ Collaborative: In collaborative cultures, the primary driver is teamwork and building consensus.
Leaders (like Dave Packard of HP) tend to focus on solving a problem based on building a shared
view of the result. The negative aspects of collaborative cultures can be slow decision-making
and excessive time to evaluate alternatives. Trustworthiness and teamwork are valued above
creativity and aggressiveness. Collaborative companies seek to develop deep, long-lasting
relationships with their clients and tend to measure the entire organization on customer
satisfaction. Matrix management and complex double and triple line reporting structures are
typical of collaborative
companies. The Table 48: Impact – Corporate Culture
unbalanced form of
collaborative culture Org.
is “insider clubs” and Organizational Survey size Revenue Employee
“analysis paralysis” culture % (emp.) growth attrition EBITDA
where unwarranted Creative 17.9% 658 11.4% 14.3% 20.4%
time and effort is Competitive 12.4% 693 9.8% 15.6% 24.3%
spent on reaching
Controlled 12.9% 898 8.2% 14.3% 24.4%
group consensus.
Favored functions are Collaborative 56.8% 625 9.7% 13.9% 18.5%
marketing and Total/Average 100.0% 675 9.8% 14.3% 20.3%
customer service.
Source: SPI Research, February 2019

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Each year SPI asks, “Which of the following terms best describes your organization's culture?” The
impact of culture is highlighted in Table 48. A collaborative culture is the dominant cultural type (56.8%)
for PS organizations which makes sense because by nature, professional services organizations are
based on dynamic, self-governing, mutually supportive teams of experts who come together to deliver
client projects. Competitive cultures drive the highest attrition and profit. But that profit comes at a
heavy employee cost. Controlled cultures experience high levels of attrition but are the most profitable.
This year creative cultures reported the highest level of growth.

Well understood vision, mission and strategy

Clear leadership direction and effective bi-directional communication are critical success factors.
Employees who lack an
Table 49: Impact – Well understood vision, mission and strategy
understanding of the vision,
mission and strategy have no
Well understood % of Rec. to
ability to work toward vision, mission Survey emp. Bid-to- Emp. family/
realizing it whereas those who and strategy % billable win ratio attrition friends
comprehend, espouse and 1: Very ineffective 1.3% 61.9% 2.93 15.4% 3.25
support the organization’s 2 6.4% 71.2% 4.07 14.5% 3.72
mission will work tirelessly to
3 18.7% 69.8% 4.64 15.3% 3.98
achieve it. In this year’s
4 53.9% 72.4% 4.93 13.9% 4.51
survey, clarity of vision,
mission and strategy directly 5: Very effective 19.7% 79.0% 5.55 11.9% 4.85
correlated with the Total/Average 100.0% 73.0% 4.91 13.8% 4.41
percentage of billable Source: SPI Research, February 2019
employees, win ratio, attrition
and propensity to recommend as a great place to work.

Confidence in PS leadership
The tools for effective Table 50: Impact – Confidence in PS Leadership
leadership, clarity of purpose
and alignment exist within all % of Rec. to
service organizations. By Confidence in PS Survey emp. Employee family/ Billable
Leadership % billable attrition friends util.
investing in these critical
aspects, service organizations 1: Very ineffective 0.3% 52.5% 20.3% 2.50 57.5%

can manage their own destiny. 2 4.1% 64.6% 17.3% 3.28 64.4%
SPI Research continues to 3 14.0% 67.8% 16.1% 3.80 65.1%
discover most key 4 54.0% 71.9% 14.2% 4.48 69.9%
performance measurements 5: Very effective 27.4% 79.0% 11.4% 4.79 72.7%
improve as confidence in
Total/Average 100.0% 72.9% 13.9% 4.41 69.7%
leadership increases.
Source: SPI Research, February 2019
According to survey results,
few other factors have the same impact on the overall health and well-being of the service organization.

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Poor leadership creates a negative spiral effect —high attrition, low morale, poor employee engagement
— which in turn lead to low levels of client satisfaction and poor financial results. Leadership is a critical
aspect of growth. As millennials become dominant in the workforce, effective leadership is more critical
than ever before. Younger workers need more guidance, handholding and constructive feedback to
hone both their technical and interpersonal skills.

Ease of getting things done

SPI Research asked participants whether it was easy to get things done within their organization,
meaning minimal red tape,
Table 51: Impact – Ease of getting things done
able to quickly and easily
assign qualified resources,
Rec. to
with limited bureaucracy. Ease of getting Survey Employee family/ Billable Project
Organizations that provide an things done % attrition friends util. margin
infrastructure that supports 1: Very ineffective 1.2% 20.4% 3.29 59.3% 39.4%
employee productivity 2 7.8% 16.6% 3.62 66.5% 32.1%
enhance both employee
3 22.6% 15.4% 4.17 66.2% 33.6%
satisfaction and financial
4 46.5% 13.8% 4.48 70.4% 35.0%
success.
5: Very effective 21.9% 11.1% 4.83 73.4% 38.9%
Table 51 shows a majority of
Total/Average 100.0% 13.8% 4.41 69.7% 35.4%
firms reported it is relatively
Source: SPI Research, February 2019
easy to get things done. As
ease of getting things done improves, so do other metrics including attrition, employee engagement,
billable utilization and project margin.

Goal and measurement alignment

Another survey question asked, "Are goals and measurements in alignment for the service
organization?" Alignment speaks to a clearly articulated strategy with goals and measurements
reinforcing the organization’s
Table 52: Impact – Goals and measurement alignment
purpose and stimulating
action. Alignment or lack of
Goals and % of Rec. to
alignment has a significant measurement Survey Headcount emp. family/ Ann. rev./
impact on bottom-line alignment % growth billable friends emp. (k)
performance. Lack of 1: Very ineffective 1.2% 4.3% 64.3% 3.57 $135
alignment emanates from a 2 7.5% 6.2% 66.3% 3.77 $136
lack of clarity and conflicting
3 22.6% 6.8% 70.5% 4.18 $159
or too many priorities. It is
4 49.3% 8.1% 72.9% 4.48 $170
characterized by low levels of
employee engagement and 5: Very effective 19.6% 8.9% 79.0% 4.78 $176
functional silos or factions. Total/Average 100.0% 7.8% 73.0% 4.41 $166
Source: SPI Research, February 2019

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The highest performing service organizations exhibit clarity of purpose and alignment around a succinct
set of core values and initiatives. Effective measurements and compensation reinforce those values,
linking strategy to execution. As shown in Table 52 goals and measurements in alignment had a
profound impact on headcount growth, percentage of billable employees, employee engagement and
annual revenue per employee.

Employees have confidence in the PSO's future

The level of employee
confidence in the future of the Table 53: Impact – Employees have confidence in PSO's future
PS organization has a
significant impact on almost all Employees have Rec. to % of ann. % of ann.
Confidence in Survey Employee family/ rev. margin
key performance PSO's Future % attrition friends target target
measurements. Firms with
1: Very ineffective 1.3% 23.5% 3.29 85.0% 79.2%
the highest levels of employee
2 5.0% 18.8% 3.53 84.6% 85.0%
confidence experienced the
highest levels of revenue 3 17.7% 16.5% 4.02 90.0% 84.3%

growth, were more often seen 4 50.1% 13.2% 4.43 93.5% 90.3%
as a great place to work, and 5: Very effective 25.9% 11.9% 4.85 98.8% 96.0%
experienced fewer project Total/Average 100.0% 13.9% 4.41 93.7% 90.3%
overruns. Capping it all off,
Source: SPI Research, February 2019
they were also more
profitable.
“The world loves a winner” seems to be an appropriate description for the positive results of the
organizations with the highest levels of employee confidence. A key “chicken or egg question” always
arises around “confidence in the future” as typically the highest performing and fastest growing
organizations propel employees to have confidence in the future, while low confidence is indicative of
organizations in turmoil or going through massive change as they reposition themselves to take better
advantage of the future. A key
consideration for firms that Table 54: Impact – Effectively communicates with employees
experience low to no growth is
how to reposition themselves Effectively Rec. to
onto a growth path. communicates Survey Employee family/ Billable Project
with employees % attrition friends util. overrun

Effectively communicates 1: Very ineffective 1.2% 23.6% 2.33 65.8% 21.5%

with employees 2 8.3% 15.2% 3.54 63.0% 10.4%

Respondents were asked to 3 19.7% 15.8% 4.19 68.5% 8.8%

rate “our organization 4 50.4% 14.2% 4.53 70.1% 8.3%
effectively communicates with 5: Very effective 20.5% 10.2% 4.80 72.6% 7.6%
employees”. Independents Total/Average 100.0% 13.9% 4.41 69.7% 8.6%
reported better
Source: SPI Research, February 2019
communication than ESOs.

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Talk may be cheap but without bidirectional communication, employees quickly become
disenfranchised. Creating an effective communication plan should be part of any improvement plan.
Poor or no communication has a profound impact on employee engagement and attrition. Project
overruns and their negative consequences are exacerbated by poor communication.

Embraces change – nimble and flexible

Change is a way of life for 21st century professional services organizations. One of the primary reasons
why more and more companies out-task IT, accounting, law, architecture, strategy and marketing to
specialized PS organizations is
that the pace and amount of Table 55: Impact – Embraces change - nimble and flexible
change and technical
Embraces Org. % of ann. % of ann.
complexity is impossible to
change - nimble Survey size rev. margin Project
keep up with, so they must and flexible % (emp) target target margin
reply on external consultants 1: Very ineffective 1.8% 1,844 91.1% 79.4% 32.1%
and specialists. Each
2 8.3% 813 89.5% 86.1% 34.1%
leadership dimension impacts
3 20.4% 513 91.7% 87.8% 34.1%
all other leadership
dimensions. Nimble 4 43.2% 752 94.2% 90.7% 34.5%
organizations that can easily 5: Very effective 26.3% 368 96.2% 94.1% 38.1%
adapt to change have higher Total/Average 100.0% 627 93.8% 90.4% 35.3%
levels of billable employees
Source: SPI Research, February 2019
and are considered better
places to work. The glue that binds superlative leadership scores is always executive real-time visibility.
Numbers don’t lie so the best led organizations invest in integrated systems to allow them to see and
take advantage of market changes instantly.

Innovation focused Table 56: Impact – Innovation focused

Innovation is a hot topic these
Rec. to Std. del.
days as technology innovators
Innovation Survey Employee family/ Billable method.
like Apple have created new focused % attrition friends util. used
markets and destroyed leaders 1: Very ineffective 1.8% 16.9% 3.45 66.5% 57.3%
like Research in Motion who
2 9.6% 14.9% 3.94 65.8% 62.7%
were not able to see and
3 21.7% 14.1% 4.25 67.5% 64.6%
respond to a “consumer-
based” future. Research into 4 43.5% 13.7% 4.43 70.5% 66.8%
the science of innovation 5: Very effective 23.3% 13.3% 4.79 71.8% 68.1%
shows innovators are more Total/Average 100.0% 13.8% 4.41 69.6% 66.0%
likely to take risks and have a Source: SPI Research, February 2019
high tolerance for failure.

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In professional services, innovation comes from exploring and embracing new business models,
processes and technologies to improve productivity and quality. To the extent thought leadership can
be considered a component of innovation, PSOs excel at innovation. The benchmark results depict the
importance of striving for new and innovative solutions to problems. Innovative organizations provide
employees with the confidence to know the organization will be around for years to come, and they will
be continually challenged and personally grow as the organization expands. Innovation focus is not
organization size dependent. One of this year’s Best-of-the-Best PSOs said their belief is “great ideas
come from anywhere”. This organization has built a culture or empowerment, embracing innovation.
Any employee with a great idea, at any level, can build a business case and receive funding and support
to tackle internal problems or create new solutions. Over 65% of survey participants gave high marks
for innovation. With innovation, billable utilization grows and attrition declines.

Challenges Faced by PSOs

Each year SPI Research asks participants to rank the key challenges facing them. For the last several
years “talent management” has been rated as the number one challenge. Record low unemployment
and a tight job market, particularly for “in demand” skills have made the job of finding and recruiting top
talent a priority. Creative recruiting strategies include more and more college hiring and taking a chance
on workers who may not possess computer science or engineering background but have strong
communication and organizational skills.
2018 was a banner year for PS but coming out of one of the best years on record, organizations are
worried they won’t be able to repeat the same performance in 2019 hence “achieving revenue and
margin target” has risen to the second-greatest challenge.
Table 57: Challenge by Organization Type and Geographic Region

Key Performance Indicator 2017 2018 ESO PSO Amer. EMEA APac
Surveys 456 622 193 429 516 68 38
Talent management 4.36 4.33 4.28 4.35 4.32 4.38 4.34
Achieve revenue and margin targets 4.31 4.26 4.23 4.27 4.27 4.19 4.24
Improve sales and marketing 4.27 4.21 4.21 4.21 4.20 4.25 4.29
Improve quality and consistency 4.16 4.21 4.22 4.20 4.23 4.08 4.16
Communication across PSO 4.22 4.19 4.19 4.19 4.21 4.08 4.13
Support rapid growth and expansion 4.12 4.18 4.25 4.14 4.16 4.22 4.37
Vision and strategy 4.07 4.07 4.10 4.05 4.06 4.14 4.03
Improve / expand portfolio and markets 3.92 4.00 4.12 3.95 4.01 3.88 4.08
Alignment between functions or groups 3.79 3.90 4.05 3.83 3.92 3.83 3.74
Source: SPI Research, February 2019

When comparing the key challenges of embedded versus independent service providers (Table 57), the
top challenge for both are “talent management”. A secondary challenge for ESOs is “supporting rapid
growth and expansion” while “achieving revenue and margin targets” ranks second for independents.

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By geography, talent management was the number one challenge in the Americas and EMEA.
“Supporting rapid growth and expansion” was the top challenge in Asia.
Top challenges by vertical are shown in Tables 58 and 58. Talent management is a top priority for
almost all segments. “Improving sales and marketing” is an urgent priority for Management Consulting,
SaaS and Marketing and Advertising. Improving alignment or breaking down functional silos is a lesser
priority for most organizations.
Table 58: Challenge by Vertical Market

IT Arch./ Mgmt. Software SaaS

Key Performance Indicator
Consulting Engineering Consulting PS PS
Surveys 156 100 75 78 70
Talent management 4.32 4.54 4.31 4.18 4.28
Improve sales and marketing 4.20 4.07 4.38 4.06 4.32
Achieve revenue and margin targets 4.19 4.31 4.43 4.21 4.10
Improve quality and consistency 4.18 4.39 4.19 4.12 4.30
Support rapid growth and expansion 4.17 3.93 4.35 4.17 4.32
Communication across PSO 4.08 4.31 4.27 4.10 4.24
Vision and strategy 4.05 4.03 4.08 4.10 4.10
Improve / expand portfolio and markets 3.93 3.84 4.09 4.12 4.18
Alignment between functions or groups 3.80 3.80 3.91 4.01 4.06
Source: SPI Research, February 2019

Table 59: Challenge by Vertical Market

Advertise / Hardware
Key Performance Indicator Accounting VAR Other PS
Mktg / PR PS
Surveys 20 19 14 11 79
Improve sales and marketing 4.33 4.17 4.36 3.90 4.28
Achieve revenue and margin targets 4.24 4.29 4.50 4.30 4.32
Communication across PSO 4.17 4.39 4.36 4.20 4.17
Support rapid growth and expansion 4.17 3.94 4.29 4.40 4.22
Alignment between functions or groups 4.17 3.56 4.00 4.20 3.94
Vision and strategy 4.17 4.06 4.29 3.80 4.03
Talent management 4.06 4.17 4.43 4.20 4.36
Improve / expand portfolio and markets 4.00 3.89 3.93 4.00 4.03
Improve quality and consistency 3.94 3.94 4.21 4.40 4.15
Source: SPI Research, February 2019

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Steps Taken to Improve Profitability

Table 60 depicts improvement priorities. In 2018 the number one and two improvement priorities are
“improving sales and marketing”. Improving sales effectiveness is a perennial challenge and opportunity
because it is so difficult to develop business development experts. In professional services the best
solution sellers tend to be the best and most knowledgeable consultants as they bring value to executive
relationships and can quickly assess client issues and codevelop solutions. “Improving marketing
effectiveness’ is a priority as organizations are reexamining their marketing strategies and looking to
both expand and consolidate their solutions portfolio. This year “improving methods and tools” is a
priority, as it should be. Consulting excellence comes with knowledge, effectively harvesting that
knowledge and making it accessible is a worthy endeavor.
Table 60: Steps Taken to Improve Profitability by Organization Type and Geographic Region

Key Performance Indicator 2017 2018 ESO PSO Amer. EMEA APac
Surveys 456 622 193 429 516 68 38
Improve sales effectiveness 3.82 3.95 4.04 3.91 3.94 4.00 3.92
Improve marketing effectiveness 3.87 3.89 3.89 3.89 3.88 3.95 3.92
Improve methods and tools 3.72 3.83 3.89 3.80 3.83 3.78 3.92
Improve utilization 3.76 3.82 3.87 3.79 3.82 3.72 3.97
Improve solution portfolio 3.59 3.77 4.05 3.64 3.76 3.84 3.79
Improve hiring and ramping 3.68 3.76 3.68 3.80 3.73 3.81 4.03
Reduce non-billable time 3.50 3.53 3.60 3.50 3.55 3.34 3.55
Increases rates 3.24 3.29 3.11 3.36 3.27 3.22 3.58
Source: SPI Research, February 2019

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7. Client Relationships Pillar

The Client Relationships pillar focuses on the activities

associated with business development and client
management. Finding and retaining customers is a primary
means of growing a business and is always one of the top
challenges for PS firms.
In this chapter, SPI Research provides the PS Sales and
Marketing Maturity Model™, along with statistics showing the
benefits of sales and marketing investments. This chapter examines service sales and marketing
effectiveness, win ratios and the impact of building a robust sales pipeline. Since referrals are a primary
driver of repeat business, SPI Research also explores the correlation between client satisfaction and
business success.
Cultivating new and repeat clients is the lifeblood of the service industry. Professional services
organizations are in business to provide knowledge, expertise and guidance. Their sales and marketing
organizations must define target markets and solutions by understanding client’s key challenges. The
job of service sales and marketing is to generate awareness and identify and close opportunities.

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Services are intangible, so service sales and marketing must demonstrate concrete proof of the firm’s
knowledge, experience, differentiation and quality.
Table 61 highlights the five levels of maturity in the Client Relationships pillar. As sales and service
delivery processes mature, organizations move from selling anything and everything to anyone, to a
more careful and selective approach to client selection; solution creation; deal capture; contract and
pricing management, reference building and partnering.
Table 61: PS Sales and Marketing Maturity Model™

Level 1 Level 2 Level 3 Level 4 Level 5

Opportunistic. No Start to use marketing to Marketing, inside CRM, PSA, CFM integration Executive
defined solution sets drive leads. Multiple sales sales, solution sales provides 360-degree view of relationships and
or go to market plan. models. Start investing in with defined solution client relationships. Business client advisory board.
Client Relationships

Focus is on closing sales training, CRM & sales sets. CRM integrated process, vertical and Thought leadership.
deals and reference methodology. Manual with PSA. Deal, horizontal solutions. Vertical Brand building and
building. Individual integration with PSA. Start pricing and contract centers of excellence. Top awareness. High
heroics, no consistent measuring sales reviews. Partner plan client and partner programs. customer
sales, marketing or effectiveness & customer and scorecard. Tight Global contract and pricing satisfaction.
partnering plan or satisfaction. Start developing pricing and contract management. Key partner Integrated sales,
methodology. Ad partners and partner mgmt. controls. High relationships. Strong marketing and
hoc, one-off projects. programs. Some level of levels of customer customer reference partnering programs.
proposal reviews and pricing satisfaction. programs. High quality
control. references.

Source: SPI Research, February 2019

The effectiveness of the organization’s sales and marketing efforts determines the quality and size of the
pipeline; bid-to-win ratios; discounts; client satisfaction and the length of the sales cycle. Effective sales
and marketing organizations continually uncover new opportunities while ensuring existing customers
continue to buy and refer. Today’s successful PSO, whether embedded or independent, is increasingly
taking charge of its own destiny by investing in sales, marketing and service packaging.
Table 62 shows why “improving marketing and sales effectiveness” is always a top improvement
priority. Perennially sales, marketing and solution development effectiveness scores are some of the
lowest in the benchmark. Dissatisfaction with service marketing continually peaks the top of the
dissatisfaction list as PS organizations are never satisfied with the number and quality of leads generated
by marketing or the quality of references. These are subjective questions in which survey respondents
are asked to “rate the effectiveness” of sales, marketing and solution development. Although these
questions revealed dissatisfaction, the objective sales metrics were not as conclusive. They show mixed
results with more wins and larger sales pipelines along with slight improvement in the length of the
sales cycle but a decline in customer “reference-ability”.
An examination of the type of work sold shows a decline in time and materials contracts in favor of
managed service contracts. Service providers are now offering “managed services” as monthly,
quarterly or annual contracts to drive more predictable, recurring revenue.

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Table 62: Client Relationships Pillar 5-year trend

Key Performance Indicator (KPI) Avg. 2014 2015 2016 2017 2018
New client % of total revenue 28.2% 29.0% 28.3% 29.7% 24.2% 29.7%
Win-to-bid ratio (per 10 bids) 4.89 4.92 4.95 4.85 4.80 4.92
Deal pipeline relative to qtr. bookings forecast 181% 199% 172% 189% 174% 181%
Sales cycle (days: qualified lead to contract signing) 90 91 88 92 90 89
Average service discount given 6.8% 7.3% 7.7% 7.7% 5.0% 6.7%
Solution development effectiveness (1 to 5 scale) 3.51 3.00 3.59 3.47 3.53 3.64
Service sales effectiveness (1 to 5 scale) 3.46 3.14 3.57 3.42 3.42 3.53
Service marketing effectiveness (1 to 5 scale) 3.17 2.72 3.29 3.07 3.20 3.25
Percentage of referenceable clients 72.2% 73.7% 70.4% 71.5% 74.7% 71.9%
Time & materials % of work sold NA 58.8% 46.7% 55.4% 49.8% 43.8%
Fixed time / fixed fee % of work sold NA 36.3% 39.7% 38.9% 40.8% 38.9%
Shared risk / performance-based % of work sold NA 2.0% 6.4% 2.8% 2.2% 2.6%
Managed Services NA NA NA NA 4.4% 10.3%
Other NA 2.9% 7.2% 2.9% 2.8% 4.3%
Source: SPI Research, February 2019

PS Sales Maturity

As part of the PS Sales and Marketing Maturity Model™, SPI Research focuses on key success criteria and
processes associated with PS sales, marketing and partnering. SPI Research charts its definitions of sales
maturity levels and shows how they progress as the organization enhances the knowledge and practice
of solution selling resulting in superior client value (Table 63).
The table depicts PS sales maturity progression. As organizations enhance their solution selling
capabilities, methods, systems and tools, overall sales effectiveness improves. These efforts pay for
themselves in higher percentages of sales quota achievement; better sales forecasting accuracy;
improved pricing and estimating accuracy resulting in fewer project overruns; faster sales cycles due to
better deal qualification; larger deals; more PS revenue by account; larger pipelines and significantly
stronger reference clients.
Table 63: PS Sales Maturity Model™

Level 1 Level 2 Level 3 Level 4 Level 5

Ad Hoc, Piloted, Experimental, Deployed, Basics in Institutionalized, Visionary, Agile,
Opportunistic, Pockets of Excellence Place for All Key in the Company Innovative,
Heroic Elements DNA / Fabric Continuous Renewal
and Improvement

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Level 1 Level 2 Level 3 Level 4 Level 5

Handcrafted Limited replication or Clear, value-based sales Client-centric, high Partnerships exist with
projects, unique, codification of service and marketing messages value services most strategic,
Client Value

highly dependent solutions. Point product developed for product / developed and forward-thinking
on individual team solutions primarily focused vertical /geographic packaged. clients to develop and
member skills. on rapid implementation. audiences. Some level of Demonstrated, enhance leading edge
Starting to focus on client value and ROI measurable services. Solutions
adoption. measurement. business value. deliver clear and
significant value.
Opportunistic and Dedicated solution selling Consistent solution selling Solution and value Established thought
instinctive with ad teams. Repeatable methods & tools reinforced selling is a way of leadership and trusted
hoc service process for point solutions. and supported in CRM. life with appropriate advisor at highest
offerings. No Implementing sales Solution-oriented best measurements and levels. Continual
consistent sales methodology, reinforced in practices. Consistent controls with fully investment in
Sales Process

methodology. CRM. Reusable proposal estimating and risk integrated improving and
Variation in pricing boilerplate. Informal evaluations. Bid supporting systems expanding service
methods. proposal roles and self- qualification criteria. and tools. portfolio as a means of
Inconsistent governing proposal teams. Standard contracts and Sophisticated market expansion.
proposals, quotes, Standard price list and statements of work. Clear selling strategies Effective proposal
contracts. Limited discount authority. roles, responsibilities and including quantified center delivers timely,
to no investment Developing standard timelines. Sales client value with high-quality estimates,
in sales training, estimating tools. organization trained to improved KPIs and proposals, contract
methods or tools. effectively sell solutions. positive ROI. and risk reviews.
Ad hoc and Partner plan in place, but Solution sets designed Co-development Co-opetition. Partners
opportunistic conflicts still exist. Defined with partners in mind with partners. contribute to
Partners

without clearly partner programs to (defined roles and Partners are company's overall
defined roles. extend market reach. deliverables for prime, integral part of service innovation by
hybrid, sub). Top partner service packaging providing SME
program. and rollout. feedback and insights.
Ad hoc reference Client reference programs Proof, testimonials and Client advisory Strategic clients are
Programs
Client Sat

requests. No established to extend references to support board influences company and service
formal program. market reach. solution client value. roadmap, evangelists.
Heroic. Consistent, ongoing participates in beta
satisfaction measures. programs.

Source: SPI Research, February 2019

PS Sales Effectiveness Metrics

Service sales effectiveness is a
subjective question but typically Table 64: Impact – Service sales effectiveness
refers to the percentage of sales
people who achieve quota and the Bid-to-
Service sales Survey Rev. win Deal Billable
probability that the sales effectiveness % growth ratio pipeline util.
organization will achieve its
Very ineffective 1.6% 6.9% 3.21 169% 59.4%
forecast and targets. SPI Research
Ineffective 9.4% 9.0% 4.10 199% 65.2%
asked respondents to rank the
effectiveness of the service sales Neither 34.6% 9.3% 4.72 155% 68.9%
organization on a scale Effective 43.1% 10.2% 4.90 177% 69.0%

from 1 to 5 with 5 representing Very effective 11.3% 12.3% 5.63 209% 72.7%
perfection (Table 64). Sales Total/Average 100.0% 10.0% 4.82 175% 68.9%
effectiveness has a profound Source: SPI Research, February 2019

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impact on all aspects of PS but unfortunately 11.0% of respondents give sales effectiveness a failing
grade of 1 or 2; 34.6% give sales effectiveness an “OK” score of 3; 54.4% give sales effectiveness high
marks. This year’s average rating of sales effectiveness improved slightly to 3.53 (71%) up from last
year’s 3.42 (68%). ESOs gave lower marks for sales effectiveness (3.49 or 70%) than independents (3.55
or 71%). By geography, Asia-Pacific gave the highest score of 3.79 (76%) and EMEA gave the lowest of
3.25 (65%).

PS Marketing Maturity
The global economy has evolved into a services economy with services like health care, technology and
consulting representing the hottest areas of growth. Marketing services is an important skill, and a
tough one, for businesses to master. Without a tangible product to show and tell customers about,
service marketers must be adept at pulling together all the pieces of the marketing mix to demonstrate
value for their target clients. Services are inherently intangible, are consumed simultaneously at the
time of their production, and cannot be stored, saved or resold once they have been used. Service
offerings are unique and cannot be exactly repeated even by the same service provider for the same
customer. Service marketing has become a big business with a focus on establishing the services brand,
generating awareness and leads while providing powerful tools and collateral to support service sales
and delivery. Service marketing typically produces customer case studies and client testimonials. The
move to social marketing has accentuated the role of marketing in building awareness.

Relationships Are Key

In service marketing, because there is no tangible product, relationships are key – both with the services
sales force and clients. Service marketers must listen to and understand the needs of customers and
prospects to identify the compelling reasons they buy and what attributes they most care about to build
differentiation for the firm. The role of service marketing is to identify target markets and clients and to
position the firm and its solutions in a differentiated way while supporting the sales force with lead
generation and reference building activities. In many organizations, service marketing is also
responsible for developing customer references, testimonials, case studies and client advisory boards.

Services Marketing versus Service Lifecycle Management

A key finding from this benchmark is most PS organizations are confusing service marketing with service
lifecycle management. Service marketing is clearly an aspect of service lifecycle management but most
often does not encompass the truly transformational elements of building a services portfolio comprised
of repeatable sales and service delivery methods and tools, which we include in the larger scope of
service lifecycle management.

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Table 65: PS Marketing Maturity™ Levels

Level 1 Level 2 Level 3 Level 4 Level 5

Ad Hoc, Piloted, Experimental, Deployed, Basics in Institutionalized, in Visionary, Agile,
Opportunistic, Pockets of Excellence Place for All Key the Company DNA / Innovative, Continuous
Heroic Elements Fabric Renewal and Improvement
Handcrafted Limited replication or Clear, value-based Client-centric, high Partnerships exist with most
projects, unique, codification of service sales and marketing value services strategic, forward-thinking
Client Value

highly dependent solutions. Point product messages for product, developed and clients to develop and
on individual team solutions primarily vertical, geographic packaged. enhance leading edge
member skills. focused on rapid audiences. Some level Demonstrated, services.
implementation. of client value and ROI measurable business
measurement. value.
Tactical. Limited Campaign-driven, Programmatic and Strategic and global, Brand, thought leadership,
to no investment focused initiatives. comprehensive. service portfolio and innovation are
in service Service marketing Service marketing - reflects and supports established and supported
Marketing

marketing. includes collateral, web target-market and brand and industries. through all marketing
and in-person seminars, segment focus to Service portfolio activities.
and other promotions establish management and High brand value.
with voice of the differentiation. strategic marketing
customer for specific efforts aligned.
service offers.
Team Definition

None. Lack of Organizational structure Permanent service Effective service Service marketing
Composition

service marketing includes borrowed or marketing roles marketing leadership organization is strategic and
and

organizational rotational roles to defined, staffed and and management. continually impacts
definition. support service funded. company's success.
marketing efforts.
No budgeting for Budgeting includes Budgeting process Service marketing Decisions to fund service
Marketing Budget Plan /

service marketing. service marketing costs fully incorporates and portfolio marketing are based on
Business planning and projected results. service marketing planning is a complex, reliable business
Business Plan

does not Business planning investments, revenue, strategic component modeling levers as part of
incorporate capabilities are based profit planning. of annual budgeting budget plan. Service
service marketing. on individuals' Mature business process. marketing business plan
Ad hoc, one off, experiences. planning capabilities. justification is mature -
impact not comprehensive, fact-based,
measurable. insightful.

Source: SPI Research, February 2019

SPI Research recommends organizations start with service marketing – building a compelling website
and on-line brand, creating lead generation campaigns, sales tools, service descriptions, service
packages and value-based presentations. Each of these activities will add value to the organization and
will start to build brand-awareness and generate leads. After the organization gains success and traction
with service marketing it will be in a better position to tackle true service lifecycle management, which
not only involves sales and marketing but also extends to product management and service execution
with repeatable delivery tools, methods and systems.

Service Marketing Effectiveness

Having a service marketing focus is not enough. Marketing must develop an effective online presence,
thought leadership, lead generation campaigns, sales tools and sales enablement to increase the firm’s
brand awareness and to showcase thought leadership and bring in qualified leads. The most successful
PS marketing efforts require a strategic focus to ensure they augment and enhance the firm’s strategy.

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Marketing should be charged with

bringing the firm’s vision and Table 66: Impact – Service marketing effectiveness
strategy to life through effective
positioning. Without a seat at the Service Bid-to- Project
marketing Survey win Deal Billable dur. (man-
executive table, marketing will be effectiveness % ratio pipeline util. months)
relegated to tactical lead Very ineffective 5.1% 4.00 152% 62.4% 19.4
generation and sales support
Ineffective 13.9% 4.60 200% 65.3% 21.6
activities. Effective marketing
requires dedicated, skilled Neither 37.9% 4.74 164% 68.5% 29.0

personnel along with sustained Effective 36.5% 4.89 171% 70.1% 30.4
funding. Very effective 6.5% 5.84 235% 75.4% 53.9

SPI Research asked how effective Total/Average 100.0% 4.81 176% 68.8% 29.6
service marketing was on a scale of Source: SPI Research, February 2019
1 to 5, with 5 representing
excellent (Table 66). Marketing effectiveness has consistently been given an even worse score than
sales effectiveness. This year marketing effectiveness improved from a lousy score of 3.07 (60%) to 3.25
(65%) in 2018. Almost 20% of organizations give marketing effectiveness a failing grade of 1 or 2. For
the 43% of firms who gave their marketing efforts a strong score of 4 or 5, marketing has a positive
impact on win ratios and billable utilization. Marketing is certainly worth the expense if it is well-staffed,
fully funded and strategically positioned.

Solution Development Effectiveness

Solution development effectiveness requires consistent PS and Sales executive funding and support. Ad
hoc teams of benched consultants cannot be effective in developing a compelling and meaningful
solution development strategy and program. Based on the Service Lifecycle Management Maturity
Model™ benchmark, very few organizations are effective at service productization. Creating an effective
and efficient solution development process is a difficult undertaking. Most firms are struggling to do
this because solution development crosses over traditional functional boundaries and requires cross-
organizational collaboration and change. Getting all the constituent groups – professional services,
sales, marketing, product management and channel partners – on the same page to create compelling
solutions for targeted markets is a tough but worthwhile task.
Solution development requires significant leadership, organizational commitment, money and on-going
change management. SPI Research believes that the following are critical success factors for
instantiating and sustaining a successful solution development program:
∆ Articulated and understood services strategy;
∆ Service productization program vision;
∆ Executive sponsorship;
∆ Market-driven focus;
∆ Global company adoption of program;

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∆ Resource commitment;
∆ Cross-functional participation; and
∆ Common sales and delivery method, tools, and templates.
SPI Research asked how effective solution development was on a scale of 1 to 5, with 5 representing
excellent (Table 67). Solution Development effectiveness has traditionally been given a lower score than
sales effectiveness but higher
marks than marketing Table 67: Impact – Service development effectiveness
effectiveness. This year overall
solution development effectiveness % of % of
Solution Bid-to- Ann. Ann.
was rated higher than sales development Survey win Deal Rev. Margin
effectiveness with a score of 3.64 effectiveness % ratio pipeline Target Target
compared to 3.53 for sales Very ineffective 2.3% 5.60 118% 84.3% 91.4%
effectiveness. For the 60.1% of Ineffective 7.1% 3.82 160% 86.0% 84.8%
firms who gave their solution
Neither 30.6% 4.44 171% 91.9% 89.2%
development efforts a passing
Effective 44.8% 4.91 176% 94.0% 89.3%
score of 4 or 5, solution
development had a positive impact Very effective 15.3% 5.67 206% 98.4% 92.6%
on the size of the deal pipeline and Total/Average 100.0% 4.82 176% 93.2% 89.5%
target revenue and margin Source: SPI Research, February 2019
achievement.

Survey Results

The following section reviews and analyzes 2019 PS Maturity™ benchmark results from 622 participating
Professional services organizations. In this section SPI Research analyzes 20 Client Relationship key
performance measurements that are critical for measuring sales, marketing and solution development
effectiveness.
The percentage of overall revenue from new clients is an important indicator of market expansion. A
higher percentage of new client revenue shows the organization is expanding beyond its installed
base. The size of the deal pipeline, the percentage of revenue from new clients, the length of the sales
cycle and win ratios all improved year over year. On the negative side, the level of discounting
increased and the percentage of reference customers declined significantly from 74.7% to 71.9%
(Table 68).
The Bid-to-Win ratio shows the number of winning proposals for every 10 proposals submitted. It is a
strong indicator of the level of competition and portends market saturation when the win ratio declines
below 5, indicating firms are winning less than 50% of their opportunities. The win ratio improved year
over year from 4.80 to 4.92.

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Table 68: Client Relationships KPIs by Organization Type and Geographic Region

Key Performance Indicator 2017 2018 ESO PSO Amer. EMEA APac
Surveys 456 622 193 429 516 68 38
Revenue from new clients 24.2% 29.7% 38.9% 25.5% 29.1% 34.3% 30.6%
Bid-to-Win ratio (per 10 bids) 4.80 4.92 4.95 4.90 4.93 4.72 5.12
Deal pipeline / qtr. bookings forecast 174% 181% 199% 173% 182% 178% 187%
Sales cycle (days: qualified lead to
90 89 98 84 90 82 81
contract signing)
Service discount given clients 4.9% 6.7% 9.8% 5.3% 6.7% 6.9% 7.1%
Percent. of referenceable clients 74.7% 71.9% 66.3% 74.6% 72.2% 69.4% 72.5%
Solution development effectiveness `3.52 3.64 3.65 3.63 3.62 3.63 3.87
Service sales effectiveness 3.52 3.64 3.65 3.63 3.55 3.25 3.79
Service marketing effectiveness 3.42 3.53 3.49 3.55 3.30 2.89 3.24
Source: SPI Research, February 2019

The size of the deal pipeline is an important predictor of future revenue. The size of the deal pipeline in
comparison to the quarterly sales forecast increased from 174% to 181%. This increase bodes well for
PS revenue growth in 2019. Table 68 shows the size of the deal pipeline compared to the quarterly
bookings forecast is stronger for ESOs. Independent PSO pipelines improved nicely from 161% to 173%.
By geography the deal pipeline is strongest for Asia and weakest for EMEA which is consistent with the
global economic outlook.
The level of discounting is an indicator of increased competition or slowing demand. Average
discounts increased from 4.9% to 6.7%. In services, discounting has a direct impact on profit as it is
impossible to make up price concessions with volume. ESOs consistently report higher levels of
discounting, longer sales cycles and fewer client references than independents.
By organization size, the deal pipeline is strongest for mid-size organizations and weakest for the
smallest (Table 69). The smallest firms tend to live deal to deal with limited future visibility.
Interestingly, client referenceability tends to decline with organization size while level of discounting
increases. For small firms, making every client a success at a reasonable price is a business imperative.
Table 69: Client Relationships KPIs by Organization Size

Under 101 - 301 - Over

Key Performance Indicator 10 - 30 31 - 100
10 300 700 700
Surveys 53 123 166 143 54 83
Revenue from new clients 31.7% 33.2% 29.6% 26.2% 26.9% 32.1%
Bid-to-Win ratio (per 10 bids) 5.07 5.15 4.70 4.88 4.57 5.23
Deal pipeline relative to qtr. bookings forecast 130% 163% 198% 194% 187% 182%
Sales cycle (days: qualified lead to contract sign.) 65 84 97 96 86 89
Service discount given clients 3.2% 7.0% 5.9% 6.9% 7.1% 9.5%

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Under 101 - 301 - Over

Key Performance Indicator 10 - 30 31 - 100
10 300 700 700
Percentage of referenceable clients 80.3% 69.5% 72.8% 73.5% 69.2% 67.7%
Solution development effectiveness 3.53 3.53 3.67 3.65 3.70 3.72
Service sales effectiveness 3.61 3.30 3.56 3.52 3.63 3.71
Service marketing effectiveness 3.04 2.97 3.23 3.29 3.51 3.57
Source: SPI Research, February 2019

By vertical, VARS and embedded PS within hardware and networking companies reported the strongest
deal pipelines while accountancies and architects and engineers reported the weakest. Marketing and
Advertising firms reported the highest levels of client referenceability (78%), hardware service providers
reported the poorest (63%). Service discounting was highest for embedded Software and SaaS ESOs and
lowest for architects and engineers (2%). The length of the sales cycle is longest for software ESOs and
shortest for management consultancies. Tables 70 and 71 show key client relationships metrics by
vertical market.
Table 70: Client Relationships KPIs by Vertical Market

IT Arch./ Mgmt. Software SaaS

Key Performance Indicator
Consulting Engineering Consulting PS PS
Surveys 156 100 75 78 70
Revenue from new clients 31.5% 17.2% 28.7% 38.8% 46.7%
Bid-to-Win ratio (per 10 bids) 4.97 4.87 5.21 5.04 4.83
Deal pipeline relative to qtr. bookings forecast 186% 158% 168% 182% 198%
Sales cycle (days: qualified lead to contract sign.) 83 90 76 104 97
Service discount given clients 7.2% 2.0% 4.8% 10.1% 11.2%
Percentage of referenceable clients 72.5% 76.5% 77.3% 65.6% 64.5%
Solution development effectiveness 3.68 3.55 3.67 3.73 3.62
Service sales effectiveness 3.60 3.49 3.49 3.55 3.44
Service marketing effectiveness 72.5% 76.5% 77.3% 65.6% 64.5%
Source: SPI Research, February 2019

Table 71: Client Relationships KPIs by Vertical Market

Advertise / Hardware
Key Performance Indicator Accounting VAR Other PS
Mktg / PR PS
Surveys 20 19 14 11 79
Revenue from new clients 16.5% 18.8% 30.7% 27.8% 23.4%
Bid-to-Win ratio (per 10 bids) 4.43 4.92 5.07 6.05 4.47
Deal pipeline relative to qtr. bookings forecast 161% 147% 243% 225% 190%
Sales cycle (days: qualified lead to contract sign.) 82 83 105 87 89

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Advertise / Hardware
Key Performance Indicator Accounting VAR Other PS
Mktg / PR PS
Service discount given clients 3.2% 8.8% 4.3% 8.5% 6.0%
Percentage of referenceable clients 78.0% 70.0% 77.9% 63.0% 72.6%
Solution development effectiveness 4.07 3.53 3.43 3.30 3.55
Service sales effectiveness 3.80 3.65 3.43 3.50 3.49
Service marketing effectiveness 3.67 3.65 2.93 3.00 3.26
Source: SPI Research, February 2019

IT consultancies (155 firms) and embedded PS within Software and SaaS (148) dominated this year’s
benchmark, so it is no wonder that 34.7% of the work sold was IT or technology consulting while 24.7%
was management consulting. Both embedded and independents are delivering more business and
management consulting – encroaching on the pure play management consultancies.
Table 72 depicts the types of work sold by embedded and independent service providers and by major
geographic regions. This year ESOs delivered 16.2% of their work as management consulting, showing
the shift towards more business process consulting, away from technical consulting. They also have
been growing their subscription and managed service revenues.
Table 72: Type of Work Sold by Organization Type and Geographic Region

Key Performance Indicator 2017 2018 ESO PSO Amer. EMEA APac
Business / management consulting 27.4% 24.7% 16.2% 28.5% 27.4% 24.7% 16.2%
Technology or IT consulting 31.9% 34.7% 37.4% 33.6% 31.9% 34.7% 37.4%
Subscription Services 2.7% 7.6% 16.3% 3.6% 2.7% 7.6% 16.3%
Managed services 10.4% 9.5% 12.2% 8.3% 10.4% 9.5% 12.2%
Staff augmentation 4.3% 5.2% 4.3% 5.6% 4.3% 5.2% 4.3%
Hardware, software or other equipt. 3.2% 4.3% 7.9% 2.6% 3.2% 4.3% 7.9%
Other 20.1% 14.0% 5.6% 17.8% 20.1% 14.0% 5.6%
Total/Average 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

Today many IT consultancies have equal numbers of business analysts and technical consultants – they
focus on business process improvement and streamlining cumbersome business processes. Increasingly
technology-focused PS providers are adding industry and domain experts to ensure horizontal
technologies can be adopted and modified to reflect the unique needs of vertical industry clients. The
underlying technologies themselves no longer require extensive customization and integration; they
have become easier to install and integrate with standard data loaders and connectors. Ensuring user
adoption has become the primary concern of embedded ESOs. This means today’s consultants need to
understand business processes and what business users want and need to drive user adoption.

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Technology consulting now includes workflow mapping, business process modelling, rollout plans and
administrator and end-user training, all with a focus on user adoption.
Table 73: Type of Work Sold by Organization Size

Under 101 - 301 - Over

Key Performance Indicator 10 - 30 31 - 100
10 300 700 700
Business / management consulting 46.4% 20.7% 30.1% 21.3% 16.0% 17.6%
Technology or IT consulting 22.1% 31.5% 35.1% 38.0% 43.0% 35.8%
Subscription Services 7.0% 7.1% 5.1% 8.5% 9.8% 10.5%
Managed services 6.6% 8.7% 8.2% 9.1% 10.7% 15.1%
Staff augmentation 4.6% 4.1% 5.6% 4.9% 5.1% 7.1%
Hardware, software or other equipment resale 2.6% 3.2% 3.5% 5.3% 3.0% 7.5%
Other 10.8% 24.8% 12.3% 12.9% 12.4% 6.4%
Total/Average 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

Managed service revenue has increased slightly over the past five years from 7.3% in 2012 to 9.5% in
2018 but this increase is also not as dramatic as we would have expected. The greatest shift has been in
the rise of subscription services, growing from 2.4% of revenue last year to 7.6% this year. Expect
subscription revenues to continue to climb as vendors are increasingly pricing a combination of
hardware, software, consulting and support “as a service”.
Table 74 and 75 depict the business mix by vertical segments. In this benchmark, staff augmentation
increased from 4.3% to 5.2%. It appears that every segment provides some level of “providing/renting”
a person in addition to statement of work driven projects.
Table 74: Type of Work Sold by Vertical Market

IT Arch./ Mgmt. Software SaaS

Key Performance Indicator
Consulting Engineering Consulting PS PS
Business / management consulting 9.8% 28.8% 64.6% 14.0% 20.9%
Technology or IT consulting 65.5% 6.3% 16.3% 45.3% 30.4%
Subscription Services 4.7% 1.3% 3.5% 9.3% 29.0%
Managed services 8.1% 7.0% 5.9% 6.5% 11.6%
Staff augmentation 6.4% 2.3% 6.6% 5.3% 1.9%
Hardware, software or other equipment resale 3.9% 1.2% 1.2% 11.8% 0.9%
Other 1.6% 53.1% 1.9% 7.8% 5.4%
Total/Average 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

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Table 75: Type of Work Sold by Vertical Market

Advertise / Hardware
Key Performance Indicator Accounting VAR Other PS
Mktg / PR PS
Business / management consulting 50.1% 26.7% 9.7% 3.5% 24.2%
Technology or IT consulting 18.7% 22.3% 54.9% 35.7% 23.8%
Subscription Services 1.2% 4.5% 2.6% 12.3% 6.8%
Managed services 17.4% 15.0% 10.3% 28.6% 14.0%
Staff augmentation 6.3% 2.6% 2.4% 4.1% 8.9%
Hardware, software or other equipment resale 0.3% 11.6% 19.4% 8.5% 3.2%
Other 6.2% 17.2% 0.7% 7.3% 19.1%
Total/Average 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

Interestingly, the types of consulting organizations who derive a significant portion of revenue from
managed services are marketing and advertising (17.4%); accountancies (15.0%); and Hardware PS
(28.6%). These firms focus on annual contracts and retainers where they outsource entire business
processes. Most SaaS embedded ESOs have started adding managed service offers as they out-task
elements of running their applications for their clients. For many independents, the promise of managed
services as a source of annuity revenue has not been fully realized because the technology
manufacturers themselves have grabbed these opportunities by offering better economies of scale and
enhanced security.

SPI Research believes at least 30% of annual revenue should come from new clients for PS organizations
to grow. This study demonstrates the strong correlation between growth and profitability.

The bottom-line is PS organizations must constantly expand their markets, client and solution repertoire
to stay in touch with market changes and ahead of the competition. New clients allow PSOs to reap the
benefits of previous client experiences and knowledge without the baggage of long-term relationships in
which both provider and client may have become complacent. New clients provide the opportunity to
expand knowledge, skills and services.
Table 76: Impact – Percentage of Business from New Clients

Percentage of Annual Rev. Headcount Size of Billable Project

Survey % EBITDA
new clients Growth Growth Pipeline Utilization Margin
Under 10% 12.7% 8.7% 7.1% 176.4% 71.3% 36.7% 17.2%

10% - 20% 21.7% 7.8% 6.2% 176.1% 70.1% 36.0% 14.7%

20% - 30% 12.9% 11.2% 9.0% 176.0% 67.2% 34.4% 22.4%

30% - 40% 10.3% 13.7% 9.4% 200.0% 67.2% 36.2% 18.7%

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Percentage of Annual Rev. Headcount Size of Billable Project

Survey % EBITDA
new clients Growth Growth Pipeline Utilization Margin
40% - 50% 25.4% 13.1% 11.0% 204.0% 69.6% 36.4% 20.0%

Over 50% 16.9% 4.7% 3.7% 150.0% 70.6% 32.3% 18.8%

Total / Average 100.0% 9.7% 7.8% 181.3% 69.5% 35.4% 18.4%
Source: SPI Research, February 2019

Primary Service Sales Measurement depicts the primary goal for the sales force. Organizations may
accentuate revenue, bookings, margin, customer satisfaction or all the above.

SPI Research asked about the primary measurement for service sales people. The leading answer was
“all of the above” for 33.5% of respondents meaning reps were measured on service revenue, service
bookings, margin and client satisfaction (Table 77). “Service revenue” was cited for 29.2%. Few
organizations are solely measuring reps on margin or customer satisfaction because these
measurements undermine growth.
Table 77: Impact – The Effect of Sales Measurements on Performance

Primary Service Bid- On-time

Survey Ann. rev. Size of Project Rev.
Sales win project EBITDA
% growth pipeline margin emp. (k)
Measurement ratio delivery
Service Revenue 29.2% 8.9% 4.50 173% 77.1% 35.8% $163 16.6%

Service Bookings 20.3% 10.8% 4.92 205% 75.0% 36.2% $174 19.7%

Service Margin 8.0% 14.6% 4.91 208% 76.8% 32.4% $158 15.8%

Client Satisfaction 9.0% 8.8% 5.68 157% 72.2% 34.8% $158 22.9%

All of the Above 33.5% 9.9% 5.06 176% 78.6% 35.6% $166 19.5%
Total / Average 100.0% 10.1% 4.91 182% 76.7% 35.4% $165 18.7%
Source: SPI Research, February 2019
SPI Research frequently receives questions regarding how the service sales force should be measured.
The table provides an interesting view of the cause and effect of service sales measurements. With so
many variables in sales compensation, there appears to be no right or wrong measurement as all forms
of sales measurement demonstrate pluses and minuses. Regardless of primary sales measurement,
clarity and fairness drive the best results. SPI recommends an open book approach to allow sales people
to measure and improve their own performance.

Primary target buyer depicts the title of key buyers such as CEO, CEO, CIO, Line of Business or Purchasing.

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SPI Research asked, “who is the primary buyer for your services”? For the 622 benchmark respondents,
the primary target buyer is most likely to be the Chief Operating Officer.
Table 78: Impact – Primary target buyer for services

Primary target
buyer for Survey Revenue New Bid-to-win Quarterly Project
services % growth clients ratio Backlog margin EBITDA
CEO 24.3% 9.9% 26.3% 4.86 40.7% 32.0% 23.7%

COO 28.1% 12.3% 30.3% 5.90 42.5% 38.9% 23.1%

CIO 27.2% 11.4% 31.9% 4.85 49.7% 39.1% 16.1%

Line of Business 14.3% 10.1% 30.4% 4.80 44.6% 34.4% 19.0%

Purchasing 4.2% NA NA NA NA NA NA

Other 1.9% 7.1% 28.3% 5.04 43.0% 35.4% 16.8%

Total / Average 100.0% 10.1% 29.9% 4.91 44.8% 35.4% 18.7%
Source: SPI Research, February 2019

Table 78 correlates primary buyer type with other key metrics. Without knowing other aspects, it is
hard to come up with definitive best practices, but this analysis does reveal some interesting
comparisons. Although “calling at the top” is a favored strategy, it appears firms who primarily sell to
the CEO have the worst revenue growth, smallest backlogs and lowest percentage of new client
revenue. It is hard to get to the CEO and if the CEO is really the decision-maker the project is either very
strategic or the organization is very small. This year selling to the COO produced good results with the
best project and net margins.

Bid-to-Win ratio measures the number of wins per ten bids. The Bid-to-Win ratio is a powerful metric for
judging sales and marketing effectiveness but must be analyzed in conjunction with the size of the
pipeline; the length of the sales cycle and the cost to pursue the bid.

If the Bid-to-Win ratio is too high, it Table 79: Impact – Bid-to-win ratio (per 10 bids)
may be an indication that the
organization is not aggressive Bid-to-win ratio Survey % of emp. Billable Ann. rev./
(per 10 bids) % billable util. emp. (k) EBITDA
enough in targeting new clients and
new services. If it is extremely low, 1 - 2 wins 13.0% 70.3% 66.9% $147 16.7%
it is an indication the firm is 3 - 4 wins 31.3% 72.3% 68.8% $157 15.9%
competing in a commoditized 5 - 6 wins 32.2% 72.3% 69.9% $180 19.1%
market or is not well-positioned or 7 - 8 wins 17.2% 77.0% 71.7% $164 20.5%
is not doing a good job of qualifying
Over 8 wins 6.3% 77.5% 72.1% $175 26.6%
deals. The best deals are those that
Total/Average 100.0% 73.2% 69.6% $165 18.5%
do not require a bid (sole source)
because the client has done Source: SPI Research, February 2019

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business with the firm before and knows they will do a good job or they are so clearly the premium
supplier that no one else need be considered.
The table depicts the positive impact of improving bid to win ratios through better deal qualification;
reference selling; improved positioning to target the right markets and clients; and improving overall
quality and client satisfaction resulting in more and better referrals. This year the optimal ratio is over 8
wins with the highest revenue growth; most billable employees; highest revenue per employee and best
margins.
The bid-to-win ratio (per 10 bids) was 2% higher (4.92 vs. 4.80) in 2018, when compared to 2017, and
1% higher than the past five-year's survey average (4.89). Independent service providers had values 3%
lower than embedded services organizations (5.07 vs. 4.90). Organizations from APac had the highest
(5.12) bid-to-win ratio, while those from EMEA had the lowest (4.72). Management Consultancies
showed the highest bid-to-win ratio (5.21), while Marketing and Advertising firms showed the lowest
(4.43).

The deal pipeline as compared to the quarterly bookings forecast provides insight into sales effectiveness
and future revenue. The size of the deal pipeline shows direct correlation to all major growth indicators
– revenue growth; revenue per billable employee; percentage achievement of the annual revenue plan
and billable utilization.

A good sign of growth ahead is Table 80: Impact – Size of deal pipeline
that more than 50% of benchmark
participants reported their deal Quarterly Project
pipeline was two times or larger revenue duration Ann. rev.
than the forecast! Survey Revenue target in (man- /consult.
Deal Pipeline % growth backlog months) (k)
The table shows deal pipeline
Less than forecast 13.4% 7.2% 37.3% 26.3 $180
relative to the quarterly bookings
forecast was 4% higher (181.5% vs. Same as forecast 32.6% 7.8% 40.0% 27.3 $190
174.2%) in 2018, when compared 2X forecast 27.7% 11.4% 47.3% 28.6 $215
to 2017, and 0% higher than the
3X forecast 18.4% 11.1% 49.1% 29.8 $223
past five-year's survey average
4X forecast 7.9% 16.4% 59.2% 43.8 $233
(180.9%). It also shows
independent service providers had Total/Average 100.0% 10.0% 44.9% 29.3 $205
values 25% lower than embedded Source: SPI Research, February 2019
services organizations (173.0%
versus 199%).
SPI Research found organizations from APac had the highest (186.8%) deal pipeline relative to quarterly
bookings forecast, while those from EMEA had the lowest (177.9%).

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SaaS PS organizations showed the

largest deal pipeline (198.5%), while Table 81: Year-over-year change – Deal Pipeline
Accountancies showed the smallest
Deal Pipeline 2017 2018 ▲
(147.2%).
Embedded services organizations 214% 199% -7%
Organizations with 31 - 100 employees
Independent services organizations 161% 173% 8%
had the highest (197.7%) deal pipeline,
while those with under 10 employees Americas 172% 182% 6%

had the lowest (129.8%). EMEA 185% 178% -4%

APac 195% 187% -4%
Accounting 131% 147% 12%
Advertising/Marketing/PR 75% 161% 114%
Architecture/Engineering 143% 158% 11%
IT Consulting 191% 186% -3%
Management Consulting 188% 168% -10%
PS within SaaS Company 213% 198% -7%
PS within Software Company 211% 182% -14%
Source: SPI Research, February 2019

The length of the sales cycle measures the time it takes to move a qualified lead to a signed contract.
Sales cycle length is a leading indicator of demand as sales cycles elongate when the economy is
contracting and shrink when the economy is expanding.

The table shows sales cycle (days: qualified lead to contract signing) was 2% lower (88.8 vs. 90.3) in
2018, when compared to 2017, and
1% lower than the past five-year's Table 82: Impact – Sales cycle (days: qualified lead to contract sign.)

survey average (89.7). It also

Bid-to-
shows independent service Survey win Deal Quarter.
providers had values 23% lower Sales cycle % ratio pipeline backlog EBITDA
than embedded services Under 30 days 7.9% 5.64 111% 35.3% 18.1%
organizations (64.6 vs. 84.2).
30 - 60 days 20.1% 5.36 156% 44.9% 20.7%
Organizations from the Americas 60 - 90 days 26.3% 4.81 174% 43.3% 14.4%
had the longest (90.2) sales cycle 90 - 120 days 23.6% 4.94 199% 45.5% 18.8%
while those from APac had the
120 - 150 days 11.5% 4.25 188% 45.4% 22.0%
shortest (80.8). Software PS
Over 150 days 10.6% 4.39 256% 52.4% 20.3%
organizations showed the longest
sales cycle in the survey (103.8). Total/Average 100.0% 4.91 182% 44.7% 17.1%
Organizations with 31 - 100 Source: SPI Research, February 2019

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employees had the longest (96.6) sales

cycle, while those with under 10 Table 83: Year-over-year change – Sales cycle (days)
employees had the shortest (64.6).
Sales cycle 2017 2018 ▲
Embedded services organizations 110 98 10%
Independent services organizations 84 84 0%
Americas 92 90 2%
EMEA 75 82 -10%
APac 98 81 17%
Accounting 80 83 -3%
Advertising/Marketing/PR 75 82 -10%
Architecture/Engineering 87 90 -4%
IT Consulting 86 83 4%
Management Consulting 73 76 -4%
PS within SaaS Company 101 97 4%
PS within Software Company 111 104 6%
Source: SPI Research, February 2019

Average service discount depicts the average discount or price concession from list price.

In professional services, it is more difficult to develop a pricing strategy than in product-based

organizations. It is easy to do comparative shopping at a grocery store or for products on-line. In
professional services, pricing is
more art than science with wider Table 84: Impact – Service Discounting
variability in terms of costs,
estimates, proposals and pricing. Average Service Survey Org. size Revenue Deal
Professional services executives Discount % (emp) growth New clients pipeline
cannot just look at expected None 24.3% 335 7.8% 24.4% 169%
project cost, sales forecasts, or Under 5% 28.1% 397 9.9% 29.0% 177%
some other key metric to set
5% - 10% 27.2% 847 10.3% 30.0% 177%
pricing. Supply and demand
definitely come into play. The 10% - 20% 14.3% 974 10.8% 33.2% 207%

more unique the offering; the more 20% - 30% 4.2% 1,243 12.5% 37.7% 202%
demonstrable the return on Over 30% 1.9% 1,499 19.0% 53.5% 265%
investment; the larger the
Total/Average 100.0% 643 9.9% 29.6% 182%
reference base; the harder to find
required skills; the more a premium Source: SPI Research, February 2019

pricing is warranted.

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Past win ratios are critical but must be Table 85: Year-over-year change – Service Discount
viewed in conjunction with past and
projected project margins to determine Service Discount 2017 2018 ▲
the optimal pricing strategy. Embedded services organizations 8.5% 9.8% -15%
Professional services executives should
Independent services organizations 3.8% 5.3% -40%
not mind losing bids when they hurt
Americas 4.8% 6.7% -39%
margin because “bargain basement”
pricing rarely results in win-win EMEA 6.0% 6.9% -15%

partnerships. If firms are continually APac 5.6% 7.1% -26%

asked to discount pricing it is a sure Accounting 4.6% 8.8% -88%
sign that something is wrong. Either Advertising/Marketing/PR 2.8% 3.2% -13%
they have not properly demonstrated Architecture/Engineering 1.7% 2.0% -18%
their value, or they are moving into a
IT Consulting 6.2% 7.2% -17%
commodity market or they have not
Management Consulting 5.3% 4.8% 10%
done a good job of differentiating their
services. PS within SaaS Company 12.5% 11.2% 11%
PS within Software Company 8.3% 10.1% -22%
There is absolutely no way service
organizations can make up in volume Source: SPI Research, February 2019

the amount they lose per deal because

margins are too thin and there is no way to recoup hours worked at cheap rates. Surprisingly, Table 84
shows that the highest level of discounting produced the best results. This anomaly was because the
largest organizations in the survey reported high levels of discounting which was offset by growth.
Although limiting discounting might impact growth, it enhances bid-win ratios, billable utilization, on-
time project delivery and client referenceability. Firms who refrain from discounting do a better job of
using standardized methods and tools, resulting in fewer project overruns. Profit is the fuel that drives
expansion. While not every project achieves its desired profitability goal, one or two money-losing
projects can quickly undermine all profit.
When creating a large bid, all costs including sales costs should be measured. Very few projects are
delivered precisely on time and on budget, so change control is an important element of pricing. If a
client demands pricing concessions, scope must be contained, but the client must also understand and
accept the risks. Best practices in pricing include creating a dedicated proposal center to ensure all
proposals are of the highest quality. Bid, estimate, pricing and contract reviews are all good investments
which pay dividends by improving project margins and reducing the risk of overruns and losses.
Table 85 shows the service discount given was 36% higher (6.7% vs. 4.9%) in 2018, when compared to
2017, and 1% lower than the past five-year's survey average (6.8%). Independent service providers had
values 38% lower than embedded services organizations (3.2% vs. 5.3%).
Organizations from APac had the highest (7.1%) service discounts, while those from North America had
the lowest (6.7%). SaaS PS organizations showed the highest service discounts (11.2%), while
Architecture and Engineering firms reported the least (2.0%). Organizations with over 700 employees
had the highest (9.5%) service discounts, while those with under 10 employees had the lowest (3.2%).

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The percentage of referenceable

clients depicts the percentage of Table 86: Impact – Percentage of "referenceable" clients
clients who would act as a
reference. It is a strong quality % of % of On-time
measurement and improves sales "referenceable" Survey emp. Bid-to- billable project
effectiveness. clients % billable win ratio util. delivery
Under 50% 13.5% 64.7% 4.35 65.3% 69.3%
The percentage of reference clients
is considered one of the most 50% - 60% 14.7% 66.4% 4.63 66.4% 70.6%

important KPIs in the professional 60% - 70% 14.7% 69.7% 4.92 67.5% 71.4%
services sector. Client references 70% - 80% 17.5% 75.1% 5.03 70.9% 78.7%
have a strong correlation with
80% - 90% 18.4% 75.2% 5.08 71.7% 80.4%
service sales effectiveness; the
length of the sales cycle; ease of Over 90% 21.2% 80.2% 5.20 73.2% 85.6%
getting things done and whether Total/Average 100.0% 72.7% 4.91 69.6% 76.9%
employees would recommend the
Source: SPI Research, February 2019
PSO as a great place to work. The
relationship between client and Table 87: Year-over-year change – Client references
employee satisfaction is irrefutable.
Client references 2017 2018 ▲
Client references are a leading indicator
Embedded services organizations 68.4% 66.3% -3%
of organizational success. As this
percentage increases, so does the Independent services organizations 76.8% 74.6% -3%

probability of high levels of growth; Americas 75.4% 72.2% -4%

better win ratios and lower sales costs. EMEA 67.4% 69.4% 3%
Any maturity improvement plan must APac 76.8% 72.5% -6%
address measuring and improving client Accounting 68.6% 70.0% 2%
satisfaction and building references.
Advertising/Marketing/PR 74.4% 78.0% 5%
Best practices include post-project
Architecture/Engineering 78.4% 76.5% -2%
engagement surveys; acquiring client
references and testimonials as part of IT Consulting 75.4% 72.5% -4%
project close-out along with frequent Management Consulting 80.0% 77.3% -3%
and consistent project quality reviews. PS within SaaS Company 66.9% 64.5% -4%
Executive teams should review the PS within Software Company 67.1% 65.6% -2%
project dashboard at weekly meetings
Source: SPI Research, February 2019
and immediately assign executives to
troubled projects.

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Pricing structure refers to the percentage of work sold by deal structure: time and materials; fixed fee;
performance-based; managed services or other.

Every year, SPI Research has seen a shift in pricing and deal structure. As clients have become
increasingly concerned about risk and cost overruns, they have pushed more accountability to the PSO
through fixed fee and shared risk contracts. Until 2014 the percentage of fixed fee work steadily
increased from 35.5% in 2009 to 44% in 2013. In 2014 SPI Research saw a resurgence in time and
materials priced contracts – signaling increased demand for services. 2014 was the first time in eight
years that we saw an increase in time and materials pricing from 51.7% in 2013 to 58.8% in 2014 but
since that time we have seen a steady decline in time and materials priced contracts in favor of fixed
price and subscription-priced managed services.
Managed service contracts bundle hardware, software, services and technology refresh into a monthly
or annual contract price. Time and materials-based pricing puts emphasis on accurate resource
management, time collection and reporting. Fixed price pricing puts an emphasis on accurate estimates,
project costing and change management. Either way PSA applications are critical to support accurate
time and cost capture and billing.
Table 88: Fee Structure by Organization Type and Geographic Region

2017 2018
Fee Structure ESO PSO Americas EMEA APac
Survey Survey
Time & Materials 49.9% 43.8% 40.3% 45.4% 41.8% 58.9% 44.5%
Fixed Time / Fixed Fee 40.7% 38.9% 41.3% 37.8% 40.5% 30.0% 33.5%
Shared Risk / Performance based 2.2% 2.6% 2.7% 2.6% 2.6% 1.1% 5.7%
Managed Services 4.4% 10.3% 12.1% 9.5% 10.4% 9.0% 11.5%
Other 2.8% 4.3% 3.5% 4.6% 4.7% 1.1% 4.8%
Total / Average 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

Table 88 compares billing models for embedded and independent PSOs. ESOs have been steadily
shifting to fixed fee contracts – moving from 34% in 2009 to 41.3% in 2018. Independents have always
preferred time and materials contracts, but they too have shifted to more fixed price work, from 37% in
2009 to 37.8% in 2018. By geography, time and materials is the prevalent pricing structure. EMEA
predominantly sells time and materials contracts although they are often “daily” contracts which are far
less favorable for the service provider than hourly contracts.

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Table 89: Fee Structure by Organization Size

Under 101 - 301 - Over

Key Performance Indicator 10 - 30 31 - 100
10 300 700 700
Time & Materials 53.1% 40.8% 48.8% 43.5% 43.4% 33.5%
Fixed Time / Fixed Fee 33.4% 46.4% 41.3% 38.6% 32.6% 31.9%
Shared Risk / Performance based 3.9% 0.9% 1.4% 1.9% 2.4% 8.0%
Managed Services 5.0% 7.9% 6.6% 11.8% 18.1% 16.6%
Other 4.6% 3.9% 1.9% 4.1% 3.6% 10.1%
Total / Average 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

Table 89 compares deal structure by size of organization. The percentage of managed services or
recurring revenues goes up proportionately with the size of the organization while the percentage of
fixed price contracts goes down.
Table 90: Fee Structure by Service Market Vertical

IT Arch./ Mgmt. SaaS

Fee Structure Software PS
Consulting Engineering Consulting PS
Time & Materials 58.1% 36.2% 44.9% 47.4% 38.9%
Fixed Time / Fixed Fee 23.7% 57.8% 41.5% 38.8% 44.6%
Shared Risk / Performance based 2.0% 1.3% 2.8% 2.6% 1.0%
Managed Services 12.1% 3.2% 7.8% 7.6% 11.1%
Other 4.1% 1.5% 3.0% 3.6% 4.4%
Total / Average 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

Table 91: Fee Structure by Service Market Vertical

Advertise / Hardware
Fee Structure Accounting VAR Other PS
Mktg / PR PS
Time & Materials 26.4% 40.4% 39.0% 20.9% 33.2%
Fixed Time / Fixed Fee 48.1% 27.5% 49.2% 37.0% 38.2%
Shared Risk / Performance based 6.1% 5.6% 1.4% 6.8% 4.9%
Managed Services 11.7% 18.1% 10.4% 30.7% 14.7%
Other 7.8% 8.4% 0.0% 4.5% 8.9%
Total / Average 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

By vertical, architects, marketing and advertising firms and VARs rely on fixed price contracts (Tables 90
and 91). IT consultancies favor time and materials contracts (58.1%). Hardware ESOs clearly favor

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managed service contracts and SaaS ESOs favor fixed price and managed service contracts. As the SaaS
market has become more mature a greater emphasis is being placed on customer adoption, so SaaS
firms focus on “time to value” with fixed price rapid implementation contracts. Net profit is not
necessarily tied to pricing structure as it is possible to make good service margins with either time and
materials or fixed price contracts. Accurate estimating, excellent project management, good
communication and change control are the most important elements in ensuring quality services are
delivered at planned margins.

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8. Human Capital Alignment Pillar

The shift to a digital economy is fundamentally rewriting the

rules of employment relationships. Technologies like AI
(Artificial Intelligence), Security, Mobile and Analytics are
fueling disruption and change in both our personal and
professional lives.
SPI’s PS Maturity™ research over the past twelve years
supports the notion that only a handful (less than 20%) of Professional services organizations achieve
greatness. These leaders are able to quickly seize market opportunities and drive best-in-class
performance through the effective use of technology in conjunction with enlightened management and
workforce practices.
Over this same timeframe, real growth in billable hours (utilization) has been miniscule. Almost all PS
productivity growth has come from the effective use of technology to lower overhead and
administrative costs in combination with the move to virtual (off-site) consulting delivery. PS employees
are working the same number of annual hours (2,040 hours per year) but are working smarter through
the use of agile development methodologies; virtual consulting delivery (limiting travel time);

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maximizing the ability to multi-task across multiple projects while limiting administrative time for time
and expense capture and meetings.
Firms require younger workers with new skillsets— but competition to recruit them is fierce. Millennial
workers are less loyal than previous generations, and more inclined to hop between jobs, which makes
retention even harder. According to a Gallup poll, in 2016, 21% of millennials switched jobs compared to
fewer than 7% job change for older workers. All firms must learn to manage multi-generational and
multi-cultural workforces, especially since we’re seeing a younger and younger workforce (24.7
percent are under 30 years of age).
Attrition has been increasing steadily over the past ten years and now stands at 13.9 percent. This is
worrisome for a people-based business. In 2018 we saw one of the strongest job markets in history –
with unemployment hitting a 48-year low (3.7%) in the US in September; since then unemployment has
inched up but we are still experiencing an incredibly tight job market.
Today’s consulting workforce is increasingly virtual, with almost as many consulting hours delivered off-
site as on the client’s site. In this year’s benchmark, 26.8% of consultants primarily work from home
with another 5.8% described as contingent workers either onshore or off. The new world of consulting
work depends on a global multi-lingual, multi-generational, multi-cultural, technically-skilled, project-
based workforce.
Top performing organizations continually point to their unique, employee-oriented cultures as the
number one element in their business success. Culture is defined as the system of values, beliefs and
behaviors that define how work really gets done. Culture brings together the implicit and explicit
reward systems that define how an organization works in practice, no matter what an organizational
chart, business strategy, or corporate mission statement may say.
SPI Research’s “Human Capital Alignment” pillar encompasses all elements of the Professional Services
workforce strategy. Human Capital Alignment focuses on both the people processes and systems
required to recruit, hire, ramp, retain and motivate a high-quality consulting workforce. The following
table shows how PSOs mature across the Human Capital Alignment pillar:
Table 92: Human Capital Alignment Maturity Model

Level 1 Level 2 Level 3 Level 4 Level 5

Initiated Piloted Deployed Institutionalized Optimized
Hire as needed. Begin forecasting Resource, skill and Business process and Continually staff and
Generalist skills. workload. Start career management. vertical skills in addition train to meet future
Human Capital

Chameleons, Jack developing job and Employee to technical and project needs. Highly skilled,
Alignment

of all Trades. skill descriptions & satisfaction surveys. skills. Career ladder motivated workforce.
Individual heroics. compensation plans. Training plans. Goals and mentoring Outsource commodity
May perform Rudimentary career and measurements programs. Training skills or peak demand.
presales as well as paths. Start aligned with investments to support Sophisticated variable
consulting delivery. measuring employee compensation. career. Low attrition, on and off-shore
satisfaction Attrition <15% high satisfaction workforce model.

Source: SPI Research, February 2019

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Survey Results

Today’s Professional Services leaders must squarely confront the realities of attracting and retaining a
younger workforce against the backdrop of a technical labor shortage. Globalization has significantly
impacted workforce strategies with many service providers providing hybrid on and off-site resources
via regional and global competency centers. Based on technology advances, consulting emphasis is
shifting toward business process and vertical industry expertise however demand for horizontal
application and technical skills still remains high. SPI Research found Human Capital Alignment metrics
contain some of the highest number of performance indicators with extremely strong correlation to
success — meaning, employees, and how they perform once onboard determine success or failure
(Table 93).
Table 93: Human Capital Alignment Performance Indicators tied to Maturity levels

Maturity Level Level 1 Level 2 Level 3 Level 4 Level 5

Recommend company to friends/family (1-5 scale) 4.03 4.32 4.56 4.75 4.85
Well-understood career path for all employees (1-5 scale) 2.59 3.27 3.46 3.75 4.21
Employee annual attrition - voluntary 7.5% 7.5% 7.6% 11.4% 13.5%
Employee annual attrition - involuntary 5.6% 5.4% 5.0% 5.2% 7.4%
Non-billable project hours 231 149 125 107 79
Billable project hours 1,249 1,388 1,509 1,546 1,641
Employee billable utilization 56.7% 65.7% 76.0% 79.5% 87.4%
PS Profit (EBITDA) 5.0% 8.3% 17.8% 21.8% 32.5%
Source: SPI Research, February 2019

SPI Research analyzed 27 Human Capital Alignment key performance measurements that are critical to
attaining superior employee performance. Table 94 portrays trends in human capital alignment. The
chief issues facing PS employers are recruiting and retention. Skilled employees have more career
choices than ever before resulting in high levels of voluntary attrition.
Table 94: Human Capital Alignment Pillar 5-year trend

Key Performance Indicator (KPI) 2014 2015 2016 2017 2018

Voluntary attrition 8.9% 7.9% 8.0% 7.6% 8.5%
Recommend company to friends/family (1 to 5 scale) 4.24 4.19 4.28 4.38 4.41
Management to employee ratio 10.05 11.52 10.00 10.06 10.33
Days to recruit and hire for standard positions 61.8 60.5 62.2 60.8 59.9
Days for a new hire to become productive 64.1 57.9 55.4 52.5 57.4
Guaranteed annual training days / employee 8.20 8.92 8.33 7.78 8.83
Well-understood career path for all employees (1 to 5 scale) 3.14 3.29 3.17 3.20 3.28
Employee billable utilization 71.0% 70.6% 70.4% 71.5% 69.7%
Source: SPI Research, February 2019

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As the table shows, many human capital metrics improved in 2018 but both voluntary and involuntary
attrition increased significantly bringing average workforce attrition to 13.9%. The percentage of
companies who would recommend their company as a great place to work grew from 87.6% to 88.2%.
Management span of control increased this year while the days to recruit new employees decreased,
signaling slightly better balance in the job market.
Table 95: Human Capital Alignment KPIs by Organization Type and Geographic Region

Key Performance Indicator 2017 2018 ESO PSO Amer. EMEA APac
Surveys 456 622 193 429 516 68 38
Employee annual attrition - voluntary 7.6% 8.5% 8.3% 8.6% 8.5% 7.4% 10.8%
Employee annual attrition - involuntary 4.8% 5.4% 6.2% 5.0% 5.4% 4.9% 6.3%
Recommend company to friends/family 4.38 4.41 4.28 4.47 4.41 4.43 4.32
Management to employee ratio 10.06 10.33 10.95 10.04 10.20 10.24 12.11
Days to recruit and hire for standard positions 60.8 59.9 62.0 58.9 59.5 64.3 57.6
Days for a new hire to become productive 52.5 57.4 70.7 51.3 58.1 58.6 47.8
Guaranteed annual training days / employee 7.78 8.83 10.04 8.27 8.76 8.23 10.72
Well-understood career path for all emp. 3.20 3.28 3.17 3.33 3.26 3.35 3.45
Employee billable utilization 71.5% 69.7% 66.0% 71.4% 69.6% 70.1% 70.0%
Annual fully loaded cost per consultant (k) $108 $122 $125 $121 $123 $108 $128
Source: SPI Research, February 2019

Other signs of improvement are shown in more guaranteed training days per employee and
enhancements in career management. Average reported utilization dipped down to 69.7%. The
average was dragged down by embedded PS organizations who reported 66% average utilization.
Table 95 summarizes important talent management questions by organization type and location. The
table shows independents are more likely to refer their firm as a great place to work than their
embedded counterparts. Employees in EMEA are more likely to recommend the firm as a great place to
work than their global counterparts. Management span of control increased year over year, with APAC
firms reporting over 12 employees per manager.
The average time to recruit, hire and ramp a new consultant increased from 113 days to 117 days in
2018 with EMEA reporting the longest recruiting and ramping time of 123 days. Obviously, reducing
the time and cost of finding and ramping new employees has a major impact on growth and profitability.
Interviews with this year’s Best-of-the Best revealed innovative college hiring and ramping programs –
with intense on-boarding programs of three months or more to ensure new consultants are successful
and productive. The need for skill and leadership development has resulted in a big increase in the days
of guaranteed training – moving from 3.8 days in 2008 to over 8.8 days on average in 2018. PS
organizations of all types and sizes are investing in training to ensure their workforces remain engaged
by enhancing their skills.

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PS organizations are finally starting to realize the importance of providing employee career paths and
opportunities – this has led to a slight improvement in the benchmark of “a well-understood career
path,” which has advanced from a score of 2.67 out of 5 (53%) in 2009 to 3.28 (65.6%) in 2018.
Table 96: Human Capital Alignment KPIs by Organization Size

Under 101 - 301 - Over

Key Performance Indicator 10 - 30 31 - 100
10 300 700 700
Surveys 53 123 166 143 54 83
Employee annual attrition - voluntary 7.2% 7.3% 8.5% 9.6% 8.6% 9.1%
Employee annual attrition - involuntary 5.3% 5.1% 5.4% 5.6% 5.5% 5.7%
Recommend company to friends/family 4.47 4.48 4.51 4.44 4.20 4.17
Management to employee ratio 6.63 8.57 9.50 11.26 13.14 13.13
Days to recruit and hire for standard positions 57.4 62.8 59.6 58.6 59.1 60.4
Days for a new hire to become productive 63.8 61.6 54.9 57.4 56.5 53.7
Guaranteed annual training days / employee 7.82 8.13 8.75 8.26 10.49 10.43
Well-understood career path for all emp. 3.33 3.26 3.24 3.17 3.49 3.40
Employee billable utilization 64.8% 69.0% 68.6% 71.3% 68.4% 73.8%
Annual fully loaded cost per consultant (k) $112 $120 $121 $123 $123 $121
Source: SPI Research, February 2019

Table 96 shows the human capital alignment scores by organization size. Attrition tends to rise in direct
proportion to organization size as employees feel less ownership and their work becomes more
impersonal. This year organizations with 100 to 100 employees reported the highest voluntary attrition
(9.6%). One of the reasons for this is that these large organizations are experiencing the highest levels
of mergers and acquisitions which often lead to attrition. Management span of control grows
proportionately with organization size as larger organizations provide more employee support
structures. Small to midsize organizations were more likely to be viewed as “great places to work” with
higher employee recommendation scores. This important employee engagement metric increased this
year from 4.38 to 4.41 (88.2%).
Table 97: Human Capital Alignment KPIs by Vertical Market

IT Arch./ Mgmt. Software SaaS

Key Performance Indicator
Consulting Engineering Consulting PS PS
Surveys 156 100 75 78 70
Employee annual attrition - voluntary 9.0% 7.0% 7.3% 7.6% 9.1%
Employee annual attrition - involuntary 5.4% 4.3% 4.4% 5.4% 7.1%
Recommend company to friends/family 4.46 4.59 4.55 4.21 4.34
Management to employee ratio 10.54 9.51 9.13 11.16 10.15
Days to recruit and hire for standard positions 54.4 67.7 62.7 62.9 63.1
Days for a new hire to become productive 48.1 50.9 56.3 72.3 73.2

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IT Arch./ Mgmt. Software SaaS

Key Performance Indicator
Consulting Engineering Consulting PS PS
Guaranteed annual training days / employee 8.95 7.42 8.38 10.58 10.18
Well-understood career path for all emp. 3.38 3.30 3.42 3.23 3.19
Employee billable utilization 72.6% 69.9% 71.7% 67.8% 64.5%
Annual fully loaded cost per consultant (k) $127 $106 $128 $126 $122
Source: SPI Research, February 2019

Table 98: Human Capital Alignment KPIs by Vertical Market

Advertise / Hardware
Key Performance Indicator Accounting VAR Other PS
Mktg / PR PS
Surveys 20 19 14 11 79
Employee annual attrition - voluntary 11.4% 13.1% 6.4% 8.1% 9.8%
Employee annual attrition - involuntary 5.0% 7.0% 6.0% 4.1% 6.1%
Recommend company to friends/family 4.53 4.12 4.57 4.30 4.25
Management to employee ratio 7.50 11.88 10.36 12.50 11.42
Days to recruit and hire for standard positions 50.3 57.4 65.4 63.0 54.1
Days for a new hire to become productive 45.0 58.2 76.1 57.0 55.2
Guaranteed annual training days / employee 8.75 9.85 10.36 9.50 7.20
Well-understood career path for all employee 3.29 3.24 3.07 2.70 3.16
Employee billable utilization 72.0% 73.5% 64.3% 66.5% 68.3%
Annual fully loaded cost per consultant (k) $106 $108 $132 $131 $122
Source: SPI Research, February 2019

Tables 97 and 98 show key Human Capital Alignment metrics by market. Accountancies and Managed
Services providers reported the highest voluntary attrition while Architects and Engineers reported the
lowest. Hardware ESOs had the largest management span of control while marketing and advertising
firms had the smallest. Software ESOs reported the greatest investment in employee training while
architects had the least. It takes the least amount of time to recruit and ramp new hires in marketing
and advertising and the longest time in VARs. Billable utilization is highest for accountants at 73.5%
while VARs reported the lowest billable utilization at 64.3%.
SPI Research asked questions about the age and gender of the global PS workforce (Table 99). This
benchmark reflects statistics from a global PS workforce of 390,000 employees. PS continues to be a
young man’s game with 57.8% of the workforce under age 40 while 62% are male. This year the
percentage of employees under 30 increased again from 23.1% to 24.7% while over age 50 employees
decreased from 19.4% to 16.4%. Embedded PSOs reported slightly younger workforces as they tend to
provide better on-boarding programs and they require the latest technical skills. The Americas has the
oldest workforce with the most employees over 40 (43%). EMEA is the most male-dominated with 64%
male PS employees. The percentage of females increased this year from 35.2% to 38%. APAC is leading
the way in bringing women into the PS workforce with 39.5% females. Around the world we are seeing

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a host of new programs designed to bring women into the world of technology. STEM education and
strong female role models are starting to make a difference, but a significant gender gap persists.
Table 99: Workforce Age and Gender by Organization Type and Geographic Region

Workforce Age (years) 2017 2018 ESO PSO Amer. EMEA APac
Under 30 23.1% 24.7% 25.6% 24.3% 24.8% 24.2% 24.7%
30 - 40 31.9% 33.1% 35.2% 32.1% 32.3% 35.3% 39.6%
40 - 50 25.7% 25.3% 26.0% 25.0% 26.0% 24.7% 18.1%
Over 50 19.4% 16.9% 13.2% 18.6% 17.0% 15.8% 17.5%
Average Age (Years) 39.6 38.9 38.0 39.3 38.9 38.6 38.3
Percentage Male 64.8% 62.0% 62.7% 61.6% 61.8% 64.0% 60.5%
Source: SPI Research, February 2019

When comparing workforce demographics by organization size, in general the average age of the
workforce is older for smaller firms as many experienced consultants leave large firms to start their own.
Table 100: Workforce Age and Gender by Organization Size

Under 101 - 301 - Over

Workforce Age (years) 10 - 30 31 - 100
10 300 700 700
Under 30 10.0% 21.6% 27.9% 26.4% 27.9% 26.9%
30 - 40 26.0% 35.0% 32.4% 32.9% 37.5% 33.8%
40 - 50 27.6% 26.2% 25.2% 25.6% 21.7% 24.7%
Over 50 36.5% 17.1% 14.5% 15.2% 12.8% 14.6%
Average Age (Years) 45.0 39.3 38.0 38.3 37.3 38.1
Percentage Male 60.5% 61.2% 63.3% 65.2% 59.0% 57.9%
Source: SPI Research, February 2019

The largest organizations have the highest percentage of employees under 30 as they invest in college
recruiting. Large firms like Deloitte and Accenture provide an excellent introduction to the world of
consulting because they provide structured on-boarding programs combined with career planning and
progression. The largest organizations also do a better job of recruiting women as they are able to
provide more flexibility and programs.
By vertical market, the big three – IT, Management Consulting and hardware and networking are heavily
male dominated with more than 70% male employees. Only marketing and advertising firms have
more female employees than male. They also have the youngest workforces with an average age of
35 years. Management consultancies employ the most over 50 employees with 24.6% of their workers
over 50. Marketing and Advertising and cloud (SaaS) PSOs contain the most under age 30 employees
with almost 1/3 of their employees in their 20s. They also have the fewest employees over age 50.

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Table 101: Workforce Age and Gender by Vertical Market

IT Arch./ Mgmt. Software SaaS

Workforce Age (years)
Consulting Engineering Consulting PS PS
Under 30 25.2% 22.1% 22.1% 24.6% 31.2%
30 - 40 35.0% 29.9% 29.4% 36.2% 36.8%
40 - 50 24.9% 27.5% 23.9% 26.5% 23.9%
Over 50 14.9% 20.5% 24.6% 12.7% 8.1%
Average Age (Years) 38.3 40.1 40.7 38.0 36.1
Percentage Male 64.1% 66.4% 61.0% 63.4% 60.5%
Source: SPI Research, February 2019

Table 102: Workforce Age and Gender by Vertical Market

Advertise / Hardware
Workforce Age (years) Accounting VAR Other PS
Mktg / PR PS
Under 30 34.5% 32.6% 14.1% 16.4% 22.6%
30 - 40 42.1% 28.1% 33.8% 34.5% 28.7%
40 - 50 14.5% 24.8% 32.1% 26.6% 26.1%
Over 50 8.8% 14.5% 19.9% 22.5% 22.6%
Average Age (Years) 35.0 37.5 41.3 41.1 40.4
Percentage Male 44.2% 60.6% 70.4% 67.5% 55.5%
Source: SPI Research, February 2019

Table 103 depicts organization structure with functional predominant. This means most PSOs have
defined functions for sales and marketing, service delivery, finance and operations, service engineering,
human resources, etc. The second most prevalent structure is line of business or product-oriented
meaning groups are organized by vertical industries or products. Matrix-oriented structures are
favored, particularly by larger organizations which may have double-line reporting by geography,
vertical, competency or product. Increasingly large organizations are creating technical and vertical
competency centers of experts who are deployed to support geographical or account-based teams with
specialized expertise. Geographic organizations are prevalent for new, young organizations as they
expand city to city, state to state and country to country. Only 12.8% of organizations are structured
primarily by account although account-specific teams exist within most large organizations. Geographic
organizations reported the best revenue growth and profit.
Table 103: Primary organizational structure

Primary organizational Revenue Headcount % of emp. Project

structure Survey % growth growth billable margin EBITDA
Functional 34.5% 8.8% 7.8% 74.7% 36.3% 19.4%
Geographic 12.2% 12.1% 8.3% 69.1% 32.4% 22.4%
Line of business or product 22.6% 9.7% 7.7% 71.5% 36.7% 16.4%

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Primary organizational Revenue Headcount % of emp. Project

structure Survey % growth growth billable margin EBITDA
Account/Customer 12.8% 10.3% 5.8% 69.2% 30.6% 15.9%
Matrix 13.4% 10.3% 8.7% 74.8% 38.0% 18.7%
Other 4.5% 9.8% 8.9% 77.9% 35.9% 17.1%
Total/Average 100.0% 9.9% 7.7% 72.7% 35.4% 18.4%
Source: SPI Research, February 2019

Why do employees leave? Obviously, employees leave for a variety of reasons, but in many cases there
is one primary catalyst which is the reason for moving on. Table 104 shows the top reasons why
employees leave. The number one rationale (44.7%) is “better opportunity” which translates to a better
work environment, perhaps better compensation or more opportunity for advancement. “Other
(19.7%)” is in second place. “Other” covers a magnitude of issues – “work/life” balance or leaving the
industry entirely.
Table 104: Why employees leave

Recommend On-time
Employee to family/ Billable project
Why employees leave Survey % attrition friends utilization delivery EBITDA
Better opportunity 44.7% 14.4% 4.47 69.5% 76.5% 18.3%
Money 11.0% 16.1% 4.22 68.1% 77.3% 19.1%
Mgmt. dissatisfaction 6.0% 17.2% 3.71 63.5% 74.9% 22.5%
Travel 4.5% 13.5% 4.46 74.2% 81.3% 26.8%
Stress 4.8% 14.7% 4.21 70.2% 72.5% 9.7%
Lack of career advance. 9.3% 13.1% 4.30 69.5% 74.2% 17.7%
Other 19.7% 11.2% 4.65 71.3% 79.7% 17.1%
Total/Average 100.0% 14.0% 4.41 69.6% 76.9% 18.3%
Source: SPI Research, February 2019

“Money” is the third most prevalent reason employees leave. A younger, less traditional workforce
requires challenging projects; exposure to hot new technologies and leading-edge clients plus training,
communication and teamwork to remain engaged but money is often a determining factor. “Lack of
career advancement” was cited as the primary reason to leave by 9.3%. Interestingly these firms
experienced the least growth which would explain why career opportunities are limited.
“Management dissatisfaction”, “Stress” and “Travel” are also major reasons employees quit.
Management dissatisfaction leads to high attrition and makes the workplace one that employs would
not recommend to their friends and family. With more than ¼ of PS employees under the age of 30,
leadership development must be a top priority. The table shows “management dissatisfaction” has a
profound negative impact on attrition, employee engagement and billable utilization. The best firms are
intently grooming and growing a new generation of leaders.

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Employee annual attrition – voluntary

Employee attrition is defined as the number of employees who left the company, either voluntarily or
involuntarily, over the past year divided by the weighted average number of employees.
Attrition Rate = Number of Attritions/Weighted Average Number of Employees *100

Voluntary attrition, employees who leave who are not asked to leave, is one of the most important key
performance indicators in the
services sector as employees Table 105: Impact – Voluntary Attrition
are the most valuable
resource. Annual attrition in Ann. % of
Rec. to
rev./ ann.
the professional services Employee annual Survey Rev. family/ emp. rev.
sector has been steadily attrition - Voluntary % growth friends (k) target
climbing since the recession None 9.2% 8.9% 4.58 $176 98.9%
ended.
1% - 5% 29.3% 9.7% 4.52 $165 94.4%
Table 105 shows the 5% - 10% 31.2% 10.3% 4.43 $160 93.4%
correlation between voluntary
10% - 15% 17.3% 11.0% 4.23 $176 93.1%
attrition and revenue growth
and profit; demonstrating the 15% - 25% 7.6% 10.4% 4.36 $175 91.2%
negative consequences of high Over 25% 5.4% 6.4% 4.00 $129 87.7%
voluntary attrition rates. As
Total/Average 100.0% 9.9% 4.41 $165 93.7%
attrition rises, most other
aspects of performance suffer. Source: SPI Research, February 2019

The probability of on-time project delivery decreases while project overruns increase. Remaining
employees must pick up the pieces from exiting workers and must quickly come up to speed to
reestablish client relationships. Clients are forced to back-track to reestablish previous decisions and
vendor commitments.
The costs of high voluntary attrition permeate all aspects of the firm. Lower employee engagement
influences the firm’s ability to recruit new top talent. The very real cost to replace leaving employees
shows up in 117 work days on average to find, recruit, hire and ramp new consultants. But this lost time
is just the tip of the iceberg, as it does not measure lost productivity time for recruiters and managers
nor the impact on the remaining workforce from taking over work after a valuable employee has left.
SPI Research believes the real cost to replace a valuable consultant is more than $150,000 causing a big
bottom-line profit impact and making it hard to increase revenue and margins when firms must backfill
leaving employees.
Table 106 shows Voluntary Attrition trends by geography, vertical and size of organization. Year over
year, ESOs did a better job or employee retention than independents. APac experienced the highest
attrition. By vertical, marketing and advertising firms have the worst attrition and it is only getting
worse. Larger organizations experience more voluntary attrition than smaller ones, but the impact of
voluntary attrition is enormous on the smallest organizations who reported a significant jump in
attrition.

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Table 106: Year-over-year change – Voluntary Attrition

Voluntary Attrition 2017 2018 ▲

Embedded services organizations 8.5% 8.3% 2%
Independent services organizations 7.2% 8.6% -19%
Americas 7.4% 8.5% -14%
EMEA 7.6% 7.4% 2%
APac 8.9% 10.8% -21%
Accounting 7.3% 13.1% -78%
Advertising/Marketing/PR 8.9% 11.4% -28%
Architecture/Engineering 6.5% 7.0% -8%
IT Consulting 8.6% 9.0% -5%
Management Consulting 7.4% 7.3% 1%
PS within SaaS Company 9.6% 9.1% 5%
PS within Software Company 6.9% 7.6% -10%
Average Age – Under 30 4.6% 4.1% 9%
Average Age – 30 – 40 5.2% 5.8% -11%
Average Age – 40 - 50 4.7% 4.9% -2%
Average Age – Over 50 2.9% 6.0% -108%
Source: SPI Research, February 2019

Employee annual attrition – involuntary

Involuntary attrition refers to employees who are laid off or fired. It is calculated based on the number of
employees terminated within the period divided by the weighted average number of employees.

Involuntary attrition typically refers to an employer decision to terminate the employee. Reasons for
involuntary attrition include poor performance, excessive absenteeism or violation of a workplace policy
that is considered a terminable offense. Attrition due to layoffs, reduction in force or job elimination is
typically involuntary because the employment relationship ends based on the employer's circumstances,
not the employee's decision. Involuntary attrition or layoffs may have a temporary positive impact on
per consultant and per employee revenue yield as well as utilization because available work is
performed by fewer employees. However, the long-term effects of involuntary attrition show up in
lower top-line growth and poor employee engagement. Interestingly, voluntary attrition rises directly in
response to involuntary attrition as non-impacted employees fear they will be next or become
disenfranchised with their prospects for long-term career growth.
Table 107 shows involuntary attrition trends by geography, vertical and size of organization.
Remarkably, involuntary attrition increased in almost all geographies and all sizes and types of

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organizations except IT consultancies.

ESOs reported high levels of involuntary Table 107: Year-over-year change – Involuntary Attrition
attrition as did APAC and
Involuntary Attrition 2017 2018 ▲
accountancies. Cloud (SaaS) PS
organizations reported the worst Embedded services organizations 4.8% 6.2% -30%
involuntary attrition at 7.1%. Independent services organizations 4.7% 5.0% -7%

These are very troubling trends Americas 4.9% 5.4% -9%

because the emotional cost of EMEA 3.2% 4.9% -56%
involuntary attrition is significant for APac 3.8% 6.3% -63%
both the terminated employee and his Accounting 3.5% 7.0% -101%
colleagues. High involuntary attrition
Advertising/Marketing/PR 4.9% 5.0% -2%
means firms are not hitting their
Architecture/Engineering 4.1% 4.3% -6%
revenue and growth targets or they
have done a poor job of forecasting IT Consulting 5.7% 5.4% 6%
demand. Involuntary attrition also Management Consulting 4.2% 4.4% -5%
signifies broken recruiting and new hire PS within SaaS Company 3.7% 7.1% -92%
reference checking processes if PS within Software Company 5.1% 5.4% -5%
employees are terminated for cause.
Average Age – Under 30 9.0% 13.3% -48%
With the high cost of finding, hiring and
Average Age – 30 – 40 8.0% 8.7% -10%
ramping a new employee, firing or
laying off an employee should be a last Average Age – 40 - 50 7.5% 7.7% -2%
resort. Average Age – Over 50 3.2% 8.1% -149%
Source: SPI Research, February 2019

Recommend company to Table 108: Impact – Recommend company to friends/family

friends/family
Bid-to- On-time
Recommending one’s company Recommend company Survey win Deal Emp. project
to family and friends as a to friends/family % ratio pipeline attrition delivery
“great place to work” is an Definitely not 0.7% 3.50 50% 12.3% 63.3%
important measure of
employee engagement. Probably not 2.7% 3.63 157% 22.0% 65.0%
Don't know 6.7% 4.53 181% 19.4% 67.6%
Table 108 shows the powerful
impact of workplace Probably 34.8% 4.78 173% 14.3% 74.6%

satisfaction. The good news is Definitely 55.1% 5.12 190% 12.7% 80.3%
55.1% of the organizations in Total/Average 100.0% 4.91 182% 13.9% 77.0%
the survey would highly
Source: SPI Research, February 2019
recommend their work
environment. Great places to work are characterized by high employee engagement, a strong culture of
achievement and confidence in the future.

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Table 109 shows employee

engagement trends by geography, Table 109: Year-over-year change – Recommend company to
friends/family
vertical and size of organization. The
most engaged employees are architects
Recommend company to 2017 2018
and engineers; the least engaged are ▲
friends/family
accountants. Employee engagement
Embedded services organizations 4.28 4.28 0%
diminishes as the size of the
Independent services organizations 4.41 4.47 1%
organization increases. European
employees are more engaged than Americas 4.41 4.41 0%
their counterparts in the Americas and EMEA 4.20 4.43 5%
APAC. Employee engagement dropped APac 4.15 4.32 4%
year over year for PS within software Accounting 4.00 4.12 3%
companies and for firms with more
Advertising/Marketing/PR 4.38 4.53 4%
than 300 PS employees.
Architecture/Engineering 4.49 4.59 2%
Management to employee ratio IT Consulting 4.32 4.46 3%

The management-to-employee ratio Management Consulting 4.45 4.55 2%

compares the number of employees to PS within SaaS Company 4.29 4.34 1%
the number of people managers. PS within Software Company 4.23 4.21 -1%
Management-to-employee ratio (also Source: SPI Research, February 2019
referred to as “management span of
control”) is an important measurement of management effectiveness and is an indication of lean or
excessive management overhead. The average management-to-employee ratio has hovered around 1
to 10 every year.
With a significant upturn in Table 110: Impact – Management to employee ratio
business, firms are starting to
hire again and are finding the Head- % of Project
burden of recruiting and Management to Survey Revenue count emp. duration
employee ratio % growth growth billable (man-months)
ramping new employees is
putting tremendous pressure 1:5 32.2% 7.9% 5.9% 74.3% 22.0

on already stretched 1:10 42.5% 9.8% 7.8% 73.7% 28.8

managers. Few small and 1:15 16.8% 13.6% 11.0% 69.5% 32.3
medium-size firms have 1:20 5.3% 10.6% 8.2% 66.3% 44.0
effective management training Over 1:20 3.1% 10.0% 9.2% 74.7% 53.4
programs, so we are seeing a
Total/Average 100.0% 9.9% 7.8% 72.8% 28.7
significant number of “battle-
Source: SPI Research, February 2019
field” promotions without the
requisite support structure. The Best-of-the-Best organizations are starting to add “team leader”
positions and leadership development programs to groom the next generation of leaders.
SPI Research found Table 110 interesting because it shows the impact of management to employee
ratios. Larger organizations have larger management span of control because presumably they have

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more support systems. The optimal management span of control for growth appears to be 1 to 15 as
these organizations reported the highest employee and revenue growth. A larger span of control
reduces the cost of management overhead. It can be effective if employees clearly understand the work
they are asked to perform and have a rich support structure of mentors, tools and knowledge to guide
them, so they don’t have to rely solely on management for direction.
Accountancies and PS within Software reported the highest management span of control at 11.9 to 1.
Organizations over 300 employees reported a 13 to 1 ratio. Table 11 compares the management-to-
employee ratio to other key performance indicators for the 622 PSOs in the survey. 74.7% of the
organizations maintain a 1:10 or less management to employee ratio. As the ratio increases, so do many
of the key financial metrics. The key to profitable growth is finding the right balance of respected
managers to employees. Integrated business applications and strong communication practices along
with standardized methods, tools and knowledge sharing all contribute to higher productivity with less
reliance on management overhead.

Time to recruit and hire for standard positions (days)

SPI Research considers the length of time to recruit and ramp new employees to be very important
determinants in overall performance, sustainable growth and profit. “Ramping” time is critical because
it not only focuses on making employees productive faster, but also reduces the non-billable time and
cost of other resources who support the hiring and on-boarding process.
Most firms do not track the full cost of
Table 111: Year-over-year change – Time to recruit and hire for
recruiting and hiring, but it is standard positions (days)
substantial (in many cases over 50% of
the first-year new hire base salary). Time to recruit and hire for
This year the average cost of recruiting standard positions (days) 2017 2018 ▲
is 1.1% of total revenue. The most Embedded services organizations 64.9 62.0 4%
mature firms create a dedicated Independent services organizations 59.4 58.9 1%
recruiting function, armed with in- Americas 61.3 59.5 3%
depth skill and personality
EMEA 60.8 64.3 -6%
profiles for targeted positions. Since all APac 49.5 57.6 -16%
indicators point to a continuing talent
Accounting 60.0 57.4 4%
shortage in PS – firms would be well-
Advertising/Marketing/PR 60.0 50.3 16%
served to examine and improve their
recruiting, on-boarding and training Architecture/Engineering 62.9 67.7 -8%
functions. Recruiting must be closely IT Consulting 53.1 54.4 -3%
aligned with the sales pipeline and Management Consulting 63.2 62.7 1%
resource management plan. PS within SaaS Company 73.4 63.1 14%
PS within Software Company 64.0 62.9 2%
Source: SPI Research, February 2019

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Table 111 shows recruiting time trends by geography, vertical and organization size. ESOs take longer to
recruit than independents. Recruiting time is five days longer in EMEA than in the Americas and 7 days
longer than APAC. Architects and Engineers spend the most time in recruiting; marketing and
advertising the least. When comparing the time required to recruit for standard positions (such as
consultants) to other key performance indicators, as it takes longer to recruit and hire, billable
utilization suffers, because current employees must spend more time helping with the process, which
limits their billable time. Project overruns increase because more seasoned employees are tasked with
time to hire and ramp new employees plus new hires are not available to fill required roles and may
make mistakes due to inexperience. A key factor in longer recruiting times is the fact that these
organizations report poor visibility to the sales and resource pipeline. Maintaining a “warm pool” of
candidates with clearly defined job roles is a good practice.

Time for a new hire to become productive (days)

40% of the PSOs in the survey reported over 60 days for a new consultant to become productive. Well-
structured on-boarding and mentoring
programs are mandatory for Table 112: Year-over-year change – Time for a new hire to become
productive (days)
organizations planning on significant
growth. This year the average time for
Time for a new hire to become
a new hire to become productive productive (days) 2017 2018 ▲
increased from 52 to 57 days. 5 more
Embedded services organizations 69.9 70.7 -1%
days in ramping time is significant. At
Independent services organizations 46.7 51.3 -10%
$150 per hour, slower on-boarding
translates to a potential loss in revenue Americas 53.0 58.1 -10%
per consultant of $6,000 per year. This EMEA 53.6 58.6 -9%
is one metric that has shown APac 39.8 47.8 -20%
considerable degradation year over Accounting 45.0 58.2 -29%
year. ESOs take longer than
Advertising/Marketing/PR 37.5 45.0 -20%
independents. PS within SaaS and
Architecture/Engineering 47.8 50.9 -7%
Software companies take the longest to
ramp employees, average 73 days. IT Consulting 47.1 48.1 -2%
Smaller organizations take longer than Management Consulting 38.6 56.3 -46%
larger ones as they require employees PS within SaaS Company 85.2 73.2 14%
to perform more roles and have less PS within Software Company 78.7 72.3 8%
well-defined on-boarding programs.
Source: SPI Research, February 2019

Guaranteed annual training days /

employee
The guaranteed number of training days per employee per year is the average number of training days
budgeted each year per employee. Like the annual training budget, this indicator, while promised to
employees, is not necessarily utilized, but does reflect the organization's commitment to employee
development and shows the organization is investing in the future of its employees.

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Across the benchmark the average cost of training is 1% of total revenue. Best-of-the-Best organizations
mandate more than two weeks of training per year. Almost 10% of firms provide three weeks or more
of training per year. Several Best-of-the-Best firms put new hires through intensive three-month
scenario-based training programs where they work as a team to develop requirements, architect and
implement real-world solutions. PSOs find investments in both technical and interpersonal skill building
pay dividends.
In this year’s benchmark, Table 113: Impact – Guaranteed annual training days / employee
higher numbers of guaranteed
training days positively % of
correlate with net profit (Table Employ ann.
Guaranteed training Survey Deal ee margin
113). Access to high quality
per employee per year % pipeline attrition target EBITDA
training is a major attraction
None 2.9% 147% 17.6% 82.5% 12.5%
driver. Many firms report they
bring together the entire Under 5 days 23.6% 168% 15.3% 89.0% 17.3%
consulting team twice a year 5 - 10 days 44.3% 182% 13.4% 89.0% 16.3%
for skill-building, reinforcing 10 - 15 days 14.9% 186% 13.2% 93.4% 20.4%
the company’s direction and
15 - 20 days 6.7% 207% 11.8% 94.2% 29.2%
strengthening collaboration
and team-building. Team Over 20 days 7.5% 201% 15.3% 94.4% 24.8%
meetings give road warriors a Total/Average 100.0% 182% 13.9% 90.2% 18.5%
break and allow them to
Source: SPI Research, February 2019
establish new friendships and
partnerships while rejuvenating. Several of the Best-of-the-Best firms include significant others and
spouses in their annual events to thank them for holding down the fort while their road-warrior partners
delight clients.

Well-understood career
path for all employees Table 114: Impact – Well-understood career path for all employees

The survey asked if the Well-understood Rec. to

organization provides a well career path for all Survey Emp. family/ billable
understood employee career emp. % attrition friends util. EBITDA
path, meaning as employees Strongly Disagree 4.6% 17.6% 3.96 63.6% 21.4%
are hired and move within Disagree 15.9% 17.7% 3.93 64.2% 17.0%
different roles, is there a
Neither Agree/Disagree 36.2% 13.7% 4.31 68.6% 22.2%
planned next step for their
career progression (Table Agree 33.8% 13.0% 4.64 71.6% 23.5%
114). This KPI is important Strongly Agree 9.6% 11.2% 4.84 72.7% 27.4%
because it shows the firm’s Total/Average 100.0% 14.0% 4.39 69.1% 22.3%
commitment to employee skill
Source: SPI Research, February 2019
growth and career

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development. Even though this question is subjective, and answered by PS executives, who might have
a bias, the results show how important career development is.
It shows employees with a well-defined career path are more likely to recommend their firm as a great
place to work and are less likely to leave. Interestingly, employees work harder and are happier at firms
with well-defined career paths. Numerous studies have shown that employees become increasingly
productive with longer tenure so keeping them engaged is an investment worth making.

Employee billable utilization

SPI Research defines employee utilization on a 2,000 hour per year basis. Employee utilization is
calculated by dividing the total annual billable hours by 2,000. This key performance indicator is central
to organizational profitability. Utilization is consistently the most measured key performance indicator
but must be examined in conjunction with overall revenue and profit per person along with leading
indicators like backlog and size of the sales pipeline to become truly meaningful. Utilization is a major
indicator of opportunity and workload balance. It provides a signal to expand or contract the workforce.
To improve margins, PS executives must continually focus on increasing employee billable utilization, as
well as increasing the percentage of billable employees. The primary gain from increased utilization is a
significant increase in net profit. Table 115 shows the actual (not theoretical) benefits this year’s firms
experienced from increasing employee utilization. This year the results favored organizations who
reported billable utilization over 80%. This level of utilization produced the best on-time project
delivery; more revenue per consultant; higher achievement of annual revenue and margin targets and
the best net margins.
Table 115: Impact – Employee Billable Utilization

On-time % of ann.
Employee Survey project Project Ann. rev./ % of ann. margin
utilization % delivery overrun consult. (k) rev. target target EBITDA
Under 50% 6.7% 66.1% 13.3% $173 83.0% 83.8% 20.1%
50% - 60% 13.5% 73.1% 8.2% $184 90.2% 86.9% 14.3%
60% - 70% 27.6% 74.1% 8.9% $207 94.0% 90.0% 18.5%
70% - 80% 32.5% 79.9% 7.9% $212 95.0% 91.5% 18.4%
80% - 90% 14.3% 80.6% 7.7% $226 96.0% 92.1% 20.7%
Over 90% 5.4% 86.1% 8.7% $197 100.2% 95.0% 23.1%
Total/Average 100.0% 76.9% 8.6% $205 93.7% 90.2% 18.6%
Source: SPI Research, February 2019

Understandably, firms reporting the highest levels of utilization also deliver the largest projects, making
it easier to keep utilization high without the churn associated with short projects. Running a growing PS
organization at greater than 80% utilization can produce strong profits but may not be sustainable over
the long run as employees burnout and leave. At the other end of the spectrum, organizations who
reported less than 60% utilization reported the some of the worst metrics. The key to success is to have
the right balance of meaningful work with enough time set aside for skill and client relationship building.

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Although PS firms would like to Table 116: Year-over-year change – Employee Billable Utilization
abandon the billable utilization metric
(and all the accompanying time tracking Employee Billable Utilization 2017 2018 ▲
it entails), unfortunately there is no
Embedded services organizations 70.7% 66.0% -7%
other metric which provides as good a
Independent services organizations 71.8% 71.4% -1%
picture of workforce productivity.
Perhaps as more and more firms shift Americas 71.4% 69.6% -3%
to subscription and fixed price work the EMEA 71.8% 70.1% -2%
focus on billable utilization will decline APac 72.3% 70.0% -3%
but if this is the case firms must ratchet Accounting 71.0% 73.5% 4%
up their focus on project accounting
Advertising/Marketing/PR 71.3% 72.0% 1%
and budget to actual performance. But
Architecture/Engineering 70.4% 69.9% -1%
here again, how can budget to actual
performance be measured without IT Consulting 74.7% 72.6% -3%

tracking work effort? Management Consulting 71.5% 71.7% 0%

PS within SaaS Company 67.1% 64.5% -4%
Table 116 depicts billable utilization by
type of organization, geography, PS within Software Company 70.1% 67.8% -3%
vertical and size. Independents bill Source: SPI Research, February 2019
more hours than embedded service
organizations. For the first time, EMEA headquartered firms billed more hours than their counterparts in
the Americas and APAC. Accountancies bill the most hours, SaaS bills the least. Billable utilization
increases with organization size as larger firms do not require employees to perform non-billable tasks.

Annual fully loaded cost per consultant

A year ago, SPI added a question regarding the fully loaded annual cost per consultant. Fully loaded cost
includes base and variable
compensation as well as the Table 117: Impact – Annual fully loaded cost per consultant
cost of fringe benefits and
healthcare. Almost one-third Ann. Head-
of firms reported a fully Annual fully loaded Survey rev. count Billable Project
loaded cost of $100 to cost per consultant % growth growth util. margin
$120,000. Only 2.4% pay Under $100k 24.1% 7.5% 4.8% 66.6% 34.1%
more than $200,000. 55% pay $100k - $120k 31.3% 10.2% 8.7% 68.5% 34.6%
$120,000 or less and 45% pay
$120k - $150k 28.9% 10.5% 8.1% 71.9% 36.6%
more than $120,000.
Interestingly, the firms that $150k - $200k 13.4% 11.7% 8.7% 72.9% 35.7%
pay the most are also growing Over 200k 2.4% 16.3% 17.5% 70.0% 39.5%
the fastest.
Total/Average 100.0% 10.0% 7.8% 69.7% 35.4%

Source: SPI Research, February 2019

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Annual Hours Worked

Always one of the most anticipated metrics from the annual PS Maturity™ benchmark survey is the
breakdown of work hours. Most organizations put a lot of focus on consultant time spent on both
billable and non-billable tasks. Across the benchmark, billable utilization declined from 1,500 hours on
average in 2017 to 1,428 in 2018 (Table 118). Embedded organizations reported a sharp decrease in
billable hours from 1,467 to 1,320. SaaS PS led this decline with only 1,261 billable hours!
Independents also reported a decrease in billable hours from 1,510 to 1,480. This decrease in average
billable hours means across the benchmark, firms lost almost two work weeks of billable time per
employee. With average bill rates of at least $150 per hour this means firms saw a decrease in billable
hours per consultant of $12,000 per year!
The surge in non-billable hours can be attributed to 21 more training hours; 25 more administrative
hours and a whopping 56 more hours spent on non-billable sales support and project hours! These are
some of the worst results we have ever seen – they are not sustainable.
Table 118: Hours Worked by Organization Type and Geographic Region

Hours Worked 2017 2018 ESO PSO Amer. EMEA APac

Vacation / personal / holiday hours 164 169 164 171 159 228 196
Education / training hours 59 80 90 76 79 88 86
Administrative hours 132 157 193 140 160 149 132
Non-billable bus. dev. sales support 110 126 145 117 124 137 131
Non-billable project hours 111 151 193 131 154 114 183
Total Billable hours 1,500 1,428 1,320 1,480 1,437 1,375 1,397
Billable hours on-site 863 757 633 817 761 683 837
Billable hours off-site 637 671 687 663 676 692 560
Total Billable hours 1,500 1.428 1,320 1,480 1,437 1,375 1,397
Total hours 2,076 2,111 2,105 2,114 2,113 2,091 2,125
Source: SPI Research, February 2019

The number of hours worked on-site decreased from 863 to 757 hours while off-site billable hours
increased from 637 to 671. With these changes billable hours averaged 1,428; down from the last five
year’s average of 1,442 and considerably below the 2017 average of 1,500.
Across all job titles, billable hours average 1,480 for independents compared to 1,320 hours for
embedded service organizations. The average ESO consultant spends 338 hours (8.45 weeks) on non-
billable project and business development activities while the independents spend 248 hours.
The table shows consultants in the Americas were billable 1,437 hours; EMEA based consultants billed
the least hours at 1,375 and Asia Pacific consultants billed 1,397 hours. Workaholic Americans take
shorter vacations; spend less time in training; and more time on non-billable administration. This year
EMEA firms invested the most in vacations and education and training but they also spent the most
hours in non-billable business development/sales support. APac firms deliver the most hours on-site.

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Non-billable administrative time increased year over year to 126 hours. Excessive administrative time
usually results from not having enough billable work combined with poor systems and processes.
When examining annual hours by vertical it is clear to see best and worst practices. Embedded SaaS PS
organizations spend the most non-billable hours in administration and non-billable project hours leading
to the lowest number of billable hours in the survey at 1,261! Charter confusion and conflict within
cloud software companies means valuable consultants spend an inordinate amount of time in meetings,
performing sales support and non-billable project activities.
Table 119: Hours Worked by Vertical Market

IT Arch./ Mgmt. Software SaaS

Hours Worked Consulting Engineering Consulting PS PS
Vacation / personal / holiday hours 171 157 198 160 160
Education / training hours 88 47 81 88 84
Administrative hours 114 151 157 190 222
Non-billable bus. dev. sales support 103 103 139 118 154
Non-billable project hours 133 122 86 170 247
Total Billable hours 1,509 1,523 1,428 1,356 1,261
Billable hours on-site 749 996 759 698 503
Billable hours off-site 760 527 668 659 758
Total Billable hours 1,509 1,523 1,427 1,357 1,261
Total hours 2,118 2,103 2,089 2,082 2,129
Source: SPI Research, February 2019

Table 120: Hours Worked by Vertical Market

Advertise / Hardware
Hours Worked Mktg / PR Accounting VAR PS Other PS
Vacation / personal / holiday hours 174 159 145 202 168
Education / training hours 78 128 71 105 83
Administrative hours 179 215 170 155 142
Non-billable bus. dev. sales support 126 117 172 176 158
Non-billable project hours 133 125 139 93 203
Total Billable hours 1,396 1,461 1,391 1,344 1,370
Billable hours on-site 763 1,030 717 791 710
Billable hours off-site 633 431 673 553 661
Total Billable hours 1,396 1,461 1,490 1,344 1,371
Total hours 2,087 2,204 2,087 2,075 2,125
Source: SPI Research, February 2019

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It is inevitable that cloud growth rates will have to level off at some point; when they do, they will need
to focus on improving the productivity of their PS organizations. Accountants work the most hours,
unfortunately a lot of it is spent in non-productive administration (215 hours). Green shading
represents “best”, red shading “worst”. Architects bill the most hours; SaaS PS bills the least. Hardware
and Software ESOs work the fewest annual hours.

Employee Location
Changing workforce demographics are fascinating as they depict a changing work world, but this
benchmark does not reflect dramatic changes in employee’s primary work location. For the past 5 years
the percentage of headquarters-based employees has remained relatively constant near 50%. So too
has the percentage of employees who work from home at nearly 25%. Over this same time horizon,
despite all the rhetoric, the % of offshore workers has stayed relatively constant at 5%. Since many PSOs
are now starting to focus on college hiring they are finding young workers perform better in office
environments where they can get the support and mentoring, they need to grow. Not surprisingly with
protectionism growing in the Americas and EMEA, only a small percentage of workers were located in
offshore locations. 28.5% of American PS workers work from home while only 7.3% of APac workers do.
EMEA has the largest concentration of employees working from a headquarters office (57.4%).
Embedded PSOs continued to increase their reliance on offshore workers from 6.9% to 7.8% while
independents increased their offshore workers from 4.3% to 4.9%. Many PS firms are reducing their
usage of offshore workers as labor costs and turnover have skyrocketed in favored offshore destinations
like India. Offshore quality and security concerns are also starting to offset offshore labor cost
advantages.
Table 121: Employee Location by Organization Type and Geographic Region

Employee Location 2017 2018 ESO PSO Amer. EMEA APac

Headquarters 53.7% 45.5% 37.3% 49.4% 45.3% 45.2% 49.0%
Branch offices 20.1% 21.9% 20.8% 22.4% 21.0% 22.4% 32.3%
Home based 21.3% 26.8% 34.2% 23.3% 28.5% 25.1% 7.3%
Offshore / Nearshore 4.9% 5.8% 7.8% 4.9% 5.2% 7.3% 11.4%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

Table 122 shows the use of offshore workers is most prevalent in the largest firms and least prevalent in
the smallest firms. Smaller firms favor having employees report to the headquarters location while the
majority of employees work from branch offices in the largest firms. The smallest firms have the most
home-based employees as they are able to hire and assimilate senior hires wherever they can find them.

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Table 122: Employee Location by Organization Size

Under 101 - 301 - Over

Employee Location 10 10 - 30 31 - 100 300 700 700
Headquarters 53.4% 53.6% 53.7% 41.7% 35.8% 25.2%
Branch offices 4.2% 13.4% 14.6% 31.5% 30.7% 37.5%
Home based 40.3% 30.6% 28.4% 20.8% 24.9% 21.4%
Offshore / Nearshore 2.1% 2.4% 3.4% 5.9% 8.7% 15.9%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

By vertical market, architects and engineers favor headquarters-based employees while hardware
consultants predominantly work from branch offices. Hardware, Software and IT consultancies use the
most offshore workers, closely followed by IT consultancies. Architects and embedded software PS use
the fewest offshore workers. Management consultants are predominantly home-based.
Table 123: Employee Location by Vertical Market

IT Arch./ Mgmt. Software SaaS

Employee Location Consulting Engineering Consulting PS PS
Headquarters 38.5% 71.8% 47.8% 35.5% 42.3%
Branch offices 23.5% 22.4% 14.3% 19.7% 18.8%
Home based 28.7% 5.1% 36.5% 34.9% 33.0%
Offshore / Nearshore 9.2% 0.8% 1.4% 9.9% 5.9%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

Table 124: Employee Location by Vertical Market

Advertise / Hardware
Employee Location Mktg / PR Accounting VAR PS Other PS
Headquarters 60.2% 51.0% 25.9% 31.9% 38.7%
Branch offices 16.1% 22.7% 23.6% 36.4% 29.2%
Home based 16.4% 25.0% 47.5% 21.2% 26.2%
Offshore / Nearshore 7.4% 1.3% 3.0% 10.5% 5.9%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: SPI Research, February 2019

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9. Service Execution Pillar

The Service Execution Pillar measures the quality, efficiency

and repeatability of service delivery. It focuses on the core
activities for planning, scheduling and delivery of service
engagements. Regardless of the maturity of every other area
of the PSO it will not succeed unless it can successfully and
profitably deliver services, with an emphasis on quality,
timeliness and customer value.
The Service Execution pillar is where money is made in professional services. Work must be scoped, bid,
sold, delivered and invoiced in order to generate revenue and maximize project margin. The alignment
of sales, service and finance is critical for success. All project-related information (time, expense, project
details and knowledge) must be captured to be invoiced and to improve the next service delivered.
In an increasingly competitive consulting marketplace, success most often comes down to operational
excellence – with visibility and management controls in place to ensure effective resource and project
management. Done right, gross project margins of more than 60% are possible. Done wrong, project
yields can drop to single digits, or go negative.

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Table 125 highlights the maturity levels in the Service Execution pillar, as the PSO moves from basic
reactive “all hands-on deck” project delivery to greater efficiency, repeatability and higher quality
service execution.
Table 125: Service Execution Performance Pillar Mapped Against Service Maturity

Level 1 Level 2 Level 3 Level 4 Level 5

Initiated Piloted Deployed Institutionalized Optimized
No scheduling. Skeleton PSA deployed for resource Integrated project and Integrated solutions.
Reactive. Ad hoc. methodology in and project management. resource management. Continual checks
Heroic. place. Centralized Collaborative portal. Effective scheduling. and balances to
Service Execution

Scheduling by resource mgmt. Earned Value Analysis. Using portfolio assure superior
spreadsheet. No Initiating project Project dashboard. Global management. Global utilization and bill
consistent project mgmt. and technical Project Management PMO. Global project rates. Complete
delivery methods. skills. Starting to Office, project quality dashboard. Global visibility to global
No project quality measure project reviews and Knowledge project quality.
controls or satisfaction and measurements. Effective Management. Global Multi-disciplinary
knowledge harvest knowledge. change management. resource management. resource
management. management.

Source: SPI Research, February 2019

Strategic Resource Management for PSOs

Given market growth and an increasing talent shortage, effective resource management has become
critical as the supply of qualified consultants is outstripped by the demand for services. Improving and
maintaining high levels of billable utilization is a constant challenge requiring a delicate balance between
demand (sales) and supply (delivery).

Resource management business processes

One of the most important elements of service execution is resource management and scheduling. SPI
Research has developed a “Resource Management Maturity Model” in Table 126:
∆ Sales Pipeline: Integration of the sales project pipeline with resource requirements and
availability.
∆ Resource Management: The process for scheduling and deploying resources. Resource
management can be centralized or decentralized.
∆ Functional Interlock: Alignment between the sales project pipeline, the resource management
process, the recruiting process, the human resource onboarding and skill development processes
and the resources themselves.
∆ Human Resource Processes: Recruiting, onboarding, ramping, and resource skill development.
∆ Resources: The consultants and contractors available to deliver projects and engagements.

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Table 126: The Resource Management Maturity Model

Level 1 Level 2 Level 3 Level 4 Level 5

Initiated Piloted Deployed Institutionalized Optimized
No scheduling. Skeleton PSA deployed for resource Integrated project and Integrated solutions.
Reactive. Ad hoc. methodology in and project management. resource management. Continual checks
Heroic. Scheduling place. Beginning to Collaborative portal. Earned Effective scheduling. and balances to
Service Execution

by spreadsheet. centralize resource value analysis. Project Using portfolio ensure superior
No consistent mgmt. Initiating dashboard. Global Project management. Global utilization and bill
project delivery project mgmt. Management Office, project PMO. Global project rates. Complete
methods. No discipline. Starting to quality reviews and dashboard. Global visibility to global
project quality measure project measurements. Effective knowledge management. project quality. Multi-
controls or satisfaction and change management. Global resource disciplinary resource
knowledge harvest knowledge. management. management.
management.
Sales pipeline and Standalone CRM CRM and resource Fully integrated CRM and Optimized and
forecast is and resource management applications Resource management. integrated CRM and
Sales Pipeline

disconnected from forecast. Limited deployed. Sales starts High levels of pipeline resource
scheduling. visibility into resource forecasting future resource forecast accuracy. Ability management. Sales
Reactive or no schedule or available and skill requirements by to dynamically and visibility into resource
sales resource skills. engagement. automatically map the availability and skills.
demand forecast sales forecast to Strong analytic and
or plan. resource requirements. query tools.
Reactive resource Weekly resource Centralized resource Centralized resource Completely
brokering and brokering meetings management function management function optimized and
Functional

bartering. Sales to assign resources handles the majority of handles resource seamless sales ->
Interlock

picks and commits and discuss future resource requests and requests and schedules. resource
resource projects and schedules. At least manual Integrated with HR for management ->
“favorites.” Time- resources integration between CRM recruiting and resource recruiting -> skill and
consuming manual requirements. and PSA. skill development. career development
scheduling. processes.
Reactive and ad Project initiation and Central PMO and resource Fully integrated systems Global, on-site, off-
hoc scheduling. closeout processes. management provide and tools to support site roles. Ability to
No visibility to Some visibility into methodology guidance and career and skill growth. view and bid on
future projects. No future projects. oversight. Ability to input Self-service employee preferred
Consulting Resources

career or skill plan. Some ability to plan skill and role preferences. portal allows employees assignments.
Broad job and express project Visibility to upcoming to continually maintain Employees have
requirements but preferences. Training projects. Reasonable notice and update skills and input to and control
limited training or support to improve given for schedule changes. preferences. Visibility to over their career and
support. skills. Integrated career & skill preferred assignments. skill progression.
Firefighting leads development plans. Career planning and Specialized
to consultant training. Predictable horizontal, vertical
burnout. schedule. and technical roles.
Career growth. High
employee
satisfaction.

Source: SPI Research, February 2019

Which resource management strategy is best?

SPI’s research shows there may not be "one magic bullet" resourcing strategy that is clearly superior to
all others. The five strategies that follow enable PSOs to manage talent and fulfill client demands.
Although centralized resource management is the most prevalent strategy, each organization must
create a resourcing strategy that works best for their business, with the ultimate goal of increasing
utilization and client and employee satisfaction.

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1. Centrally-managed – Most resource management pundits favor "centralized" resource

management. It provides superior management visibility into the entire project backlog and level
of skills required both today and in the future. In centralized resource management, a dedicated
resource management team is responsible for managing the master resource schedule and
making staffing decisions based on skills, availability, location, cost, etc. Centralized management
is the most efficient way to manage a large workforce. In this year’s benchmark, centralized
management produced high average billable utilization as well as good project margins and on-
time project delivery and net profit (EBITDA).
2. Local resource management – Local resource management is the preferred form of resourcing for
young organizations where the workforce is small enough to foster real esprit de corps, and
employees wear many hats. Smaller organizations can't afford the overhead of a dedicated
resource management function, as relationships and roles are fluid, requiring more local control
and finesse. Staffing locally also provides the benefit of closer client relationships and less travel.
3. By horizontal skill sets – Managing resources by horizontal skill set is useful for developing best
practices, repeatable processes and shared knowledge. For example, many firms have project and
program managers report directly or indirectly to the Project Management Office (PMO). By
building affinity around "birds of a feather," project managers or specialized consultants can more
easily share best practices and standardize methodologies, templates, etc. As organizations grow,
a horizontal or competency-based overlay reporting structure can help firms develop repeatable
best practices and deep, shared domain expertise while still enjoying the efficiency of centralized
management.
4. Account-based – Resource management by account may be a good strategy for very large
accounts where there is a strong backlog of projects, but account-based resourcing can cause big
issues if account revenue dries up. An example was Electronic Data Systems' (EDS) reliance on
revenue from General Motors. As the relationship with General Motors soured, and its fortunes
began to wane, Electronic Data Systems was left holding the bag. The other drawback to account-
based resourcing is that it narrows consultant range of experience as teams are not exposed to
different business models and client challenges.
5. Centers of excellence – The current trend towards vertical Centers of Excellence (COE) was
pioneered by Accenture over the last decades. The advantage of industry-specific "Centers of
Excellence" is the development of deep industry domain knowledge. In theory, each Center of
Excellence acts as a clearinghouse for specialized knowledge, expertise and solutions. Clients and
prospects delight in seeing a "Vision of the Future" for their unique industry challenges. The
downside of COE can be excessive overhead, the creation of an ivory tower mentality along with
the inability to learn from emerging new horizontal and vertical trends. Further, use of horizontal
skills sets and technologies outside the COE can become cumbersome and inefficient. Centers of
Excellence are favored for outsourced consulting – particularly development and managed service
centers where consultants are collocated to maximize collaboration, design and quality control
while minimizing cost.

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To improve utilization, PSOs must improve resource management effectiveness. As the following chart
shows, there are pluses and minuses to different resource management strategies. Green shading
indicates “Best” while red shading indicates “Worst” based on responses from 622 firms. This year it’s a
toss-up between Centrally Managed and By Horizontal skill set for the best results. “Other” indicating
ad hoc or “as needed” resource scheduling delivered the worst results, particularly if resources are
hoarded by account, prohibiting redeployment to more lucrative clients and services.
Table 127: Impact – Resource Management Strategy

On-time Std. del. Project

Resource Mgmt. Survey Revenue Billable proj. Project method. duration
Strategy % growth utilization delivery overrun used (man-months)
Centrally Managed 46.4% 10.2% 70.9% 78.4% 8.1% 68.6% 26.9
Locally Managed 22.3% 9.9% 69.0% 74.6% 8.7% 68.0% 26.4
Center of Excellence 8.8% 9.3% 68.8% 78.8% 8.5% 63.2% 38.6
By Account 10.7% 9.2% 68.5% 75.9% 9.4% 55.8% 32.8
By Horizontal Skill Set 6.8% 11.2% 70.0% 75.8% 8.8% 63.7% 26.7
Other 5.0% 7.9% 66.3% 73.3% 10.5% 62.8% 23.6
Total / Average 100.0% 9.9% 69.7% 76.9% 8.6% 66.0% 28.2
Source: SPI Research, February 2019

Survey Results

Table 128 shows 5-year trends for Service Execution KPIs. The table shows the number of projects
delivered per year per firm at an all-time high, although the average revenue per project is at its lowest
level since SPI Research began collecting this KPI. On-time project delivery has deteriorated slightly,
which PS executives should note. And while project margins are still under 35%, they have improved
significantly from 2017 when they hit an all-time low. Project and subcontractor margins increased
year-over-year, but they are still lower than their peak in 2014. Project profitability was best in 2014
and worst in 2017 but service delivery effectiveness received the best scores in 2018.
This benchmark highlights services-driven organizations have become more focused on efficiency than
they were five years ago. Project overruns go down as the use of standardized delivery methodologies
increase. Green shading indicates the best annual performance for each metric. Red shading indicates
the worst performance.
Table 128: Service Execution Pillar 5-year trend

Key Performance Indicator (KPI) 2014 2015 2016 2017 2018

Project staffing time (days) 9.41 10.40 8.68 8.94 9.14
Number of projects delivered per year NA NA 372 398 871
Average revenue per project (k) $189 $225 $163 $171 $152
Concurrent projects managed by PM 4.23 5.77 5.56 6.18 6.04

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Key Performance Indicator (KPI) 2014 2015 2016 2017 2018

Project staff size (people) 4.85 4.70 4.17 4.45 4.36
Project duration (months) 5.57 6.21 5.44 6.37 5.71
Projects delivered on-time 78.3% 76.1% 78.1% 79.8% 76.9%
Projects canceled 1.7% 2.6% 2.0% 2.0% 2.1%
Project overrun 8.9% 10.0% 8.4% 8.3% 8.6%
Use a standardized delivery methodology 66.2% 64.6% 71.2% 69.7% 66.1%
Project margin for time & materials projects 36.3% 33.7% 35.5% 31.7% 34.9%
Project margin for fixed price projects 35.8% 33.0% 34.9% 31.6% 34.4%
Project margin — subcontractors, offshore 28.4% 26.2% 28.3% 23.0% 25.8%
Effectiveness of resource management process 3.59 3.60 3.59 3.50 3.63
Effectiveness of estimating processes and reviews 3.37 3.55 3.56 3.55 3.56
Effectiveness of change control processes 3.26 3.44 3.45 3.38 3.45
Effectiveness of project quality processes 3.36 3.58 3.61 3.62 3.69
Effectiveness of knowledge management processes 3.01 3.36 3.23 3.31 3.42
Source: SPI Research, February 2019
Table 129 shows independents staff faster than embedded service organizations, which makes sense
due to the complexities of hardware and software installation that the embedded service organizations
must contend with. North American-based firms deliver almost four times as many projects as EMEA-
based firms and twice as many as APAC headquartered firms. This year APAC delivered the largest
projects, averaging 30 man-months; the Americas, averaged 25 man-months compared to 19.7 man-
months in EMEA.
Table 129: Service Execution KPIs by Organization Type and Geographic Region

Key Performance Indicator 2017 2018 ESO PSO Amer. EMEA APac
Surveys 456 622 193 429 516 68 38
Project staffing time (days) 8.94 9.14 9.35 9.03 8.83 9.28 12.92
Number of projects delivered per year 399 871 465 1,059 981 228 513
Average revenue per project (k) $171 $152 $130 $163 $158 $108 $153
Concurrent projects managed by PM 6.18 6.04 6.99 5.59 6.23 5.16 5.03
Project staff size (people) 4.45 4.36 3.93 4.55 4.31 4.03 5.50
Project duration (months) 6.37 5.71 5.16 5.97 5.83 4.89 5.53
Projects delivered on-time 79.7% 76.9% 71.8% 79.3% 76.7% 78.3% 77.2%
Projects canceled 2.0% 2.1% 2.4% 2.0% 2.2% 1.6% 1.8%
Project overrun 8.2% 8.6% 10.3% 7.8% 8.5% 9.3% 8.1%
Use a standardized delivery method. 69.7% 66.1% 65.9% 66.2% 66.1% 66.3% 66.0%
Project margin for T&M projects 31.7% 34.9% 35.3% 34.7% 34.9% 35.3% 33.8%

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Key Performance Indicator 2017 2018 ESO PSO Amer. EMEA APac
Project margin for fixed-price projects 31.8% 34.4% 34.3% 34.5% 34.6% 32.8% 34.7%
Project margin — subs., offshore 23.1% 25.8% 29.3% 24.1% 25.2% 28.5% 28.0%
Effect. of resource mgmt. process 3.50 3.63 3.59 3.65 3.62 3.71 3.68
Effect. of estimating proc. and reviews 3.56 3.56 3.51 3.58 3.56 3.57 3.45
Effect. of change control processes 3.38 3.45 3.38 3.48 3.45 3.44 3.52
Effect. of project quality processes 3.62 3.69 3.59 3.73 3.69 3.67 3.61
Effect. of knowledge mgmt. processes 3.31 3.42 3.38 3.43 3.41 3.36 3.55
Source: SPI Research, February 2019

Project cancellation rates have hovered around 2%. Today, PSOs rarely have projects cancelled, but
when they do, they throw a monkey wrench into overall operations. Resources must be reallocated,
and costs may be absorbed by the PSO. EMEA led the way with the fewest projects canceled (1.6%)
while the Americas experienced the most (2.2%).
The nature of projects is shifting towards more configuration, workflow analysis, user interfaces and
report design away from the complex, custom mega projects of the past making them somewhat easier
to manage and keep within scope. A host of accelerators, configuration, project and knowledge
management tools have come to market to enhance knowledge sharing and collaboration while
facilitating more natural oversight, guidance and real-time quality reviews to mitigate risks.
Table 130 shows the differences in service execution metrics by size of organization. As one might
expect, the smallest organizations staff faster than larger organizations, and do a good job of delivering
projects on-time. The number, size and complexity of projects increases proportionately to organization
size with the largest organizations delivering projects averaging 39-man months (over 3 years) but
unfortunately on-time project delivery diminishes with organization size. The downside of larger
organizations is clearly shown in decreasing on-time project delivery and increasing project cancellation
rates which add up to depress project margins. This chart clearly shows why the consulting industry is
primarily comprised of small boutique firms as project margins and project quality metrics such as on-
time delivery and cancellation rates are very respectable for the smallest organizations.
Table 130: Service Execution KPIs by Organization Size

Under 101 - 301 - Over

Key Performance Indicator 10 - 30 31 - 100
10 300 700 700
Surveys 53 123 166 143 54 83
Project staffing time (days) 6.22 6.90 8.54 10.20 10.15 12.69
Number of projects delivered per year 40 122 214 2,247 1,475 1,197
Average revenue per project (k) $58 $104 $117 $196 $209 $238
Concurrent projects managed by PM 5.61 6.57 6.05 5.87 6.63 5.41
Project staff size (people) 2.64 3.38 4.03 4.75 5.43 6.03
Project duration (months) 4.67 5.49 5.39 6.13 5.89 6.48

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Under 101 - 301 - Over

Key Performance Indicator 10 - 30 31 - 100
10 300 700 700
Projects delivered on-time 80.7% 76.0% 77.6% 76.8% 77.1% 74.9%
Projects canceled 1.4% 1.8% 2.2% 1.9% 2.3% 3.2%
Project overrun 7.3% 8.8% 8.9% 9.0% 6.8% 8.8%
Use a standardized delivery methodology 59.3% 65.9% 70.4% 67.7% 67.1% 58.3%
Project margin for time & materials projects 39.2% 32.2% 36.7% 35.2% 33.4% 32.9%
Project margin for fixed price projects 38.6% 32.0% 36.0% 34.7% 32.8% 32.7%
Project margin — subcontractors, offshore 28.6% 23.8% 26.8% 24.3% 26.3% 26.3%
Effectiveness of resource management process 3.78 3.59 3.60 3.58 3.78 3.65
Effectiveness of estimating processes and reviews 3.59 3.43 3.53 3.62 3.76 3.55
Effectiveness of change control processes 3.63 3.36 3.32 3.48 3.71 3.51
Effectiveness of project quality processes 3.67 3.57 3.75 3.66 3.84 3.65
Effectiveness of knowledge mgmt. processes 3.49 3.45 3.35 3.32 3.58 3.51
Source: SPI Research, February 2019

Tables 131 and 132 show service execution metrics by vertical market. Remarkably, many service
execution metrics are very similar across markets. IT Consultancies and “Other” deliver the largest
projects averaging over $200K. SaaS PS delivers the smallest projects, averaging $61K. Management
consultancies do the best job of on-time project delivery (81.8%) while VARs and SaaS PSOs reported the
worst on-time project delivery at 68%. Management consultancies reported the best time-and-
materials project margins at 36.8%; VARS delivered the best fixed price margins (40%) and hardware PS
delivers the best subcontractor margins (31.5%). The green and red shading indicates the best and worst
metrics by vertical.
Table 131: Service Execution KPIs by Vertical Market

IT Arch./ Mgmt. Software SaaS

Key Performance Indicator
Consulting Engineering Consulting PS PS
Surveys 156 100 75 78 70
Project staffing time (days) 10.07 7.47 8.37 10.51 8.15
Number of projects delivered per year 232 458 159 458 443
Average revenue per project (k) $201 $110 $138 $177 $61
Concurrent projects managed by PM 4.45 7.83 4.84 6.71 7.23
Project staff size (people) 4.78 4.54 3.49 4.13 3.47
Project duration (months) 5.62 7.65 4.70 5.52 4.56
Projects delivered on-time 78.9% 79.3% 81.8% 74.2% 68.0%
Projects canceled 2.0% 2.2% 1.3% 2.0% 2.7%
Project overrun 8.8% 9.1% 5.2% 9.4% 10.8%
Use a standardized delivery methodology 66.8% 70.7% 65.8% 63.9% 68.4%

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IT Arch./ Mgmt. Software SaaS

Key Performance Indicator
Consulting Engineering Consulting PS PS
Project margin for time & materials projects 36.5% 31.7% 36.8% 34.5% 35.9%
Project margin for fixed price projects 36.0% 29.4% 39.6% 32.9% 34.6%
Project margin — subcontractors, offshore 28.0% 14.1% 27.2% 29.6% 29.1%
Effectiveness of resource management process 3.71 3.44 3.80 3.66 3.57
Effectiveness of estimating processes and reviews 3.69 3.40 3.72 3.63 3.40
Effectiveness of change control processes 3.62 3.27 3.57 3.52 3.22
Effectiveness of project quality processes 3.65 3.86 3.90 3.66 3.56
Effectiveness of knowledge mgmt. processes 3.37 3.66 3.43 3.45 3.32
Source: SPI Research, February 2019

Table 132: Service Execution KPIs by Vertical Market

Advertise / Hardware
Key Performance Indicator Accounting VAR Other PS
Mktg / PR PS
Surveys 20 19 14 11 79
Project staffing time (days) 6.53 11.67 8.27 12.50 9.20
Number of projects delivered per year 904 2,834 293 1,295 3,876
Average revenue per project (k) $77 $82 $128 $166 $203
Concurrent projects managed by PM 5.12 6.73 7.50 5.80 6.45
Project staff size (people) 4.44 4.80 2.88 4.15 5.36
Project duration (months) 4.50 5.00 4.62 5.70 6.56
Projects delivered on-time 80.8% 72.1% 68.8% 80.0% 77.0%
Projects canceled 2.9% 2.6% 1.5% 3.1% 2.4%
Project overrun 6.3% 6.8% 11.0% 10.0% 7.9%
Use a standardized delivery methodology 58.8% 56.7% 77.7% 54.0% 62.8%
Project margin for time & materials projects 35.0% 37.9% 36.2% 36.5% 32.0%
Project margin for fixed price projects 38.3% 36.4% 40.0% 33.5% 31.7%
Project margin — subcontractors, offshore 30.0% 22.5% 30.4% 31.5% 22.6%
Effectiveness of resource management process 3.88 3.73 3.69 3.30 3.51
Effectiveness of estimating processes and reviews 3.65 3.27 3.46 3.30 3.47
Effectiveness of change control processes 3.19 3.73 3.46 2.90 3.44
Effectiveness of project quality processes 4.00 3.91 3.31 3.30 3.53
Effectiveness of knowledge mgmt. processes 3.63 4.00 3.38 3.10 3.17
Source: SPI Research, February 2019

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By vertical, management consultancies reported the best overall service execution metrics with high
marks for on-time project delivery; low cancellation rates and limited project overruns adding up to the
best time and materials project margins of 36.8%.
Marketing and advertising agencies deliver hundreds, if not thousands, of small projects per year.
Because of the creative nature of their work their use of standardized methods and tools is very low
(58.8%). The whole field of marketing and advertising is changing dramatically with the rich brand-
building agency retainers of the past giving way to sophisticated multi-media campaigns combining
search engine optimization with social media. Marketing and advertising agencies are finding they must
do a better job of resource management.
Overall, embedded hardware PS received the lowest marks in most service execution metrics. The only
area hardware PS excels in are the best subcontractor margins.

Project staffing time

Project staffing time is the length of time between contract signing and project team commencement.
This key performance indicator is important because it is an early warning sign of too much demand
when it takes too long to assemble the right team.

Project staffing time (in days) was 2% higher (9.1 vs. 8.9) in 2018, when compared to 2017, and 2%
lower than the past five-year's survey average (9.3). Independent service providers staff 31% faster than
embedded services organizations (6.2 vs. 9.0). By geography, APac had the longest (12.9) project staffing
time (days); while North America had the shortest (8.8).
By vertical, accountancies reported the longest project staffing time (11.7), while Marketing and
Advertising firms reported the
Table 133: Impact – Project staffing time
least (6.5). By organization
size, organizations with over On-time
700 employees had the Average project Survey Billable project Project
longest (12.7) project staffing staffing time (days) % util. delivery overrun EBITDA
times while the smallest Under 5 days 39.0% 69.0% 78.5% 8.2% 18.2%
organizations had the least 5 - 10 days 24.4% 69.0% 76.0% 7.8% 20.2%
(6.2). 10 - 15 days 17.6% 70.5% 74.9% 10.2% 17.0%
15 - 20 days 8.0% 70.6% 75.1% 9.7% 17.4%
Over 20 days 10.9% 72.3% 78.0% 8.2% 18.6%
Total/Average 100.0% 69.8% 76.9% 8.6% 18.5%
Source: SPI Research, February 2019

Revenue per project

The average revenue per project is calculated by dividing the total revenue of the service organization by
the total number of projects delivered. This KPI provides insight into the size, scope, and duration of
projects.

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Many PSOs complete many small projects along with a few larger ones, which may skew revenue per
project. Wide variability in
Table 134: Impact – Revenue per project
project size stresses resource
management predictability.
Project Ann. rev./ Ann.
Revenue per project was 11% Average revenue Survey duration Billable consult. rev./
lower ($152K vs. $171K) in per project (k) % (man-mnths) util. (k) emp. (k)
2018, and 15% lower than the Under $25k 17.1% 10.5 65.8% $175 $140
past five-year's survey average $25k - $50k 22.1% 20.4 66.5% $202 $158
($179K). Independent service
$50k - $100k 24.3% 24.0 69.2% $207 $167
providers had values 64%
$100k - $250k 21.4% 33.3 72.1% $206 $165
higher than embedded
services organizations ($163K $250k - $500k 8.3% 42.4 77.4% $229 $188
vs $130K). Organizations from $500k - $1mm 5.2% 74.5 76.5% $239 $196
the Americas had the highest Over $1mm 1.7% 131.8 75.6% $272 $234
($158K) revenue per project, Total/Average 100.0% 28.8 69.8% $205 $164
while those from EMEA had
Source: SPI Research, February 2019
the lowest ($108K). IT
Consultancies showed the highest revenue per project ($201K), while SaaS PS organizations showed the
least ($61K). Table 134 shows “bigger is better” with almost all metrics improving with project size.
Unfortunately, the days of mega projects are over as 63.5% of projects were $100K or less. Small, agile,
iterative projects are increasingly the norm so firms of all sizes and types must learn to efficiently staff,
deliver and bill them.

Concurrent projects managed by a project manager

The number of concurrent projects managed per project manager is a measurement of project
management efficiency and effectiveness. It also indicates project complexity and risk. Larger more
complex projects require more skilled, dedicated project or program managers, while multiple, smaller
concurrent projects tax the scheduling and multi-tasking ability of even the most skilled project
managers.
Table 135: Impact – Concurrent projects managed by a PM
Concurrent projects managed
by a project manager were 2% On-time Std. del.
Concurrent Survey project Project method. Project
lower (6.0 vs. 6.2) in 2018, and
projects per PM % delivery overrun used margin
5% higher than the past five-
1-2 17.0% 80.1% 7.1% 62.7% 38.6%
year's survey average (5.7).
Organizations from the 3-5 36.3% 77.0% 8.8% 65.5% 34.7%
Americas had the highest (6.2) 6-8 30.7% 74.6% 9.1% 67.8% 35.1%
concurrent projects managed, 9 - 11 1.6% 72.2% 6.7% 78.9% 43.9%
while those from APac had the Over 11 14.4% 78.8% 8.9% 65.8% 33.5%
lowest (5.0). Embedded
Total/Average 100.0% 77.0% 8.6% 66.0% 35.4%
service providers increased
Source: SPI Research, February 2019
concurrent projects managed

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1% from 2017 to 2018 (6.9 to 7.0). Independent service providers decreased theirs by 6% from 2017 to
2018 (5.9 to 5.6). By vertical, Architects and Engineers firms showed the highest concurrent projects
managed by a project manager (7.8), while IT Consultancies showed the least (4.5).

Project staff size

The project staff size is the FTE number of resources dedicated to projects. Shorter, more iterative,
“agile” projects cause more scheduling issues but may result in improved project value and ROI.

Project staff size (people) was

Table 136: Impact – Project staff size
2% lower (4.4 vs. 4.5) in 2018,
when compared to 2017, and
Project
3% lower than the past five- duration Std. del.
year's survey average (4.5). Average project Survey (man- Project method. Project
staff size (people) % months) overrun used margin
Independent service providers
had values 42% higher than 1-2 23.2% 5.9 8.3% 68.4% 36.6%
embedded services 3-5 53.1% 22.1 8.7% 65.1% 35.4%
organizations (2.6 vs. 4.6). By 6-8 20.3% 49.1 8.4% 66.5% 35.4%
geography, APac had the 9 - 11 0.4% 112.5 8.8% 30.0% 24.0%
highest (5.5) project staff size,
Over 11 3.1% 175.4 10.1% 67.3% 27.8%
while those from EMEA had
Total/Average 100.0% 28.9 8.6% 66.1% 35.4%
the lowest (4.0).
Source: SPI Research, February 2019
Embedded service providers
decreased project staff size 18% from 2017 to 2018 (4.8 to 3.9). Independent service providers increased
project staff size 5% from 2017 to 2018 (4.3 to 4.6). Firms headquartered in the Americas decreased
project staff size 5% from 2017 to 2018 (4.5 to 4.3). Those headquartered in EMEA decreased project
staff size 3% from 2017 to 2018 (4.2 to 4.0). Firms headquartered in the APac region increased project
staff size 48% from 2017 to 2018 (3.7 to 5.5).

Project duration
The average project duration, expressed in months, pertains to how long it takes to deliver projects. The
average project duration, like average project staff size, is important in that it shows the length and scale
of projects. Longer projects may be easier to forecast and staff but are not necessarily more profitable
because they may entail more risk and complexity.

Project duration in months was 10% lower (5.7 vs. 6.4) in 2018, when compared to 2017, and 3% lower
than the past five-year survey average (5.9). Independent service providers had values 22% higher than
embedded services organizations (4.7 vs. 6.0). Organizations from the Americas had the longest (5.8)
project durations, while those from EMEA had the lowest (4.9).
Embedded service providers decreased project duration 21% from 2017 to 2018 (6.5 months to 5.2).
Independent service providers decreased project duration 6% from 2017 to 2018 (6.3 to 6.0). Firms
headquartered in the Americas decreased project duration 13% from 2017 to 2018 (6.7 to 5.8). Those

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headquartered in EMEA
increased project duration Table 137: Impact – Project duration
12% from 2017 to 2018 (4.4 to
On-time
4.9). And firms headquartered
Project Duration Survey billable proj. Project Project
in the APac region increased (months) % util. delivery overrun margin
project duration 47% from Under 1 4.5% 65.0% 75.2% 8.4% 31.1%
2017 to 2018 (3.8 to 5.5).
1-3 23.4% 68.6% 76.6% 7.2% 36.3%
3-6 36.0% 69.4% 76.5% 8.1% 36.1%
6-9 18.4% 71.2% 75.0% 10.0% 35.6%
9 - 12 9.7% 72.0% 77.4% 10.8% 36.7%
Over 12 8.1% 73.3% 83.4% 9.1% 30.5%
Total/Average 100.0% 69.9% 76.8% 8.6% 35.5%
Source: SPI Research, February 2019

Projects delivered on-time

The percentage of projects delivered on time is a measurement that divides the number of projects
completed on-time by the total number of projects. This KPI is critical for billable service organizations,
because when it decreases, both profitability and client satisfaction decline.

Projects delivered on-time was 4% lower (76.9% vs. 79.7%) in 2018, when compared to 2017, and 1%
lower than the past five-year's survey average (77.7%). It also shows independent service providers had
values 2% higher than embedded services organizations (80.7% vs. 79.3%).
Table 138: Impact – Ontime project delivery

Projects Rec. to % of ann. Exec

delivered on- Survey Bid-to- family/ Billable Ann. rev./ % of ann. margin realtime
time % win ratio friends util. emp. (k) rev. target target visibility
Under 40% 3.8% 3.88 4.19 61.0% $135 86.8% 80.9% 2.72
40% - 60% 8.1% 4.36 4.02 64.8% $144 88.9% 83.7% 3.23
60% - 70% 12.2% 4.58 3.99 64.5% $154 90.6% 86.8% 3.34
70% - 80% 26.4% 4.91 4.37 70.6% $166 93.8% 90.1% 3.47
80% - 90% 26.6% 4.93 4.50 71.3% $173 94.8% 92.1% 3.63
Over 90% 23.0% 5.24 4.71 73.4% $175 96.8% 93.8% 3.93
Total / Average 100.0% 4.87 4.40 69.8% $165 93.7% 90.2% 3.55
Source: SPI Research, February 2019

Organizations from EMEA had the highest (78.3%) projects delivered on-time, while those from North
America had the lowest (76.7%). Embedded service providers decreased projects delivered on-time 9%
from 2017 to 2018 (79.0% to 71.8%). Independent service providers decreased projects delivered on-
time 1% from 2017 to 2018 (80.0% to 79.3%). Firms headquartered in the Americas decreased projects
delivered on-time 4% from 2017 to 2018 (79.9% to 76.7%). Those headquartered in EMEA increased

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projects delivered on-time 3% from 2017 to 2018 (75.9% to 78.3%). And firms headquartered in the
APac region decreased projects delivered on-time 8% from 2017 to 2018 (83.9% to 77.2%). Table 138
shows the powerful impact of on-time project delivery as most key metrics improve.

Project Cancellation Rate

The project cancellation rate represents the number of projects canceled divided by total projects. In
billable professional services organizations, the project cancellation rate is typically quite low when
compared to internal IT organizations.

The project cancellation rate

was 8% higher (2.1% vs. 2.0%) Table 139: Impact – Projects canceled

in 2018, when compared to

Emp. Project Exec realtime
2017, and 1% higher than the Projects canceled Survey % attrition overrun visibility
past five-year's survey average
None 13.9% 12.2% 7.2% 3.67
(2.2%). Independent service
0% - 1% 30.3% 11.8% 7.6% 3.66
providers had values 31%
lower than embedded services 1% - 2% 21.8% 14.0% 7.4% 3.65
organizations (1.4% vs. 2.0%). 2% - 5% 22.7% 14.4% 10.4% 3.43
Organizations from the 5% - 7% 6.8% 16.4% 10.9% 3.33
Americas had the highest 7% - 10% 3.6% 21.7% 12.0% 3.18
(2.2%) project cancellation
Over 10% 0.9% 31.2% 12.5% 2.50
rate, while those from EMEA
Total/Average 100.0% 13.8% 8.6% 3.56
had the lowest (1.6%).
Source: SPI Research, February 2019
Embedded service
organizations decreased projects canceled from 2017 to 2018 (1.8% to 2.4%). By vertical, marketing and
advertising firms had the highest project cancellation rate while management consultancies had the
lowest (1.3%). Organizations with over 700 employees had the highest (3.2%) projects canceled, while
those with less than 10 employees had the lowest (1.4%).
Table 139 shows the powerful impact of high project cancellation rates as attrition and project overruns
go up exponentially. A key contributor to high cancellation rates is poor realtime visibility as
management does not have the insight to catch potential problems before they result in project
cancellations.

Project overrun
Project overrun is the percentage of actual to budgeted cost or actual to budgeted time. Project
overruns may be expressed in actual time/cost versus plan. This KPI is important because anytime a
project goes over budget in either time or cost; it cuts directly into the PSO’s profitability.

Project overruns were 4% higher (8.6% vs. 8.2%) in 2018, but 3% lower than the past five-year's survey
average (8.9%). Independent service providers had values 6% lower than embedded services
organizations (7.3% vs. 7.8%).

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Organizations from EMEA had

the highest (9.3%) project Table 140: Impact – Project overrun
overruns, while those from
Rec. to On-time Exec
APac had the lowest (8.1%). Survey family/ Billable project realtime
SaaS PS organizations showed Project overrun % friends util. delivery visibility
the highest project overruns Never 5.5% 4.50 68.0% 83.0% 3.71
(10.8%) while management
0% - 5% 33.9% 4.49 71.4% 84.3% 3.65
consultancies had the lowest
5% - 10% 33.6% 4.43 70.3% 77.0% 3.55
(5.2%). Table 140 shows
project overruns negatively 10% - 20% 18.8% 4.35 69.7% 70.3% 3.52
impact on-time project 20% - 30% 5.7% 4.06 59.7% 54.8% 3.46
delivery; poor visibility is a Over 30% 2.4% 3.85 71.3% 59.6% 2.80
major contributor to overruns. Total/Average 100.0% 4.40 69.8% 76.9% 3.56
Source: SPI Research, February 2019

A standardized delivery methodology is used

A standardized (or structured) delivery methodology is used to incorporate best-practices and quality
into projects. Repeatable frameworks include tools, templates and knowledge.

Mature firms invest significant time and attention into methodology development as a means to
standardize project processes; define expectations and institutionalize quality. Using a standardized
delivery methodology is a critical component of a services productization strategy. It helps improve
project forecasting and resource management thereby improving profitability. PSOs who can accurately
plan and execute services in a structured way, are not only more productive but also more likely to
deliver with quality. There is
Table 141: Impact – Standardized delivery methodology use
significant effort involved in
developing, implementing and
Percentage of projects Deal On-time Exec
adhering to standardized where a std. delivery Survey pipe- project realtime Project
delivery methodologies, but methodology is used % line delivery visibility margin
the net impact for PSOs is Under 20% 9.4% 165% 72.9% 3.19 31.9%
beneficial. Table 141 shows 20% - 40% 7.5% 164% 73.0% 3.21 34.1%
the use of standardized
40% - 60% 17.6% 176% 72.7% 3.24 35.3%
delivery methods and tools
has a positive impact on the 60% - 80% 24.2% 186% 74.4% 3.70 36.0%

deal pipeline; on-time project Over 80% 41.3% 193% 81.5% 3.77 36.2%
delivery and margins. Total/Average 100.0% 183% 76.8% 3.56 35.4%
Standardized delivery Source: SPI Research, February 2019
methodology use was 5%
lower (66.1% vs. 69.7%) in 2018, and 2% lower than the past five-year's survey average (67.4%).
Architecture and Engineering firms had highest use of standardized delivery methods (70.7%), while
Hardware PS had the least (54%).

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Project margin trends

Figure 44: Project Margin Five-year Trend
Project margin is the percentage of
revenue which remains after accounting for
the direct costs of project delivery

Figure 44 shows average project margins

have varied greatly but in general have
been declining. Fortunately, this year
average project margins increased from
their low point in 2017 of 31.5% to 34.5%
in 2018. This metric underscores the
importance of a holistic view of PS, as one
important metric like project margin can
cause a ripple effect leading to lower
overall net profit.
Source: SPI Research, February 2019
Leading professional services organizations
strive to achieve project margins over 35% but as Figure 45 shows, less than one third of the
organizations surveyed consistently achieve project margins greater than 40%. Low project margins are
caused by a variety of issues including poor estimates, scope change, lack of a clear project charter, poor
project management, poor execution and poor communication. Organizations with lower project
margins struggle to meet annual margin
Figure 45: Project Margin
targets. Few organizations are making
more than 30% margin on subcontractors.
Projects can be structured in a variety of
ways – fixed price, milestone based, time
and materials or cost plus. Typically, time
and materials-based projects produce the
best margins as long as bill rates are set
appropriately. “Not to exceed” projects
should be avoided as they provide none of
the benefits of fixed price projects but
carry all of the risks. Cost-plus contracts
are also undesirable; they are most
prevalent in government work which tends
to be penny-wise and pound-foolish.
Clients and service providers alike should
be focused on paying fairly for work that Source: SPI Research, February 2019
delivers promised results. If the project
benefit is substantial, then assuring successful delivery should be the primary focus.

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Project margin for time and materials projects

Project margin for time and
Table 142: Impact – Project margin for time and materials projects
materials projects was 10%
higher (34.9% vs. 31.7%) in
Project margin On-time Ann. % of ann. Exec
2018, when compared to for T&M Survey project rev./ margin realtime
2017, and 2% higher than the projects % delivery emp. (k) target visibility
past five-year's survey average Under 20% 13.1% 77.3% $166 90.9% 3.41
(34.2%). Organizations from 20% - 30% 24.0% 75.6% $147 87.1% 3.54
EMEA had the highest (35.3%)
30% - 40% 28.4% 77.0% $172 91.2% 3.44
project margin for time and
40% - 50% 20.2% 77.7% $172 91.5% 3.74
materials projects, while those
from APac had the lowest Over 50% 14.3% 79.3% $173 92.7% 3.84
(33.8%). Embedded service Total/Average 100.0% 77.2% $166 90.5% 3.58
providers increased project Source: SPI Research, February 2019
margin for time and materials
projects 11% from 2017 to 2018 (31.9% to 35.3%). Independent service providers increased project
margin for time and materials projects 10% from 2017 to 2018 (31.7% to 34.7%). Accountancies showed
the highest time and materials project margins (37.9%); while Architecture and Engineering firms
showed the least (31.7%).

Project margin for fixed price projects

Project margin for fixed price projects was 8% higher (34.4% vs. 31.8%) in 2018, when compared to
2017, and 2% higher than the
Table 143: Impact – Project margin for fixed price projects
past five-year's survey average
(33.8%). Independent service
Project margin % of On-time % of ann. Exec
providers had values 12% for fixed price Survey emp. project margin realtime
higher than embedded projects % billable delivery target visibility
services organizations (38.6% Under 20% 16.1% 70.2% 72.1% 87.1% 3.25
vs. 34.5%). APac had the 20% - 30% 23.7% 71.4% 76.2% 87.6% 3.52
highest (34.7%) fixed price 30% - 40% 24.5% 74.0% 76.9% 90.7% 3.56
margins, EMEA had the lowest
40% - 50% 20.7% 74.0% 78.3% 92.5% 3.71
(32.8%). Management
Consultancies showed the Over 50% 15.0% 76.6% 81.3% 93.5% 3.76

highest fixed price margins Total/Average 100.0% 73.2% 76.9% 90.2% 3.56
(39.6%), while Architecture Source: SPI Research, February 2019
and Engineering firms showed
the least (29.4%).

Project margin — subcontractors and offshore

Subcontractor margin is an important metric which represents the gross margin after paying for the cost
of the resource. Markup represents the sales price, not the cost of delivery.

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Subcontractor and offshore

Table 144: Impact – Project margin — subs, offshore
margin were 12% higher
(25.8% vs. 23.1%) in 2018, Average project On-time
when compared to 2017, and margin — subs, Survey Billable project Project
1% higher than the past five- offshore % util. delivery margin EBITDA
year's survey average (26.1%). Under 20% 36.5% 68.3% 77.3% 31.6% 18.8%
EMEA had the highest (28.5%) 20% - 30% 28.9% 69.2% 76.7% 32.6% 20.7%
subcontractor margins, while 30% - 40% 16.9% 71.4% 79.7% 38.7% 14.7%
North America had the lowest
40% - 50% 11.1% 73.7% 81.4% 44.5% 19.5%
(25.2%). Embedded service
Over 50% 6.7% 66.6% 69.8% 44.5% 20.8%
providers increased
subcontractor margins 11% Total/Average 100.0% 69.6% 77.5% 35.4% 18.9%
from 2017 to 2018 (26.4% to Source: SPI Research, February 2019
29.3%); Independents
increased them 9% from 2017 to 2018 (22.0% to 24.1%). Marketing and Advertising agencies had the
highest subcontractor margins (30.0%), while Architecture and Engineering firms had the least (14.1%).

Effectiveness of the resource management processes

SPI Research asked survey
respondents to rate the Table 145: Impact – Effectiveness of the Resource Management Processes
effectiveness of their resource
management process with 1 = Effect. of On-time Std. del. Project dur.
resource Survey proj. Project method. (man-
poor and 5 = great. Resource mgmt. process % delivery overrun used months)
management is critical to
1 – poor 1.2% 73.3% 15.0% 53.3% 15.8
project planning and
2 10.9% 70.5% 9.8% 60.9% 25.3
execution. PSOs who
effectively and efficiently 3 24.9% 72.0% 10.9% 59.7% 25.7
manage resources show much 4 49.5% 78.6% 7.4% 68.0% 27.8
higher utilization rates, more 5 – great 13.5% 87.1% 5.9% 72.5% 34.3
projects delivered on-time and Total/Average 100.0% 77.2% 8.4% 65.6% 27.7
fewer project overruns.
Source: SPI Research, February 2019
Table 145 compares the
effectiveness of resource management processes to other key performance indicators. The table shows
a strong correlation between resource management effectiveness, on-time project delivery, minimal
project overruns and achievement of annual revenue and margin targets. Clearly resource management
effectiveness improves directly with the use of PSA solutions.

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Effectiveness of estimating processes and reviews

SPI Research asked survey respondent to rate the effectiveness of their estimating processes and
estimate reviews, with a rating of 5 for excellent to 1 for poor. This key performance indicator is
important as accurate
estimates hold the key to all Table 146: Impact – Effectiveness of estimating processes and reviews
other service delivery metrics.
Inaccurate estimates lead to Effectiveness of Bid-to- On-time
estimating processes Survey win billable proj. Project
miss-set client expectations; and reviews % ratio util. delivery overrun
project overruns and poor
1 – poor 1.4% 4.50 72.1% 66.4% 14.2%
client satisfaction. While this
2 10.1% 4.63 62.2% 67.0% 13.3%
subjective KPI might be hard
to fathom, its results show 3 31.0% 4.67 69.9% 72.0% 9.7%
how some of the most 4 46.2% 4.98 70.9% 80.5% 7.4%
important KPIs improve as the 5 – great 11.3% 5.28 71.3% 86.8% 5.0%
organization becomes more Total/Average 100.0% 4.88 69.8% 77.0% 8.5%
effective in their estimating
Source: SPI Research, February 2019
processes. On-time project
completion improves; PSOs experience fewer overruns, are more likely to use standard delivery
methods and have larger backlogs. Estimating requires significant investment in methodology
development and scoping projects to the task level, but obviously from this table it is well worth the
effort to ensure accuracy and thoroughness.

Effectiveness of change
control processes Table 147: Impact – Effectiveness of change control processes

SPI Research asked executives

Effectiveness of Rec. to On-time
their opinion of the change control Survey Emp. family/ Billable proj.
effectiveness of their change processes % attrition friends util. delivery
control processes, with a 1 – poor 2.0% 14.7% 4.00 65.5% 77.0%
rating of 1 for poor to 5 for
2 13.0% 14.6% 4.08 63.7% 70.5%
excellent. All projects involve
3 32.6% 14.4% 4.39 70.3% 74.5%
risk and scope changes. The
important question is how 4 42.9% 13.8% 4.46 71.0% 78.7%

these variables are managed. 5 – great 9.5% 11.5% 4.62 71.4% 87.6%
Mature PSOs invest in Total/Average 100.0% 13.9% 4.39 69.8% 77.1%
developing change and risk Source: SPI Research, February 2019
management policies along
with the project manager and project management oversight and guidance. They must also consider
the impact of changes and how it will affect subsequent projects. A critical component of change
control is to ensure project margins do not suffer. Ideally, project changes are clearly outlined; client
perception is appropriately managed and change orders are put in place. Too many change orders not

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only impact the budget and schedule but are signs of scope creep as well as inadequate executive
sponsorship and poor communication.
Table 147 compares the effectiveness of change control processes to other key performance indicators.
Again, like the organizations with high levels of resource management and estimating effectiveness,
those organizations that manage change the best demonstrate significantly higher KPIs in both the
service execution and finance and operations pillars. These key performance indicators demonstrate
that the devil is in the details. Organizations that focus on basic execution issues such as resource
management, estimating and change control drive superior results compared to those organizations
that place less emphasis on these critical business processes.

Table 148: Impact – Effectiveness of project quality processes

Effectiveness of project
quality processes Effectiveness of Rec. to Std. del. % of ann.
SPI Research asked executives project quality Survey Emp. family/ meth. margin
processes % attrition friends used target
their opinion of the
1 – poor 1.0% 19.4% 3.80 54.0% 75.0%
effectiveness of their project
quality processes, with a rating 2 7.1% 17.2% 3.89 59.1% 87.2%
of 1 for poor to 5 for excellent. 3 30.0% 14.7% 4.30 60.8% 88.8%
Quality must be a core 4 46.0% 13.5% 4.45 66.8% 90.5%
organizational attribute that is 5 – great 15.8% 11.9% 4.68 73.9% 94.7%
built into the culture and
Total/Average 100.0% 13.9% 4.40 65.5% 90.3%
management practices. Most
Source: SPI Research, February 2019
leading professional services
organizations build in quality checks and balances to assure the work is done correctly.
As more PSOs work to productize their services offerings, they must incorporate quality processes and
procedures, as well as metrics. High quality service delivery underlies client satisfaction and drives
referrals and repeat business. Table 148 shows results improve across the board as quality processes are
implemented.

Table 149: Impact – Effectiveness of knowledge management processes

Effectiveness of
knowledge management Effectiveness of On-time % of ann.
processes knowledge mgmt. Survey Billable project Project rev.
processes % util. delivery overrun target
Few organizations do a really
1 – poor 1.8% 63.3% 73.3% 10.6% 81.7%
good job of knowledge
2 14.1% 68.0% 70.9% 10.6% 92.1%
management. Top-performing
organizations understand their 3 35.3% 69.3% 75.1% 9.4% 93.7%
differentiation comes from 4 38.3% 70.1% 78.9% 7.6% 94.4%
their unique knowledge and 5 – great 10.5% 73.8% 87.0% 5.7% 96.6%
their ability to create, harvest Total/Average 100.0% 69.8% 77.1% 8.5% 93.9%
and repurpose industry-
Source: SPI Research, February 2019
leading intellectual property.

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Although a plethora of powerful and inexpensive knowledge management tools exist, they lose their
effectiveness without a centrally managed and empowered knowledge management function. The key
to knowledge management is not only capturing it and codifying it but also continually pruning it and
improving it. In today’s world of social media overload, great search capability is a must to surface the
best knowledge when it is needed.
SPI Research asked benchmark respondents their opinion of the effectiveness of their knowledge
management processes, with a rating of 1 for poor to 5 for excellent (Table 149). Knowledge
management has become a critical component of service execution. Best practices and other quality-
driven initiatives are built-in into project delivery. Assuring the right information is available to all those
who need it is paramount to success. Over the past five years’ knowledge management, especially using
social media and collaboration tools, has moved to the forefront of service execution. Team members
now work more collaboratively to achieve project objectives. The table shows that effectiveness of
Knowledge Management processes has a positive impact on both service delivery and financial results.

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10. Finance and Operations Pillar

The Finance and Operations pillar represents the realm of the

CFO for large PS organizations and is an intrinsic part of the
role of the chief service executive for all PS organizations,
regardless of size. In this service performance pillar SPI
Research examines 27 key performance measurements for
revenue, margin and operating expense. We include detailed
profit and loss statements and expense ratios by organization
size, geography and vertical. Table 150 highlights attributes of the Finance and Operations pillar as the
organization matures.

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Table 150: Finance and Operations Performance Pillar Maturity

Level 1 Level 2 Level 3 Level 4 Level 5

Initiated Piloted Deployed Institutionalized Optimized
The PSO has been 5 to 20% margin. PS 20 to 30% margin. PS PS generates > 20% of > 30% margin.
created but is not becoming a profit operates as a tightly overall company revenue Continuous
yet profitable. center but still managed P&L. Standard & contributes > 30% improvement and
Rudimentary time immature finance methods for resource margin. Well-developed enhancement.
Finance & Operations

& expense and operating mgmt., time & expense finance and operations
capture. Limited processes. mgmt., cost control & billing. processes and controls.
financial visibility Investment in CFM In depth knowledge of all Systems have been
and control. and PSA to provide costs at the employee, sub- implemented for CRM,
Unpredictable financial visibility. contractor & project level. PSA, CFM and BI. IT
financial May not have real- Processes in place for integration and real-time
performance. time visibility or BI. contract management, legal visibility. Systems have
Rudimentary Standard Library of and pricing decisions. been implemented for
contract Contracts and contract management,
management. Statements of Work. legal and pricing
Manual systems decisions.
and processes.

Source: SPI Research, February 2019

As shown in Table 151, in 2018 we saw improvement in almost all financial metrics, making 2018 the
most profitable year yet for the Professional Services Maturity™ benchmark! In fact, average net
profit reached a record breaking 18.5%! A key contributor to record profit achievement is that annual
revenue per consultant also reached a new high of $206K! In 2018 organizations reported their best-
ever achievement of revenue and margin targets which means they did a good job of planning,
forecasting and executing!
A source of optimism is the fact that reported earnings before income tax surged in 2018 to 18.5%
from 16.8% in 2017! Independents had a particularly good year as they saw their net profit grow from
15.1% in 2017 to 17.1% in 2018! Embedded service organizations (ESOs) were not able to maintain the
historic high they achieved in 2017 of 23.4% but 2018 earnings were still excellent at 22%.
But all is not rosy in River City as financial metrics declined in several important areas, most notably
backlog declined to 44.7% from 46.2% in 2017. This means PS organizations started 2019 with less
committed work. Other declining KPIs were primarily financial “hygiene” metrics like the percentage of
invoices which had to be redone; DSO (Days Sales Outstanding representing the average time to collect);
and the percentage of work that was written off. Declines in these metrics usually means there were
breakdowns in key business processes.
Declining leading indicators like backlog portend slower revenue growth in 2019. However, 2018 hiring
remained robust with 7.7% headcount growth. Headcount growth leads to revenue growth the next
year. The PS industry as a whole closely mirrors global GDP growth projections which remain favorable
for 2019. Green shading indicates best annual metrics, red indicates worst.

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Table 151: Finance and Operations Pillar 5-year trend

Key Performance Indicator (KPI) 2014 2015 2016 2017 2018

Annual revenue per billable consultant (k) $197 $198 $205 $196 $206
Annual revenue per employee (k) $167 $157 $163 $159 $166
Quarterly revenue target in backlog 48.4% 40.4% 45.6% 46.2% 44.7%
Percent of annual revenue target achieved 90.5% 91.4% 92.1% 93.0% 93.8%
Percent of annual margin target achieved 87.0% 89.4% 90.1% 89.1% 90.3%
Revenue leakage 4.05% 4.20% 4.30% 4.39% 4.29%
% of invoices redone due to error/client rejections 2.3% 2.6% 2.2% 2.2% 2.3%
Days sales outstanding (DSO) 43.4 43.8 44.6 48.2 46.3
Quarterly non-billable expense per employee $1,443 $1,908 $1,579 $1,615 $1,606
% of billable work is written off 3.10% 3.00% 2.60% 2.76% 2.84%
Executive real-time wide visibility 3.58 3.32 3.51 3.66 3.56
Profit (EBITDA) 14.7% 15.5% 14.2% 16.8% 18.5%

Source: SPI Research, February 2019

Survey Results

The following section reviews and analyzes 2019 PS Maturity™ benchmark results from 622 participating
professional services organizations. In this section SPI Research analyzes 27 finance and operations key
performance measurements that are critical to attaining superior financial performance.
Table 152 compares the finance and operations key performance indicators by the type of organization
and by region. This year, embedded service organizations (ESOs) reported more revenue per consultant
and employee than independents. Embedded service organizations outperformed independents in
revenue yields, backlog and profit but slightly underperformed independents in target margin
achievement, revenue leakage, DSO and write-offs.
Across the benchmark, average net profit (Earnings before Interest, Taxes, Depreciation and
Amortization) increased from 16.8 to 18.5%. Embedded PSOs saw net profit decrease from 23.4%. to
22%. Independents increased EBITDA from 15.1% to 17.1%. By geography, profit was up in all
territories. In the Americas net profit moved up from 17.2% to 19.1%; APAC surged from 14.8% to
32.4% and EMEA moved up from 14.3% to 18.1%. Global economic recovery has spurred PS growth
and profit.
A positive contributing factor to profit growth is that employee productivity improved in 2018. Revenue
per consultant increased from $196,000 to $206,000 while revenue per employee increased from
$159,000 to $166,000. A contributing factor to the increase in per employee revenue yields is that
organizations “pre-hired” in 2017 so new hires were able to hit the ground running in 2018.

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Backlog is always a very important KPI. Backlog decreased from 46.2% to 44.7%; signaling a moderate PS
slowdown in 2019 primarily in the Americas. EMEA reported the strongest backlog at 46.2%. Backlog
increased in APac from 45% in 2017 to 46.1% in 2018. Americas reported a decline in backlog from
46.6% to 44.4%.
Non-billable expense per employee decreased slightly in 2018. Excessive non-billable expense is a
danger signal directly related to poor cost management and ineffective business development practices.
Embedded PSOs increased non-billable expense per employee; they spent $1,660 per consultant per
quarter in 2018 compared to $1,578 in 2017. Independents decreased discretionary spending from
$1,627 to $1,581. Discretionary spending directly impacts bottom-line net profit.
Table 152: Finance & Operations KPIs by Organization Type and Geographic Region

Key Performance Indicator 2017 2018 ESO PSO Amer. EMEA APac
Surveys 456 622 193 429 516 68 38
Annual revenue per billable consultant (k) $195 $206 $210 $204 $208 $189 $206
Annual revenue per employee (k) $159 $166 $168 $165 $168 $149 $166
Quarterly revenue target in backlog 46.2% 44.7% 45.4% 44.4% 44.4% 46.2% 46.1%
Percent of annual revenue target achieved 93.0% 93.8% 94.2% 93.6% 93.8% 93.5% 94.0%
Percent of annual margin target achieved 89.1% 90.3% 89.9% 90.6% 90.0% 91.3% 92.4%
Revenue leakage 4.39% 4.29% 4.79% 4.06% 4.30% 4.38% 3.97%
% of invoices redone due to error/client rejections 2.2% 2.3% 2.3% 2.2% 2.2% 2.3% 2.5%
Days sales outstanding (DSO) 48.2 46.3 46.0 46.5 47.5 40.6 42.1
Quarterly non-billable expense per employee $1,615 $1,606 $1,660 $1,581 $1,595 $1,490 $1,935
% of billable work is written off 2.76% 2.84% 2.88% 2.83% 2.84% 2.71% 3.13%
Executive real-time wide visibility 3.66 3.56 3.40 3.63 3.54 3.70 3.58
Profit (EBITDA) 16.8% 18.5% 22.0% 17.1% 19.1% 18.1% 32.4%
Source: SPI Research, February 2019

Table 153 compares finance and operations KPI’s by organization size. Organizations with more than 700
consultants reported the best per consultant and per employee revenue yields along with phenomenal
net profit. The smallest organizations did the best job of managing financial hygiene with the lowest
revenue leakage; fewest invoice errors; shortest DSO and the least write-offs
Table 153: Finance & Operations KPIs by Organization Size

Under 101 - 301 - Over

Key Performance Indicator 10 - 30 31 - 100
10 300 700 700
Surveys 53 123 166 143 54 83
Annual revenue per billable consultant (k) $176 $198 $212 $210 $205 $217
Annual revenue per employee (k) $153 $155 $172 $167 $160 $175
Quarterly revenue target in backlog 33.3% 38.4% 46.3% 50.4% 49.9% 43.8%

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Under 101 - 301 - Over

Key Performance Indicator 10 - 30 31 - 100
10 300 700 700
Percent of annual revenue target achieved 91.3% 91.0% 93.8% 95.2% 96.4% 94.7%
Percent of annual margin target achieved 91.1% 87.7% 90.5% 92.0% 90.8% 89.9%
Revenue leakage 3.53% 4.41% 4.21% 4.84% 3.87% 4.16%
% of invoices redone due to error/client rejections 1.2% 1.8% 2.1% 2.6% 2.1% 3.5%
Days sales outstanding (DSO) 31.3 44.2 47.5 50.8 49.8 46.8
Quarterly non-billable expense per employee $1,128 $1,344 $1,545 $1,713 $1,976 $1,943
% of billable work is written off 1.59% 3.18% 2.53% 3.51% 2.91% 2.68%
Executive real-time wide visibility 3.95 3.52 3.69 3.46 3.59 3.25
Profit (EBITDA) 18.8% 17.9% 16.1% 20.6% 17.1% 24.6%
Source: SPI Research, February 2019

Tables 154 and 155 show financial results by vertical market. Best performance is highlighted in green
and worst performance is highlighted in red.
Table 154: Finance & Operations KPIs by Vertical Market

IT Arch./ Mgmt. Software SaaS

Key Performance Indicator
Consulting Engineering Consulting PS PS
Surveys 156 100 75 78 70
Annual revenue per billable consultant (k) $203 $198 $219 $216 $192
Annual revenue per employee (k) $168 $161 $176 $173 $154
Quarterly revenue target in backlog 45.8% 45.0% 41.3% 47.9% 42.5%
Percent of annual revenue target achieved 94.1% 94.6% 92.7% 95.5% 91.3%
Percent of annual margin target achieved 91.2% 90.3% 90.6% 89.1% 90.1%
Revenue leakage 3.98% 4.60% 3.36% 4.39% 4.49%
% of invoices redone due to error/client rejections 2.3% 2.1% 1.6% 2.2% 2.2%
Days sales outstanding (DSO) 41.3 61.9 37.8 45.9 43.8
Quarterly non-billable expense per employee $1,674 $1,511 $1,577 $1,873 $1,377
% of billable work is written off 2.60% 3.56% 1.93% 3.17% 2.76%
Executive real-time wide visibility 3.68 3.68 3.68 3.38 3.33
Profit (EBITDA) 16.6% 19.0% 14.7% 17.7% 26.2%
Source: SPI Research, February 2019

Surprisingly, VARs turned in some of the best financial performance with the highest per person and per
consultant revenue yields; the best achievement of revenue and margin targets; and strong net profit of
22.3%. On the opposite end of the spectrum, Marketing and Advertising firms reported some of the
worst financial metrics with the lowest per person revenue yields, poorest achievement of targets and
by far the most write-offs, nearly 6% of their work was written off.

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Table 155: Finance & Operations KPIs by Vertical Market

Advertise / Hardware
Key Performance Indicator Accounting VAR Other PS
Mktg / PR PS
Surveys 20 19 14 11 79
Annual revenue per billable consultant (k) $188 $220 $238 $258 $200
Annual revenue per employee (k) $142 $150 $196 $193 $159
Quarterly revenue target in backlog 41.9% 35.0% 52.5% 51.5% 43.7%
Percent of annual revenue target achieved 88.2% 92.3% 105.0% 91.5% 93.4%
Percent of annual margin target achieved 87.0% 90.0% 95.4% 89.5% 89.6%
Revenue leakage 5.00% 5.09% 6.42% 3.95% 4.55%
% of invoices redone due to error/client rejections 1.9% 4.0% 1.3% 2.7% 3.2%
Days sales outstanding (DSO) 36.9 48.0 50.0 43.0 50.6
Quarterly non-billable expense per employee $750 $2,068 $1,521 $1,975 $1,601
% of billable work is written off 5.88% 4.73% 2.46% 2.17% 2.31%
Executive real-time wide visibility 3.86 2.82 3.83 3.00 3.51
Profit (EBITDA) 16.9% 21.3% 22.3% 21.2% 19.2%
Source: SPI Research, February 2019

SaaS ESOs have experienced wild fluctuations in net profit as their charters swing from PS as a customer
adoption engine to PS as a profit center. No doubt cloud service providers, both embedded and
independent, are very profitable because they are able to charge some of the highest bill rates and
deliver the majority of their services virtually. SaaS ESOs saw profit decline from 25.9% in 2012 to 4.3%
in 2013; a slight improvement was shown in 2014 to 7.8%; significant improvement in 2015 to 25.7%:
good performance in 2016 at 19.4%; and best-ever performance in 2017 and 2018 at 26.2%. This is an
important KPI to watch, as
many organizations are Table 156: Steps Taken to Improve Profitability Comparison: 2017-2018
turning to the cloud for their
Steps Taken to Improve Profitability 2017 2018 Change
information infrastructure.
Improve sales effectiveness 3.82 3.95 3.2%
Steps Taken to Improve Improve marketing effectiveness 3.87 3.89 0.4%
Profitability
Improve methods and tools 3.72 3.83 2.9%
Each year SPI Research asks,
Improve utilization 3.76 3.82 1.5%
“What steps will your
organization take to improve Improve solution portfolio 3.59 3.77 5.1%
profitability?” This year Improve hiring and ramping 3.68 3.76 2.1%
“improving our sales Reduce non-billable time 3.50 3.53 0.9%
effectiveness” rose to the top
Increases rates 3.24 3.29 1.2%
of the list. PSOs are becoming
keenly aware of the need to Source: SPI Research, February 2019
effectively develop new

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business while nurturing existing clients. The second improvement priority is “marketing” to help them
evaluate and anticipate shifting market dynamics. The Best-of-the-Best are investing in “Chief Revenue
Officers” as a key member of the executive team. They conduct market research and stay abreast of
shifting technology trends, investing not in where the ball currently is but on where they think it is going
to be. This attention to portfolio expansion into hot new growth areas manifests in “first mover
advantages” and allows them to develop skills and references in anticipation of where the market is
going.
A critical component of market expansion is not only anticipating where the market is going but having
the courage to hire and develop solutions in advance of demand. Improving methods and tools is
another improvement priority as PSOs must ensure they provide their consultants the latest
technologies and methodologies.

Annual revenue per billable consultant (k)

Annual revenue per billable consultant depicts the service organization’s total revenue divided by the
FTE (Full-time equivalent) of billable consultants. Alternatively, this metric is derived by multiplying the
consultant’s average bill rate times
Figure 46: Revenue per Billable Consultant Five-year Trend
billable hours. Revenue per
consultant provides an indication of
consultant productivity; the
likelihood the firm will be profitable
is foretold by the labor multiplier.
SPI Research considers revenue per
billable consultant to be one of the
most important KPIs, but it must be
viewed in conjunction with labor
cost. Revenue per billable
consultant should minimally equal
1.5 times the fully loaded cost of
the consultant.
Revenue multipliers of three and
higher are typical for engineering
Source: SPI Research, February 2019
and architecture firms while a labor
multiplier greater than three is standard in management consulting and legal professional services.
Billable consultant revenue yield is a strong predictor of PS profit. Average consultant revenue
production hit its zenith in 2012 at $206K and has now finally returned to that level again in 2018.

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 2019 Professional Services Maturity™ Benchmark

Chicken or egg? Table 157 Table 157: Impact – Revenue per Billable Consultant
depicts the impact of
increasing revenue per On-time
consultant. Deal pipelines are Revenue per billable Survey Deal project Project
far more robust in consultant % pipeline delivery margin EBITDA
organizations with the highest Under $100k 9.1% 161% 66.7% 31.7% 15.1%
revenue yields. Clearly more $100k - $150k 16.4% 152% 75.9% 33.9% 18.4%
revenue per consultant
$150k - $200k 23.3% 164% 78.3% 35.4% 17.6%
improves project and net
margins. $200k - $250k 23.8% 189% 79.3% 36.4% 17.6%

Table 158 shows year over $250k - $300k 15.6% 209% 79.1% 35.8% 23.2%

year trends for revenue per Over $300k 11.9% 232% 78.4% 40.5% 19.2%
consultant. Revenue yields Total/Average 100.0% 183% 77.2% 35.7% 18.6%
improved across the board
Source: SPI Research, February 2019
with the strongest gains
shown by accountancies. Marketing and Advertising produced the lowest revenue per consultant while
Accountancies produced the best.
Revenue yields increase with Table 158: Year-over-year change – Revenue / Billable Consultant
organization size.
Revenue per Billable Consultant 2017 2018 ▲
Embedded services organizations $207 $210 1%
Independent services organizations $191 $204 7%
Americas $197 $208 6%
EMEA $168 $189 13%
APac $221 $206 -7%
Accounting $150 $220 47%
Advertising/Marketing/PR $182 $188 3%
Architecture/Engineering $175 $198 14%
IT Consulting $200 $203 2%
Management Consulting $229 $219 -5%
PS within SaaS Company $196 $192 -2%
PS within Software Company $205 $216 6%
Source: SPI Research, February 2019

Annual revenue per employee (k)

This calculation looks at the overall revenue yield for all PS employees – both billable and non-billable.
Annual revenue per employee is like annual revenue per billable consultant; it divides total PS revenue
by the total number of employees (FTE) but includes both billable and non-billable headcount. Revenue
per employee is a powerful indicator of the overall profitability of the firm. If the average cost

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 2019 Professional Services Maturity™ Benchmark

per employee is known, profit can be

estimated by comparing cost per Figure 47: Revenue per Employee Five-year Trend
employee to revenue per employee.
Also, like revenue per consultant, this
KPI is highly correlated with
profitability, utilization and bill rates.
PSOs with a high percentage of non-
billable employees or excessive sales,
marketing and G&A spending, have
lower annual revenues per employee.
Revenue per employee is very
important in determining the
appropriate size and financial health of
the organization. Based on the high
cost of talented consulting staff, SPI
Research believes this figure should be Source: SPI Research, February 2019
1.4 times the fully loaded cost per
person to maintain strong financial viability.
If the organization achieves an acceptable revenue yield per billable consultant but is below the
benchmark for revenue per Table 159: Impact – Annual Revenue per Employee
employee, this is an indication
of excessive non-billable Revenue per Survey New Bid-to-win Deal Billable
overhead. Figure 47 shows Employee % clients ratio pipeline utilization
revenue per employee Under $100k 12.7% 33.2% 4.66 166% 64.1%
improved in 2018. The
$100k - $150k 28.6% 26.0% 4.82 161% 68.9%
percentage of non-billable
headcount increased from $150k - $200k 29.2% 28.2% 4.85 173% 71.5%
24.5% in 2017 to 27.2% in $200k - $250k 16.7% 31.9% 5.02 218% 69.6%
2018, which should depress
$250k - $300k 7.4% 33.0% 4.68 231% 72.9%
per person revenue yields, but
at the same time organizations Over $300k 5.3% 34.5% 5.88 206% 75.6%

ratcheted back hiring in 2018 Total/Average 100.0% 29.5% 4.89 182% 69.8%
to a more sustainable level of Source: SPI Research, February 2019
7.7% (down from peak hiring
in 2017 of 9.2%). All the hires made in 2017 contributed to strong revenue performance in 2018.
Table 160 depicts year over year changes in per employee revenues. Independents led the way with
improved revenue yields in Accounting, A&E, and IT consulting. Revenue yields declined in Marketing
and Advertising; Management Consultancies and PS within SaaS and Software. The smallest
organizations saw their revenue yields go down while the largest organizations saw them climb. By
geography, APac experienced a steep decline in revenue per employee.

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Table 160: Year-over-year change – Annual Revenue / Employee

Annual Revenue per Employee 2017 2018 ▲

Embedded services organizations $168 $168 -1%
Independent services organizations $156 $165 6%
Americas $160 $168 5%
EMEA $128 $149 17%
APac $193 $166 -14%
Accounting $133 $150 13%
Advertising/Marketing/PR $158 $142 -10%
Architecture/Engineering $146 $161 10%
IT Consulting $155 $168 8%
Management Consulting $194 $176 -9%
PS within SaaS Company $157 $154 -2%
PS within Software Company $175 $173 -1%
Source: SPI Research, February 2019

Quarterly revenue target in backlog

Quarterly revenue backlog is the amount of already sold (booked) business in backlog (ready to execute)
divided by forecasted quarterly revenue. Backlog represents “fuel in the tank”; it improves an
organization’s ability to grow and increases the accuracy of financial forecasts. Some organizations
measure quarterly backlog as
Table 161: Impact – Quarterly Revenue Target in Backlog
the amount of already sold
work plus the amount of work
Qtr. rev. Std. del.
from a factored sales forecast. target in Survey New Bid-to-win Deal method.
Increasing backlog levels are backlog % clients ratio pipeline used
a clear indication of future
Under 20% 16.7% 25.9% 4.82 151% 57.9%
growth. Backlog is one of the
most powerful leading 20% - 40% 26.2% 28.5% 4.84 157% 63.9%

indicators. Product-focused 40% - 50% 16.3% 31.7% 4.90 174% 60.1%

organizations have more 50% - 60% 13.9% 32.3% 4.96 192% 67.8%
problems with backlog as they
60% - 70% 8.6% 31.4% 4.95 222% 70.0%
frequently sell a “bank of
hours” with the product sale Over 70% 18.3% 30.9% 4.83 224% 74.1%
which may never be Total/Avg. 100.0% 29.8% 4.87 182% 65.2%
consumed. It is a good idea to
Source: SPI Research, February 2019
frequently “scrub” backlog to

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determine whether booked deals can

be delivered in the current quarter. If Table 162: Year-over-year change – Qtr. Revenue Target in Backlog
they cannot, this “shadow” backlog
should not be counted. Typically, if Quarterly Rev. Target in Backlog 2017 2018 ▲
backlog is not consumed (delivered) Embedded services organizations 53.1% 45.4% -15%
within a year it should be written off or Independent services organizations 43.9% 44.4% 1%
removed from the revenue forecast as Americas 46.6% 44.4% -5%
it is unlikely the client will use the
EMEA 43.3% 46.2% 7%
consulting time they have been sold.
APac 45.0% 46.1% 3%
Table 161 compares the quarterly Accounting 42.5% 35.0% -18%
revenue target in backlog to other key
Advertising/Marketing/PR 50.7% 41.9% -17%
performance indicators. As one might
Architecture/Engineering 43.7% 45.0% 3%
expect higher backlog is an indication of
future demand and produces better IT Consulting 46.9% 45.8% -2%
financial metrics. This table shows that Management Consulting 40.3% 41.3% 3%
backlog and the size of the sales PS within SaaS Company 49.1% 42.5% -13%
pipeline are highly correlated. PS within Software Company 54.5% 47.9% -12%
Table 162 shows backlog trends. This Source: SPI Research, February 2019
year the quarterly revenue in backlog
was 44.7%; 3% lower than the 46.2% reported in 2017. Almost all organizations except for Architects
and Management Consultancies reported declining backlog. Organizations from the Americas reported
the largest decline (-5%) while EMEA and APac reported improvement.

Percentage of annual revenue target achieved

The annual revenue target achieved is the percentage of the annual revenue goal that is attained. PSOs
create detailed annual
business plans; this figure Table 163: Impact – Percentage of annual revenue target achieved
shows how accurate they are
in business planning, Percentage of
forecasting and execution. If annual target Survey Revenue Bid-to- Deal Billable
the organization does not revenue achieved % growth win ratio pipeline util.

meet its annual revenue target Under 80% 12.9% 6.6% 4.00 168% 62.3%
it is a sure bet that the annual 80% - 90% 22.4% 7.4% 4.60 161% 67.6%
margin or profit target will be
90% - 100% 34.9% 9.8% 4.86 192% 71.4%
missed as well as most
organizations plan their 100% - 110% 21.4% 12.3% 5.52 177% 72.1%
spending based on their Over 110% 8.5% 19.5% 5.75 226% 73.9%
revenue projections. On the Total/Average 100.0% 10.2% 4.91 182% 69.7%
other hand, if the organization
Source: SPI Research, February 2019
exceeds its revenue

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projections by a wide margin this may result in quality issues, staff burnout and potentially client
satisfaction issues because the organization is understaffed to meet demand.
As Table 163 shows there is a direct correlation between achieving revenue targets, revenue growth and
billable utilization. PSOs that exceeded their revenue goals produced higher margins, higher revenue
growth and superior billable utilization. There is also a strong positive correlation between meeting
annual revenue targets and profitability, assuming revenue and profit targets are set appropriately. SPI
Research also found organizations who achieved their revenue targets had lower attrition rates,
reflecting financial stability and the organization’s ability to reward performance and reinvest in the
business.
This year the percentage of annual Table 164: Year-over-year change – Percentage of annual revenue
target achieved
revenue target achieved was the
highest ever reported in this
Percentage of annual revenue
benchmark at 93.8%. The five-year target achieved 2017 2018 ▲
average is 92.5%. Table 164 shows year
Embedded services organizations 94.2% 94.2% 0%
over year trends in revenue target
Independent services organizations 92.6% 93.6% 1%
attainment. Independents achieved
93.6% of their target revenue, ESOs Americas 93.1% 93.8% 1%
achieved 94.2%. For the third year in a EMEA 92.4% 93.5% 1%
row, APAC organizations had the APac 93.3% 94.0% 1%
highest (94%) percent of annual Accounting 89.2% 92.3% 3%
revenue target attainment, while those
Advertising/Marketing/PR 88.1% 88.2% 0%
from EMEA had the lowest (93.5%). By
Architecture/Engineering 93.8% 94.6% 1%
vertical, PS within Software achieved
the highest target attainment at 95.5%. IT Consulting 93.4% 94.1% 1%
Organizations with 300 to 700 Management Consulting 89.6% 92.7% 3%
employees had the highest (96.4%) PS within SaaS Company 94.3% 91.3% -3%
percent of annual revenue target PS within Software Company 94.2% 95.5% 1%
attainment, while those with 10 to 30
Source: SPI Research, February 2019
employees had the lowest (91%).

Percent of annual margin target achieved

The annual margin target achieved, similar to the annual revenue target achieved, is the percentage of
the annual profit goal which was attained. SPI Research measures revenue and margin target
attainment to calibrate the accuracy of annual business plans. Even if PSOs don’t accurately measure
other benchmark metrics, they usually do know if they achieved their targets or not. Target attainment
is important from a planning and investment perspective. If the organization does not meet its margin
goals it might have to scale back future spending, potentially limiting growth. The percentage of annual
margin target achieved was slightly higher (90.3% vs 89.1%) in 2018. Independents had values 1% higher
than ESOs. Organizations from APac had the highest (92.4%) percent of annual margin target
achievement. By vertical, IT consultancies had the best margin target attainment (91.2%).

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Perhaps one of the most

important gauges of financial Table 165: Impact – Percentage of Annual Target Margin Achieved
maturity is the ability to
Percentage of Qtr. rev. Std. del. On-time Ann. rev./
consistently achieve annual annual target Survey target in method. project consult.
margin targets. The number margin achieved % backlog used delivery (k)
of firms who achieve their Under 80% 20.8% 39.0% 60.2% 67.6% $184
margin targets is always less
80% - 90% 26.2% 42.2% 60.7% 78.0% $200
than the percentage of firms
90% - 100% 31.1% 46.0% 68.3% 81.0% $214
who achieve their revenue
targets. Only 21.9% of survey 100% - 110% 15.5% 48.3% 70.3% 82.9% $226
respondents achieved 100% or Over 110% 6.4% 60.2% 72.1% 75.8% $232
more of their annual margin Total/Average 100.0% 44.8% 65.2% 77.4% $207
target! Source: SPI Research, February 2019

Table 166: Year-over-year change – Percentage of Annual Target

Margin Achieved

Percentage of Annual Target

Margin Achieved 2017 2018 ▲
Embedded services organizations 90.8% 89.9% -1%
Independent services organizations 88.5% 90.6% 2%
Americas 89.1% 90.0% 1%
EMEA 90.0% 91.3% 1%
APac 87.0% 92.4% 6%
Accounting 81.7% 90.0% 10%
Advertising/Marketing/PR 89.4% 87.0% -3%
Architecture/Engineering 88.3% 90.3% 2%
IT Consulting 89.1% 91.2% 2%
Management Consulting 90.3% 90.6% 0%
PS within SaaS Company 93.6% 90.1% -4%
PS within Software Company 89.1% 89.1% 0%
Source: SPI Research, February 2019
Revenue leakage
Revenue leakage refers to revenue that has been earned but is lost before it can be realized. Causes of
revenue leakage include billing errors, time the firm is unable to bill for product or project delivery
issues and incorrect statements of work or misquotes. Revenue leakage is difficult to determine in
many cases, making it a “silent killer” of profitability. In many instances, organizations don’t even realize
revenue has not been billed, making it a very difficult figure to calculate. It is also a barometer for
overall operational efficiency, as PSOs with higher levels of revenue leakage reported lower utilization,

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poorer on-time project

delivery, more project Table 167: Impact – Revenue Leakage
overruns and lower EBITDA
than organizations that better On-time
Survey Billable project Project
manage contracts, capturing Revenue Leakage % util. delivery overrun EBITDA
all hours and expenses and
Under 2% 36.8% 71.7% 81.4% 6.9% 18.8%
billing accurately.
2% - 5% 34.2% 70.2% 77.0% 7.8% 16.0%
Average reported revenue
5% - 10% 21.7% 68.6% 72.5% 10.2% 20.6%
leakage this year was 4.29%
Over 10% 7.3% 69.7% 76.9% 8.6% 18.5%
compared to 4.39% in 2017.
ESOs reported significantly Total/Average 100.0% 70.4% 77.6% 8.0% 38.2%
more revenue leakage than Source: SPI Research, February 2019
Independents. By geography,
EMEA reported the most revenue Table 168: Year-over-year change – Revenue Leakage
leakage as did accountancies.
Management Consultancies did the Revenue Leakage 2017 2018 ▲
best job of limiting leakage. Embedded services organizations 4.14% 4.79% -16%
Independent services organizations 4.47% 4.06% 9%
Americas 4.44% 4.30% 3%
EMEA 4.17% 4.38% -5%
APac 4.05% 3.97% 2%
Accounting 6.33% 5.09% 20%
Advertising/Marketing/PR 4.50% 5.00% -11%
Architecture/Engineering 5.13% 4.60% 10%
IT Consulting 4.07% 3.98% 2%
Management Consulting 3.01% 3.36% -11%
PS within SaaS Company 4.70% 4.49% 4%
PS within Software Company 3.87% 4.39% -14%
Source: SPI Research, February 2019

Percentage of invoices redone due to error/client rejections

Invoices rejected for whatever reason dip into profit, as the PSO must finance the debt incurred while
still delivering the service. Some PSOs do not consider invoices that have to be redone due to
inaccuracies or client rejections in their DSO calculation – they probably should.
If expectations are properly set and time and expense accurately reported, ideally no invoice should be
rejected. Invoicing problems tend to be systemic and emanate from the inaccurate capture of time and
expense information; unclear statements of work; lack of approved change orders; inaccurate billing and
exceeding pre-determined spending limits.

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Table 169: Impact – Invoices Redone due to Errors or Client Rejections

Invoices redone On-time % of ann. Executive

due to errors or Survey project Project margin real-time
client rejections % delivery overrun target visibility
None 7.7% 81.6% 5.2% 94.3% 3.89
Under 1% 37.0% 80.5% 7.4% 91.5% 3.69
1% - 3% 30.5% 74.7% 8.5% 90.0% 3.56
3% - 5% 15.5% 74.1% 9.8% 87.5% 3.39
5% - 10% 7.1% 76.0% 12.8% 86.8% 3.09
Over 10% 2.1% 78.5% 9.8% 94.0% 3.60
Total/Average 100.0% 77.5% 8.4% 90.4% 3.57

Source: SPI Research, February 2019

Days sales outstanding (DSO)

Days Sales Outstanding (DSO) is still one of the most important KPIs for financial executives. It reflects
the importance of accurately producing invoices and efficiently collecting payment. DSO is also a
powerful measurement of client satisfaction, strong operating controls and client credit-worthiness.
This year the average DSO was 46.3 days, lower than the 48.2 days reported in 2017 but higher than the
5-year average of 45.5 days. With the return to economic prosperity, clients are taking their sweet time
to pay their bills. Across the technology sector, committed DSO has shifted from 30 to 45 days. Cash
collection is extremely
important for independents as Table 170: Impact – Days Sales Outstanding (DSO)
they must fund operations in
constant dollars. Table 170 On-time
Days Sales Survey project Project Project
shows longer payment times
Outstanding (DSO) % delivery overrun margin EBITDA
correlate with poor on-time
project delivery and project Under 30 days 20.0% 79.7% 6.5% 36.6% 20.5%
overruns as clients are 30 - 50 days 44.8% 78.4% 8.1% 35.9% 17.5%
understandably reluctant to 50 - 70 days 22.9% 76.1% 9.5% 34.4% 19.7%
pay their bills if projects have
70 - 100 days 8.8% 75.6% 10.9% 33.3% 18.3%
gone awry. Architects and
engineers reported the longest Over 100 days 3.5% 73.3% 11.5% 42.8% 15.9%
DSO at 61.9 days; Marketing Total/Average 100.0% 77.7% 8.5% 35.7% 18.6%
and Advertising firms had the
Source: SPI Research, February 2019
lowest at 36.9 days.

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Quarterly non-billable expense per employee

Quarterly non-billable expense
per employee shows how well Table 171: Impact – Quarterly non-billable expense per employee
PSOs manage employee
Quarterly
expenses not related to
Quarterly non- Head- revenue
billable work. Ideally, this billable expense Survey Revenue count target in New
metric is minimized, but there per employee % growth growth backlog clients
are always expenses due to Under $1,500 62.4% 10.0% 7.6% 44.0% 29.1%
travel, training, IT and $1,500 - $2,500 24.0% 11.0% 8.3% 46.1% 30.4%
business development that $2,500 - $5,000 9.4% 10.5% 9.1% 41.7% 28.3%
cannot be billed to clients.
$5,000 - $7,500 2.8% 14.0% 12.3% 46.9% 31.6%
The quarterly non-billable Over $7,500 1.3% 15.8% 11.7% 60.0% 47.2%
expense per employee
Total/Average 100.0% 10.5% 8.1% 44.6% 29.6%
decreased to $1,606 in 2018.
Source: SPI Research, February 2019
Excessive non-billable
employee expense is usually a symptom of poor or ineffective business expense policies. It may also be
a symptom of runaway business development costs with non-essential personnel wasting valuable time
and money chasing non-qualified opportunities. Common causes of high non-billable discretionary
spending are high business development and training expenses or employee expense misuse.

Percentage of billable work written off

Inaccurate invoicing, improperly accounting for time, project overruns and other project-related issues
force many PSOs to write-off billable work, which naturally hurts profits. The formula is simple. The
more work written off, the lower the firm’s profit. The differential is significant. Obviously, no firm
wants to write-off billable
Table 172: Impact – Percentage of Billable Work Written-Off
hours as doing so implies
clients were not satisfied with
% of On-time
some aspect of the work. Percentage of Billable Survey emp. Emp. project Project
However, to accomplish this Work Written-Off % billable attrition delivery overrun
feat requires significant effort
None 9.5% 75.8% 8.9% 78.5% 8.1%
to clearly define requirements
Under 1% 26.2% 74.6% 12.8% 82.1% 6.2%
and deliverables; assure work
is scoped correctly; projects 1% - 3% 34.2% 73.9% 14.1% 78.7% 7.9%
are delivered on-time and 3% - 5% 17.6% 75.2% 15.3% 74.3% 9.6%
within budget; and invoices
5% - 10% 7.3% 71.6% 16.5% 72.6% 12.0%
are accurate. SPI Research
believes this initiative is well Over 10% 5.2% 67.7% 17.8% 60.6% 15.2%
worth the effort. Total/Average 100.0% 74.0% 13.8% 77.4% 8.4%

The percentage of billable Source: SPI Research, February 2019

work that was written off in

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 2019 Professional Services Maturity™ Benchmark

2018 was 2.84%, higher than the 2.76% reported in 2017. Table 172 shows a clear correlation between
increased levels of work being written off and lower performance in terms of and on-time project
delivery and overruns.
Table 172 depicts year over year trends showing most organizations increased their write-offs with
Advertising and Marketing firms writing off 5.9% of their work. Management consultancies had the
least write-offs at 1.9%. These increases in write-offs are very troubling as they indicate something went
wrong with the client relationship. Firms must closely examine their write-offs and develop a get-well
plan.

Real-time visibility
Real-time information visibility is one of the most important management tools. SPI Research asked
survey respondents whether their executives had real-time visibility into all business activities (sales,
service, marketing, finance, etc.). The rewards are significant for organizations who have integrated
systems and management dashboards that allow them to pinpoint issues and spot trends in real-time.
Table 173: Impact – Information Visibility

Rec. to On-time
Real-Time Survey Deal Bid-to- family/ Billable project Project
Visibility % pipeline win ratio friends util. delivery margin EBITDA
1 - None 1.4% 107% 3.43 4.00 61.4% 57.1% 36.4% 0.0%
2 - Minimal 13.0% 174% 4.61 4.11 68.4% 69.7% 31.3% 15.4%
3 - Some 31.7% 176% 4.75 4.27 68.8% 75.4% 34.5% 18.3%
4 - Substantial 36.2% 179% 4.84 4.46 70.9% 79.8% 36.2% 19.2%
5 - Comprehensive 17.7% 206% 5.62 4.72 71.4% 83.0% 39.9% 20.4%
Total/Average 181% 181% 4.90 4.40 69.9% 77.3% 35.7% 18.4%
Source: SPI Research, February 2019

Executives who have real-time visibility run companies that are much more profitable than those that do
not as they are able to take advantage of changing market conditions. The good news is with the
growing usage of integrated business applications, real-time visibility has been improving until this year
when it declined for most organizations. Perhaps a contributing factor to lower results this year is that
many organizations were surprised by the market turbulence which arose from seemingly nowhere in
the 4th quarter.
Real-time visibility is a very important key performance indicator. As Table 173 shows, organizations
that have comprehensive visibility can make the decisions necessary to grow and achieve high levels of
profitability. And it is not for just those KPI’s listed in this table, it is for a majority of the other metrics
tracked by SPI Research as well.
Extended real-time visibility is only attained through application integration. “Extended” means
information that flows across departments and functions, so that employees have a more complete
picture of operations, and can make quick, fact-based decisions. Without real-time visibility, decision-

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making can be subjective and reactive which hurts business performance. SPI Research believes these
results help organizations justify expenditures in IT to provide the systems and tools they need to
visualize, monitor and control the business.

Income Statements
In this section SPI Research analyzes income statements by organization type and size. Inputs were:

Revenue Table 174: Income Statement Comparison

 Direct gross PS revenue:

Income Statement Revenue & Expense 2017 2018 Delta
Directly delivered PS
Benchmark Surveys 456 622
revenue (not including re-
billable travel) REVENUE
 Indirect gross revenue: Direct gross PS revenue 82.1% 79.9% -2.7%
(revenue from Indirect gross revenue (subcontractor) 11.5% 11.3% -1.7%
subcontractors, outside Pass-thru rev. (hardware, software, mat.) 3.9% 5.3% 35.9%
resources)
Reimbursable Travel & Expense revenue 2.6% 3.5% 34.6%
 Pass-thru revenue:
Total Revenue 100.0% 100.0%
(revenue from hardware,
software, materials, etc.) EXPENSES

 Reimbursable travel and Direct labor expense 38.8% 39.9% 2.8%

expense revenue: Fringe benefit percentage of direct labor 6.3% 5.2% -17.5%
(includes re-billable travel Subcontractor/outside consultant expense 10.2% 8.9% -12.7%
and expense revenue) Pass-thru equipment expense 2.5% 3.0% 20.0%
Billable travel and business expense 2.3% 2.8% 21.7%
Expense
Non-billable travel expense 1.6% 1.9% 18.8%
 Direct Labor expense: Total recruiting expense 0.7% 1.1% 57.1%
(does not include fringe Sales expense 4.5% 4.6% 2.2%
benefits, vacation, sick Marketing expense 1.9% 1.9% 0.0%
time or overhead)
Education/training/certification expense 1.0% 1.3% 30.0%
 Fringe benefit expense:
PS IT expense 1.7% 2.0% 17.6%
as a percentage of direct
labor (for healthcare, All other G&A expense 11.6% 9.0% -22.4%
pensions, vacation and Total Expense 83.2% 81.5% -2.0%
sick pay) EBITDA 16.8% 18.5% 10.1%
 Subcontractor/outside Source: SPI Research, February 2019
consultant expense: cost
of subcontractors and outside consultants
 Pass-thru expense: (expense for hardware, software, materials, etc. that can be billed)
 Billable travel and business expense: business expenses that can be billed to clients
 Non-billable travel and business expense: business expenses that cannot be billed to clients

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 Recruiting expense: (includes recruiting headcount, fees and signing bonuses)

 Sales expense: (includes sales headcount, bonus and non-reimbursable sales expense)
 Marketing expense: (includes marketing headcount, bonus and marketing program expense)
 Education, training and certification expense: (includes the cost of training and certification)
 PS IT expense: supporting the IT infrastructure (personnel, applications, networking, etc.)
 General and Administrative: non-billable headcount, general and administration costs,
facilities, headcount and overhead.
Profits increased substantially in 2018 when compared to 2017 (Table 174). The primary catalyst for
higher PS sector profit came from significantly more pass-through hardware, software and other
materials; more expense was rebilled and much lower fringe benefit, subcontractor and G&A costs.
Typically, pass-through hardware revenue generates lower margins than direct labor, but pass-through
software is typically margin rich. Other improvements were reported in reigning in subcontractor costs
and general and administrative spending.
Positive spending trends are shown in much higher year over year recruiting, training and IT expense.
These categories are good for the business as they ensure growth, the well-being of employees and
adequate spending on IT to provide the needed infrastructure and visibility for the future.
Table 175 provides income statement comparison for embedded versus independents as well as by
geography. Sources of revenue for independents and ESOs were very similar this year but independents
spend more on subcontractors, sales and G&A. Of course, this makes sense as independents must
manage a fully loaded profit and loss statement whereas embedded organizations do not typically pay
for corporate G&A, sales, marketing and IT. APAC firms pay substantially less for fringe benefits,
particularly healthcare than their counterparts in the Americas and Europe. APAC firms spent more than
twice as much for sales compared to the Americas and Europe.
Table 175: Income Statement by Organization Type and Embedded Service Type

Key performance indicator (KPI) Survey ESO PSO Americas EMEA APac
Surveys 622 193 429 516 68 38
REVENUE
Direct gross PS revenue 79.9% 78.2% 80.6% 80.6% 77.3% 76.5%
Indirect gross revenue (subcontractor) 11.3% 10.3% 11.7% 11.1% 13.2% 9.9%
Pass-thru rev. (hardware, software, mat.) 5.3% 6.5% 4.8% 4.9% 5.8% 8.5%
Reimbursable Travel & Expense revenue 3.5% 4.9% 3.0% 3.4% 3.6% 5.1%
Total Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
EXPENSES
Direct labor expense 39.9% 40.9% 39.5% 40.0% 40.8% 37.8%
Fringe benefit percentage of direct labor 5.2% 5.7% 4.9% 5.6% 3.8% 2.3%
Subcontractor/outside consultant expense 8.9% 6.5% 9.9% 8.7% 10.1% 9.3%
Pass-thru equipment expense 3.0% 3.2% 2.9% 3.0% 2.1% 4.0%

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Key performance indicator (KPI) Survey ESO PSO Americas EMEA APac
Billable travel and business expense 2.8% 3.5% 2.5% 2.8% 2.9% 2.8%
Non-billable travel expense 1.9% 2.1% 1.8% 1.9% 1.6% 2.5%
Total recruiting expense 1.1% 1.5% 0.9% 0.9% 1.2% 2.5%
Sales expense 4.6% 3.5% 5.0% 4.3% 4.6% 8.4%
Marketing expense 1.9% 1.9% 1.9% 1.8% 2.1% 2.6%
Education/training/certification expense 1.3% 2.2% 1.0% 1.0% 1.7% 4.3%
PS IT expense 2.0% 2.5% 1.8% 1.9% 2.2% 3.0%
All other G&A expense 9.0% 4.4% 10.9% 9.1% 8.9% 7.9%
Total Expenses 81.5% 78.0% 82.9% 80.9% 82.1% 87.4%
2018 EBITDA 18.5% 22.0% 17.1% 19.1% 17.9% 12.6%
2017 EBITDA Comparison 16.8% 23.4% 15.1% 17.5% 14.3% 14.8%
Source: SPI Research, February 2019
Table 176 provides analysis of income statements by organization size. Smaller organizations
experienced a slight decline in net profit year over year, but the largest organizations saw their profit
soar! In fact, in 2018 profit declined linearly with size. The smallest organizations typically report the
best profitability primarily because many of them operate as virtual businesses, with limited G&A
spending on facilities and management. They also do not report significant recruiting expense as their
overall hiring is fairly limited. They cannot afford to invest in junior personnel or interns, preferring to
make senior hires who can become immediately productive.
Table 176: Income Statement by Organization Size

Key performance indicator

Under 10 10 - 30 31 – 100 101 - 300 301 - 700 Over 700
(KPI)
Surveys 53 123 166 143 54 83
REVENUE
Direct gross PS revenue 93.0% 80.8% 82.3% 79.5% 77.3% 64.7%
Indirect gross revenue (subs.) 2.1% 10.4% 12.4% 9.8% 11.9% 17.7%
Pass-thru rev. (hw, sw, mat.) 0.4% 6.0% 3.0% 7.5% 6.3% 9.0%
Reimbursable Travel & Expense 4.6% 2.7% 2.2% 3.2% 4.4% 8.6%
Total Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
EXPENSES
Direct labor expense 54.9% 39.8% 41.2% 37.1% 41.5% 30.7%
Fringe benefit % of direct labor 2.8% 6.0% 5.9% 5.0% 5.1% 3.3%
Subcontractor/outside consultant 6.0% 10.3% 10.2% 7.6% 8.8% 7.3%
Pass-thru equipment expense 0.4% 3.0% 1.7% 4.3% 3.5% 5.7%
Billable travel and business 3.5% 1.6% 2.1% 2.3% 4.0% 6.6%

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Key performance indicator

Under 10 10 - 30 31 – 100 101 - 300 301 - 700 Over 700
(KPI)
Non-billable travel expense 1.6% 1.8% 1.6% 1.9% 2.2% 3.3%
Total recruiting expense 0.1% 0.6% 0.8% 1.3% 1.0% 3.1%
Sales expense 2.8% 2.8% 5.2% 6.4% 3.5% 3.6%
Marketing expense 1.3% 1.9% 2.2% 1.8% 1.2% 2.1%
Education/training/certification 0.8% 1.3% 1.0% 0.9% 1.5% 3.4%
PS IT expense 1.8% 1.4% 1.8% 2.4% 2.0% 2.8%
All other G&A expense 5.2% 11.9% 10.2% 8.4% 8.5% 4.6%
Total Expenses 81.2% 82.1% 83.9% 79.4% 82.9% 76.5%
2018 EBITDA 18.8% 17.9% 16.1% 20.6% 17.1% 24.6%
2017 EBITDA Comparison 19.4% 18.7% 17.0% 15.4% 12.3% 13.5%
Source: SPI Research, February 2019
In this year’s survey, SPI Research received profitability metrics from most of the vertical markets (Only
markets with sufficient income statement data are shown). This year we received significantly more
completed surveys from architects and engineers. With economic improvement, this sector has seen
profit improvement year over year as well as revenue growth however architects reported the highest
level of G&A overhead spending in the benchmark at 19.3% of total revenue.
Table 177 shows income statement comparison for the five primary verticals represented in this
benchmark. As stated throughout this report, the cloud ESOs had another banner year – equaling last
year’s all-time high percentage of profit at 26.2%! The cloud is here to stay and as these organizations
mature, they are leading the charge in investing in tools and technology to streamline their PS
operations. The large cloud PSOs have large development centers throughout India, Asia and Eastern
Europe, allowing them to take advantage of strong technical talent at substantially lower costs.
Management consultancies and enterprise software and SaaS ESOs have high direct labor costs as they
must pay a premium for the unique skills their clients require. Software ESOs spend the most on IT and
recruiting. Architects and engineers have the highest G&A cost which dilutes their margins.
Table 177: Income Statement by PS Market Vertical

IT Mgmt. Software SaaS

Key performance indicator (KPI) Arch./ Engr.
Consulting Consulting PS PS
Surveys 156 100 75 78 70
REVENUE
Direct gross PS revenue 77.5% 82.4% 84.9% 76.2% 85.4%
Indirect gross revenue (subs.) 13.5% 12.6% 8.2% 11.9% 8.7%
Pass-thru rev. (hw, sw, mat.) 5.9% 2.9% 3.9% 5.5% 2.3%
Reimbursable Travel & Expense 3.1% 2.2% 3.1% 6.4% 3.6%
Total Revenue 100.0% 100.0% 100.0% 100.0% 100.0%

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IT Mgmt. Software SaaS

Key performance indicator (KPI) Arch./ Engr.
Consulting Consulting PS PS
EXPENSES
Direct labor expense 41.3% 31.1% 45.8% 44.9% 44.9%
Fringe benefit % of direct labor 4.3% 5.3% 6.0% 7.1% 5.4%
Subcontractor/outside consultant 10.1% 12.8% 7.0% 5.9% 6.9%
Pass-thru equipment expense 3.8% 2.5% 1.0% 1.7% 0.7%
Billable travel and business 2.3% 1.2% 2.7% 4.2% 2.3%
Non-billable travel expense 1.6% 1.6% 2.0% 1.8% 2.0%
Total recruiting expense 1.0% 0.4% 1.0% 2.0% 0.6%
Sales expense 6.4% 2.7% 4.5% 3.1% 3.6%
Marketing expense 1.6% 2.0% 2.5% 1.3% 1.3%
Education/training/certification 1.3% 0.6% 1.1% 2.9% 0.8%
PS IT expense 1.6% 1.5% 2.2% 4.0% 1.0%
All other G&A expense 8.0% 19.3% 9.5% 3.4% 4.3%
Total Expenses 83.4% 81.0% 85.3% 82.3% 73.8%
2018 EBITDA 16.6% 19.0% 14.7% 17.7% 26.2%
2017 EBITDA Comparison 12.9% 17.7% 13.5% 23.6% 26.2%
Source: SPI Research, February 2019
Table 178 shows income statements for accountancies, advertising and marketing agencies, VARs,
hardware and networking ESOs and other PS. All these segments generated substantial profit.
Hardware ESOs spend more than any other vertical on marketing (4%) and the least on fringe benefits
(1.7%). The marketing and advertising business model relies on lower cost resources and lower revenue
yields but profits are in line with other verticals due to lower employment and G&A costs.
Table 178: Income Statement by PS Market Vertical

Advertise / Hardware
Key performance indicator (KPI) Accounting VAR Other PS
Mktg / PR PS
Surveys 20 19 14 11 79
REVENUE
Direct gross PS revenue 81.1% 79.2% 80.7% 70.6% 76.4%
Indirect gross revenue (subs.) 10.3% 4.3% 8.1% 12.6% 11.0%
Pass-thru rev. (hw, sw, mat.) 6.9% 14.2% 8.3% 9.5% 7.9%
Reimbursable Travel & Expense 1.7% 2.4% 2.9% 7.4% 4.7%
Total Revenue 100.0% 100.0% 100.0% 100.0% 100.0%
EXPENSES
Direct labor expense 43.6% 46.7% 39.0% 43.8% 33.3%

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Advertise / Hardware
Key performance indicator (KPI) Accounting VAR Other PS
Mktg / PR PS
Fringe benefit % of direct labor 3.8% 4.1% 8.0% 1.7% 4.5%
Subcontractor/outside consultant 8.6% 2.0% 6.2% 5.8% 8.6%
Pass-thru equipment expense 6.9% 1.4% 5.3% 5.3% 5.1%
Billable travel and business 3.0% 2.4% 2.7% 3.5% 5.2%
Non-billable travel expense 0.9% 2.0% 2.1% 1.3% 3.3%
Total recruiting expense 1.4% 1.8% 1.0% 1.4% 1.8%
Sales expense 2.4% 2.4% 4.3% 2.5% 6.1%
Marketing expense 1.2% 1.9% 1.4% 4.0% 2.5%
Education/training/certification 1.0% 0.2% 0.8% 4.4% 1.6%
PS IT expense 2.0% 1.7% 0.7% 2.4% 2.9%
All other G&A expense 8.4% 12.1% 6.1% 2.7% 5.9%
Total Expenses 83.1% 78.7% 77.7% 78.8% 80.8%
2018 EBITDA 16.9% 21.3% 22.3% 21.2% 19.2%
2017 EBITDA Comparison 16.9% 22.1% N/A 20.3% N/A
Source: SPI Research, February 2019

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11. 2019 Professional Services Maturity™ Model Results

SPI Research has spent over a decade developing and improving the Professional Services Maturity™
Model. Over 25,000 billable professional services organizations use the model to benchmark and
improve organizational performance. With over 3,500 billable services organizations (2,260 over the
past five years) participating over the past twelve years, SPI Research has further refined the model to
improve its accuracy.
622 firms participated from September through November of 2018 representing nearly 400,000
consultants worldwide, continuing to make this the most comprehensive study of the global PS industry.
While most the participating organizations are headquartered in North America, the firms surveyed
have employees distributed globally, and SPI Research believes it to be an accurate representation of
the global PS industry. SPI Research clients continue to use the model to develop, prioritize and
implement performance gains.
In this chapter, SPI Research reveals the analytic basis of the model and gives insight into our survey
techniques. For this year’s model, SPI Research used the current database of 622 firms surveyed in
2018.

Maturity Levels Figure 48: Professional Services Maturity Model™ Levels

The maturity rating for each

Service Performance Pillar
varies based on the
performance of the
organization. In each of the
five performance pillars,
every firm operates at one
of the five maturity levels
(Figure 48):

∆ Level 1 (Initiated – Source: SPI Research, February 2019

30% of the
respondents): In the initial stages, the focus of the organization is primarily on client acquisition
and building a reference base. To accomplish this core mission, the organization must recruit
and hire excellent staff. Therefore, at Maturity Level 1 the priority focus areas are Customer
Relationships and Human Capital Management.
∆ Level 2 (Piloted – 25% of the respondents): The organization is becoming a profit center, so
focus is still on client relationships, but human capital and finance and operations have become
more important as the organization moves from a cost center to a profit center.
∆ Level 3 (Deployed – 25% of the respondents): The organization has now deployed core
operating processes in all five service performance pillars. At this point, the organization must

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continue to accentuate Human Capital Alignment, but the key focus has shifted to Finance and
Operations and Service Execution. The organization must start to consider strategy and vision to
ensure the focus is on the right clients, markets and competition. At this level, the organization
must have deployed standard business processes across all dimensions.
∆ Level 4 (Institutionalized – 15% of the respondents): At this level, the organization must start
optimizing across all dimensions. However, maintaining and growing service revenue and
margin is of paramount importance. The organization must start developing a differentiated
approach to clients with vertical and horizontal market segments and geographies so a focus on
the Client Relationship pillar is critical.
∆ Level 5 (Optimized – 5% of the respondents): The organization has achieved “black belt” status
in all functional areas. Processes are fully developed, deployed and institutionalized. The
organization is now developing comprehensive measurement, monitoring, and optimization
processes across all pillars.
While every organization should strive to attain Maturity Level 5 in each of the five service performance
pillars, some areas are more important than others depending on the overall maturity of the company
or its market. For instance, early in the life of a professional services organization client relationships
are far more important than profitability because without clients there can be no future. Over time,
client relationships always remain important, but the organization must equally focus efforts on other
Pillars. To be a truly optimized organization, the firm must aspire to reach Level 5 in all dimensions.

Model Improvements
Each year SPI Research makes modifications to improve the model based on additional surveys, its own
analysis, and feedback from PSOs that use the model. This year, there were no changes to the questions
asked, however, the model change slightly in terms of the weight other specific questions. These mainly
were changes to emphasize the importance of specific KPIs SPI Research found as not having a strong
impact on overall performance.
As is the case each year, not every question is included in the PS Maturity™ model. Demographic
information is not part of the PS Maturity™ model but helps PS executives better compare their
organizations to the benchmark.

Model Inputs
SPI Research conducts correlation analysis between the questions to determine what, if any, impact
each of the key performance indicators (KPIs) have on each other. The questions were then rated by
relative importance from 0.0 (unimportant) to 1.0 (very important) for each of the KPIs. Each question
was assigned a maximum value based on the answer given and the weight of the question. At the
bottom of each of the following tables is the total maximum value possible in each maturity rating. Here
is a synopsis of the SPI Research methodology:
∆ Factor: Respondent’s unique answers to the given question. Some questions are answered
within a range to reduce the time to complete the survey.

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∆ Weight: The relative value of the question as compared to others. Questions were weighted
from 0.0 to 1.0 depending on the overall importance of the question. Questions with a weight
of 1.0 are the most important in determining organizational maturity.
∆ Pillar Correlation: SPI Research incorporates a correlation coefficient for each question to all
pillars, reflecting the inter-relationship that exists between different functions and key
performance metrics within PSOs. Correlations range from -1.0 to 1.0 depending on the KPI’s
negative or positive impact on performance.
∆ Maximum Score: The maximum score for each question is determined by multiplying the
normalized value of the question by its weight. Scores are normalized on a scale from 1 to 100
and then assigned a Maturity Level based on a score from 1 to 5.
The minimum scores for each Pillar are summarized in Table 179. The maximum value is 100, which
means the organization is at the “Optimized” level. By design, maturity scores are relative to the size of
the survey with approximately 5% of organizations designated at Level 5 (Optimized) in any given pillar.
Moreover, SPI Research assumes 15% perform at Level 4; 25% perform at Level 3; 25% perform at Level
2 and the other 30% perform at Level 1. These scores are slightly different from the 2017 report in most
pillars as SPI Research annually adjusts scores based on economic conditions and the feedback received
over the past year.
Table 179: Minimum Normalized Performance Pillar Scores

Pillar Level 1 Level 2 Level 3 Level 4 Level 5 Maximum

Leadership (LE) 0.0 66.71 73.03 80.07 89.13 100.0
Client Relationships (CR) 0.0 45.41 52.02 58.29 65.16 100.0
Human Capital (HC) 0.0 53.81 60.87 68.27 74.75 100.0
Service Execution (SE) 0.0 45.65 56.60 70.00 80.93 100.0
Finance & Operations (FO) 0.0 35.74 50.27 60.64 70.28 100.0
Source: SPI Research, February 2019

What might be interesting to readers of this report is that when analyzing the normalized scores (1 to
100) in each Pillar it shows that no firm scores a “0”, meaning the lowest level of performance, nor does
any firm score a “100”, meaning the highest level.
SPI Research works with services organizations to improve performance in each Pillar. The analysis
highlights how the firm scored relative to its peers (for example, management consultancies with
between 100 and 300 employees) and the overall survey. This graphical display highlights areas where
the organization performs poorly and where additional attention should be paid to produce
improvements. After over five-years of engagements using the Professional Services Maturity Model™
SPI Research recommend firms look first at the areas performing poorly (red), as opposed to further
improving areas where it already does well (green). Figure 49 highlights one such example.

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Figure 49: Increase performance by focusing on low-performing KPIs

Peer Survey
Service Execution Performance Indicator Consulting Rus Level 1 Level 2 Level 3 Level 4 Level 5
Average Average
Describe your resource management process By Account
Project staffing time (days) Under 5 days 10.09 9.14
Number of projects delivered per year 110 224 871
Revenue per project (k) $25k - $50k $201 $152
Concurrent projects managed by PM 6-8 4.45 6.04
Project staff (size people) Over 11 4.78 4.36
Project duration (months) 9 - 12 5.62 5.71
Projects delivered on-time 60% - 70% 79.0% 76.9%
Projects canceled 0% - 1% 2.0% 2.1%
Project overrun 5% - 10% 8.9% 8.6%
A standardized delivery methodology is used 60% - 80% 66.6% 66.1%
Project margin for time & materials projects 30% - 40% 36.5% 34.9%
Project margin for fixed price projects 30% - 40% 36.0% 34.4%
Project margin — subs, offshore Under 20% 28.0% 25.8%
Effectiveness of resource management process Neither Effective nor Ineffective 3.71 3.63
Effectiveness of estimating processes and reviews Neither Effective nor Ineffective 3.69 3.56
Effectiveness of change control processes Neither Effective nor Ineffective 3.61 3.45
Effectiveness of project quality processes Neither Effective nor Ineffective 3.65 3.69
Effectiveness of knowledge management processes Neither Effective nor Ineffective 3.37 3.42

Source: SPI Research, February 2019

Model Results

SPI Research analyzed each of the 622 participating firms to minimize any bias when comparing PSOs of
different sizes. Table 180 shows most organizations in each size category have similar averages for each
pillar.
Table 180: Average Service Maturity by PSO Size (People)

Average Maturity Level

Organization Size (people) Count LE CR HC SE FO Average
Under 10 53 2.77 2.30 2.40 2.52 2.22 2.44
10 – 30 123 2.49 2.15 2.54 2.50 2.30 2.40
31 – 100 166 2.38 2.22 2.37 2.42 2.54 2.39
101 – 300 143 2.60 2.16 2.54 2.41 2.39 2.42
301 – 700 54 2.19 2.09 2.57 2.52 2.43 2.36
Over 700 83 2.77 2.30 2.40 2.52 2.22 2.44
Total 622 2.41 2.41 2.41 2.41 2.41 2.41
Source: SPI Research, February 2019

As one might expect, the smallest firms scored highest in the Leadership pillar, as they can communicate
much more efficiently than larger, global organizations. SPI Research did find it interesting that the
largest organizations scored the second highest in this year survey, reflecting a strong commitment to
better leadership. Smaller firms also scored higher in the Client Relationships pillar, fueling strong
growth along the way. However, in Human Capital Alignment, smaller firms scored lower, as many lack

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the training, compensation and internal growth potential that tend to keep attrition low and employees
happy.
SPI Research found it interesting that the smallest firms scored the highest level of maturity in delivering
services. This result is atypical, as larger firms have more tools and methodologies in place to perform
efficiently and effectively. However, sometimes larger firms have very bureaucratic processes, which
slow the ability to deliver services, and potential profit, down. Overall, midsize firms will show the
greatest Finance & Operations maturity, primarily due to not being so small as to worry about profit, but
not so large, as to worry about corporate bureaucracy.
Table 181: Average Service Maturity by PSO Type

Average Maturity Level

Organization Size (people) Count LE CR HC SE FO Average
Embedded 193 2.37 2.40 2.21 2.36 2.52 2.37
Independent 429 2.43 2.41 2.50 2.43 2.36 2.43
Total 622 2.41 2.41 2.41 2.41 2.41 2.41
Source: SPI Research, February 2019

SPI Research analyzed the maturity of PSOs by type (embedded vs. independent), and the results are
summarized in Table 181. This year’s results show that embedded service organizations scored better in
only two of the five performance pillars, which was also the case in last year’s survey. In the past
embedded organizations exhibited greater maturity in all five dimensions. Embedded PSOs are typically
early adopters of business applications as they receive the benefit of sophisticated IT investments while
independents tend to forego solution acquisition in favor of business development and marketing
expenditures. Just like most years, this year independents were superior in leadership, talent
management and service delivery.
Table 182 shows the average level of maturity for each of the performance pillars by select vertical
markets. IT consultancies, management consultancies and SaaS of PS scored the highest on two levels,
although SaaS PS also scored the lowest on one (Human Capital Alignment). Several of the markets
where SPI Research did not have enough quantitative data showed lower results. However, it is difficult
to analyze those markets when there are less than 20 surveys.

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Table 182: Average Service Maturity by Vertical Market

Average Maturity Level

Market Count LE CR HC SE FO Average
IT Consulting 156 2.58 2.69 2.72 2.72 2.54 2.65
Architecture/Engineering 100 2.25 2.08 2.24 2.07 2.24 2.18
Software PS 78 2.32 2.27 2.29 2.24 2.41 2.31
Management Consulting 75 2.75 2.60 2.63 2.63 2.43 2.61
SaaS PS 70 2.36 2.31 2.21 2.39 2.37 2.33
Advertising/Marketing/PR 20 2.15 2.05 2.50 2.45 2.00 2.23
Accounting 19 2.11 2.11 2.63 2.00 2.00 2.17
VARs 14 2.86 3.21 2.00 2.64 3.36 2.81
Hardware/Networking PS 11 2.09 2.45 1.82 2.73 3.27 2.47
Government Contracting 10 2.20 2.30 2.20 1.50 2.10 2.06
All Others 69 2.19 2.33 2.17 2.30 2.32 2.26
Total 622 2.41 2.41 2.41 2.41 2.41 2.41
Source: SPI Research, February 2019

The Financial Benefits of Moving Up Levels

The PS Maturity Model™ was developed to demonstrate the importance of organizational improvement
through the use of benchmarking. SPI Research believes that the importance of the maturity model is to
help organizations improve balanced performance across the entire organization, not just in terms of
financial performance. However, if the organization is profit-motivated (which most are), increasing
maturity levels do show up in significant bottom-line profit. Table 183 highlights some of the key
performance indicators by maturity level and should alone be an important reason why PS executives
should looker deeper into using it to accelerate both productivity and profit.
Table 183: Key Performance Indicators (KPIs) by Maturity Levels

Key performance indicator (KPI) Level 1 Level 2 Level 3 Level 4 Level 5

Year-over-year change in PS revenue 5.3% 9.1% 11.1% 14.0% 16.4%
Year-over-year change in PS headcount 4.6% 6.8% 8.4% 12.3% 11.6%
Well understood vision, mission and strategy (5 pt.) 2.96 3.83 4.08 4.63 5.00
Confidence in PS leadership (5-pt. scale) 3.26 4.00 4.27 4.81 5.00
Bid-to-win ratio (per 10 bids) 3.50 4.66 5.45 5.82 6.88
Deal pipeline relative to qtr. bookings forecast 110% 157% 196% 249% 309%
Employee billable utilization 56.7% 65.7% 76.0% 79.5% 87.4%
Projects delivered on-time 65.2% 75.1% 80.6% 83.9% 91.4%

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Key performance indicator (KPI) Level 1 Level 2 Level 3 Level 4 Level 5

A standardized delivery methodology is used 60.6% 66.3% 65.1% 71.8% 73.6%
Annual revenue per billable employee (k) $74 $160 $219 $268 $296
Annual revenue per employee (k) $78 $129 $170 $224 $252
Project margin 30.3% 32.6% 35.5% 41.3% 46.6%
Percent of annual revenue target achieved 86.8% 89.7% 95.6% 98.0% 101.1%
Percent of annual margin target achieved 83.6% 85.9% 92.2% 94.0% 99.1%
EBITDA (Profit) % 5.0% 8.3% 17.8% 21.8% 32.5%
Source: SPI Research, February 2019

This table shows some of the benefits in moving up levels. Virtually every one of the 158 KPIs improve
as firms move up from one level to the next. Most organizations SPI Research has worked with find that
improving by one maturity level annually is about all they can do. While moving up even one level can
be difficult, the model shows the investment is well worth it.

The Inter-relationship of Pillars

Process improvement can both positively and negatively impact other Key Performance Indicators (KPIs)
in the same Service Performance Pillar as well as the other four. Some examples include:
∆ Bid-to-Win (Client Relationships) impacts margins and revenue growth (Finance and Operations).
Winning bids might improve a PSO’s sales effectiveness but might worsen its Finance and
Operations pillar due to lower profit margins if heavy discounting is required to win the bids.
∆ Leadership issues (communication, well understood vision, mission and strategy,) can impact
the ability to grow (Finance and Operations), staffing levels (Human Capital) and the ability to
effectively deliver projects (Service Execution).
∆ If a project is delivered late (Service Execution) it can negatively impact relations with the client
and future sales effectiveness (Client Relationships), revenue growth and project profitability
(Finance and Operations).
SPI Research took these interrelationships into account when building the Professional Services Maturity
Model™ (Figure 50). It adds complexity to the model, but SPI Research believes it provides a real-world
balanced view that improves PSOs ability to positively enact change.

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Figure 50: Key Performance Indicators (KPIs) are Correlated

Source: SPI Research, February 2019

Model Conclusions

In 12 years of building the Professional Services Maturity Model™ SPI Research has seen the correlation
of KPIs vary from year-to-year, as the economy and competitive environment dictate how PS
organizations operate. The model is an aggregate built for PSOs (both embedded and independent),
different size organizations, as well as for the different vertical markets surveyed. Therefore, the results
will have some type of “generic bias.” PS executives who wish to have their organization compared
directly to their peer group (i.e., IT Consultants with 100 to 300 employees) should contact SPI Research.
As organizations grow, they will gain greater operational efficiency and other advantages, while losing
intimacy and ease of communication. Every vertical market has its own constraints, particularly in
pricing strategies, in many cases limiting the ability for high levels of profitability. The key to this
maturity model is for executives to hone in on their own vertical market, as well as organization size, to
better determine relative performance. SPI Research can further segment this information to help PS
executives specifically analyze performance relative to their exact peer group. Contact SPI Research for
more information on the Professional Services Maturity Model™.

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12. Conclusions and Recommendations

2018 started off strong but ended with turbulence. For most of the year stocks continued to ride the
longest bull market in history but took a nose dive in December, only to recover somewhat in January
and February. In 2019, volatility and tumult appear to be the order of the day, with government
shutdowns, political turmoil, trade wars and Brexit making the headlines.
Among the major world economies, India’s growth surpassed China’s as the Asian giant continues to
decelerate. Based on 12 years of surveying for the Professional Services Maturity™ Benchmark report,
SPI Research has seen the economy go through many cycles, both ups and downs, but through it all the
PS industry keeps expanding. Professional Services growth continues to outpace that of other
industries, with Computer Systems Design at the top of the list.
This year’s benchmark showed that there are definitely “Haves” and “Have-nots”. The Haves are
expanding rapidly and are very profitable. The future looks bright for them. The Have-nots are either in
a commoditizing market or have not found a way to differentiate themselves. Quite often lackluster
performance emanates from management failure and the inability to measure and improve execution.
The professional services maturity benchmark is a good place to start. It shows organizations where they
are deficient and where their improvement dollars will produce the best payoff.
The Professional Services Maturity Model™ has shown effective leadership is a critical component of
organizational success. As the economy changes and the makeup of the professional workforce
changes, leadership is now more important than ever. Hiring and developing future leaders is critical, as
the new generation of millennial workers thirsts for guidance.

Growth Will Continue in 2019

While no one has a crystal ball, the Professional Services sector continues to be poised for growth, albeit
not at the levels seen in 2017 and 2018. Although “Cloud Computing” is now past its 20th year, plenty of
headroom still exists with new technologies like artificial intelligence continuing to transform how
business is conducted and how work gets done. Services and Professional Services in particular, are
clearly at the epicenter of the next wave innovation as knowledgeable experts are needed more than
ever before to help companies prioritize and integrate the endless array of tempting new technologies
coming at them. With new volatility creeping into world markets we could see commensurate swings in
PS revenues and hiring but overall 2019 should be a good year.

You Can’t Fix What You Can’t Measure

The Professional Services Maturity™ Benchmark provides clear metrics and guidance on over 160 key
performance measurements. SPI Research likes to say, “Running a service organization is a game of
singles and doubles.” Small percentage improvements in just a few key performance areas can have
dramatic bottom-line results. PS executives often feel isolated and have a limited support base to rely
on for advice. The Professional Services Maturity™ Benchmark and score-carding process takes the

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guesswork out of metrics. Completing the PS Maturity™ survey can highlight new avenues for
improvement and enable PSOs to conduct their own self-assessment.
Most PSOs consider themselves leaders and they probably are in one or more areas. To continue to
remain relevant in this competitive and fragmented market, they must have unique and specific
capabilities that set them apart. However, as with most organizations as they scale, inefficiencies and
blind-spots start to appear, threatening to derail growth and undermine productivity. There may be
areas of immaturity or overly cumbersome or manual systems and processes. This benchmark helps PS
executives measure and compare their performance, armed with an objective fact base and competitive
comparisons. By developing a measurable annual improvement plan and backing it up with clear
enhancement initiatives and goals the organization can create and institutionalize a continuous cycle of
improvement and renewal.

Digital Transformation is Not Just for your Clients

Knowledge is power, and data fuels knowledge. Analytics have enabled firms to better prepare and
operate in a changing world. A lack of actionable information hinders progress. Effective and integrated
business applications provide the cornerstone for any type of business transformation.
The Professional Services Maturity Model™ is based on accurate and timely information. Needless to
say, PS firms cannot run optimally without accurate and timely information either. Scrimping on
systems costs more in the long run. Service providers need to use and recommend the right tools for the
job including their own information infrastructure. The acumen they use to help their clients embrace
digital transformation must also be brought to bear on their own systems. Investments in IT will pay off.

Dramatic improvements are possible when PSOs implement the right information technologies, but only
when real-time information and consistent metrics are visible and reinforced throughout the
organization. The quote to cash business cycle is at the heart of providing visibility to the three key areas
underpinning growth – pipeline, projects and people. In a knowledge intensive business, like
Professional Services, arming employees with a view of active deals, the resources required to
effectively deliver projects, and the skills and competencies needed both today and tomorrow goes a
long way towards enhancing progress.

Get Ready!
Concentrate on your organization’s weakest links, but continue to improve in each of SPI Research’s five
core pillars:
1. Leadership: build leaders for the future. As organizations expand, it is imperative they have
strong leadership around the world. With changing workforce dynamics, effective leadership is
required more than ever before.
2. Client Relationships: selling professional services has become increasingly difficult, as client
organizations look for demonstrable value. Marketing and sales campaigns must address client’s
key challenges and provide the means for clients to buy the way they want to. New usage-

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based business models make it easier for buyers to buy but more complex for service providers
to provide. Measurable business value and adoption are driving references and growth.
3. Human Capital Alignment: your talent pool is your most critical asset, and continued
understanding of how the workforce changes, and how they wish to be treated, from training to
compensation to social programs, is critical to understand and cultivate a high-quality
workforce.
4. Service Execution: delivering services on time and on budget with sufficient margins fosters
growth and profitability. Always keep an eye on project budgets to actuals, eliminating overruns
before they spiral out of control. You can't have your best people on every project, there must
be a mix between higher-level skills and lower level and lower cost talent. Implementing
standardized business processes helps you better understand and track effort for the services
delivered.
5. Finance & Operations: keep an eye on the bottom-line! Cash flow is critical, and it is imperative
for your organization to track costs and expenses to determine where improvement is needed.
Predictable financial performance provides the breathing room to make investments into new
growth areas.
SPI Research believes benchmarking is an activity that should be conducted continuously, as the insights
it delivers enable PSOs to make changes in real time that are necessary for growth and prosperity.
Continue to compare your organization to the Best-of-the-Best organizations. This information will shed
light on best practices and help galvanize your organization around improvement priorities.

Best of luck for a prosperous and profitable 2019!

Jeanne Urich and Dave Hofferberth

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13. Appendices

Appendix A: Acronyms Used in This Report

Table 184: Lexicon of Acronyms and Abbreviations

Acronym Meaning Acronym Meaning

AI Artificial Intelligence PA Project Accounting
APac Asia-Pacific PaaS Platform as a Service
BI Business Intelligence PMI Project Management Institute
BPM Business Process Management PMO Project Management Office
BPO Business Process Outsourcing PMP Project Management Professional
CEO Chief Executive Officer PPM Project Portfolio Management
CFM Core/Corporate Financial Management PS Professional Services
CFO Chief Financial Officer PSA Professional Services Automation
CIO Chief Information Officer PSO Professional Services Organization
CRM Client Relationship Management ROI Return on Investment
DSO Days Sales Outstanding RSD Remote Service Delivery and Collaboration
EMEA Europe, Middle East, Africa SaaS Software as a Service
ERP Enterprise Resource Planning SCM Supply Chain Management
ESO Embedded Service Organization SM Social Media
EVM Earned Value Management SMAC Social, Mobile, Analytics, Cloud
HCM Human Capital Management SRP Service Resource Planning
HR Human Resources SLA Service Level Agreement
IaaS Infrastructure as a Service SLM Service Lifecycle Management
IoT Internet of Things STEM Science, technology, math and engineering

ISV Independent Software Vendor SVC Service Value Chain

IT Information Technology VSOE Vendor-Specific Objective Evidence

KPI Key Performance Indicator WBS Work Breakdown Structure

MarCom Marketing Communication / Advertising YoY Year-over-year

NAICS North American Industry Classification System

Source: SPI Research, February 2019

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Appendix B: Financial Terminology

The following table contains a list of standard key performance measurement terms and definitions
used in the benchmark report. The terms and definitions have been compiled from our knowledge and
experience and a variety of sources including www.wikipedia.org http://www.investopedia.com and
Morris, Manning and Martin, LLP. SPI Research is interested in expanding and evolving common key
performance measurements, standards and definitions for Professional services organizations. If you
would like to add terms or suggest changes, your comments and suggestions will be appreciated.
Table 185: Standard Key Performance Indicator (KPI) Definitions

Term Definition
70% utilization ~ 1,400 billable hours/year or 350 hours/quarter
Corporate allocations refer to a company’s policy of distributing the cost of shared resources, for example, facilities,
Allocations
healthcare, IT and Sales, General and Administrative (SG&A) costs to specific functions or departments.
Annual Billable Annual Billable Hours/(2080 hours – vacation and holidays) or
Utilization % Billable days/(260 days – 10 vacation – 10 holidays ~ 240 days)
Attrition % Attrition % = (Voluntary + involuntary) / Total Beginning Employees
Backlog = Bookings - Billings
The total value of contract commitments yet to be executed:
Backlog
Total Backlog = Previous fiscal year’s contracts not yet billed
+ Latest fiscal year’s sales
- Latest fiscal year’s revenue
The ratio of successful bids (resulting in signed contracts) divided by the total number of bids or proposals issued. Bid Win
Bid Win Ratio ratio is a good measure of sales and marketing effectiveness because it demonstrates the organization is pursuing
appropriate types of business and is able to beat its competitors.
Billings Completed, accepted work that can been billed (T&M, Work in process, Milestone, Deliverables)
Bookings Signed Contracts (signed PS Agreement + signed SOW + PO)
Typically employee burdened costs are the costs per employee for benefits (Healthcare, Pensions, 401K) and an
Burdened Cost apportioned cost for the employee’s facility and IT usage + all discretionary expense. The difference between burdened
cost and fully burdened cost is that fully burdened cost includes an allocation for corporate SG&A costs.
Expensed computing equipment: expenses (typically less than $100k) vs. capitalized (paid for over a time period).
Servers for example, are typically capitalized and depreciated over a 3 year period. Capital expenditures usually refer to
Capitalization
expenses a company makes for property, buildings or equipment. Capitalized items typically have a useful life of several
years.
The value of the most liquid assets within the balance sheet. Cash equivalents are assets such as money market accounts
Cash
that can be accessed quickly and are not subject to significant change. Does not include the value of accounts receivable.
Is the balance of the amounts of cash being received and paid by a business during a defined period of time, sometimes
Cash flow tied to a specific project. The timing of cash flows into and out of projects is used as input to financial models such as
internal rate of return, and net present value.
Cost per person Cost Per person = Base + Fringe (~25%) + Bonus

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Term Definition
A measure of the average number of days that it takes a company to collect revenue after a sale has been made and a bill
has been issued. A low DSO means that it takes a company fewer days to collect its accounts receivable. A high DSO
means that a company is selling its product to slow-paying customers and it is taking longer to collect money.

Days sales outstanding is calculated as:

Days Sales
Outstanding
(DSO)

DSO is a key performance measurement of the credit-worthiness of a company’s clients; a general indicator for client
satisfaction and the effectiveness of the billing and collection process. DSO is reported either quarterly or annually.
An expense recorded to allocate a tangible asset's cost over its useful life. Because depreciation is a non-cash expense, it
Depreciation
increases free cash flow while decreasing reported earnings.
Direct Costs Cost incurred as a direct consequence of producing a good or service, as opposed to overhead or indirect costs.
Earnings Before Interest, Taxes, Depreciation and Amortization.

EBITDA is essentially net Income with interest, taxes, depreciation, and amortization added back to it. EBITDA can be used
EBITDA to analyze and compare profitability between companies and industries because it eliminates the effects of financing and
accounting decisions. However, this is a non-GAAP measure that allows a greater amount of discretion as to what is (and is
not) included in the calculation. This also means that companies often change the items included in their
EBITDA calculation from one reporting period to the next.
An organization formed in 1984 by the Financial Accounting Standards Board (FASB) to provide assistance with timely
financial reporting. The EITF holds public meetings in order to identify and resolve accounting issues occurring in the
financial world. EITF 08-01 and EITF 09-03 are scheduled to go into effect in June, 2010. These new rulings provide
EITF revenue recognition guidelines around the value of multi-element contracts which include products and services. These
new rulings will allow companies to more accurately recognize revenue as services are delivered for complex multi-element
contracts. They create a hierarchy of evidence to support revenue recognition including VSOE (Vendor Specific Objective
Evidence), TPE (Third Party Evidence) and ESP (Estimated Selling Price).

A seven-member independent board consisting of accounting professionals who establish and communicate standards of
financial accounting and reporting in the United States. FASB standards, known as generally accepted accounting
FASB
principles (GAAP), govern the preparation of corporate financial reports and are recognized as authoritative by the
Securities and Exchange Commission.
Fixed costs are costs that remain the same regardless of changes in the business. For example, facility lease costs remain
Fixed Costs the same for the life of the lease, regardless of the level of occupancy. If the business is expanding, the percentage of fixed
costs may decrease whereas if the business is contracting, the percentage of fixed costs may increase.
A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are
met. Fringe benefits commonly include health insurance, group term life coverage, education reimbursement, childcare and
Fringe Benefits
assistance reimbursement, cafeteria plans, employee discounts, personal use of a company owned vehicle and
other similar benefits.
Gross Margin = (Total Services Revenue – Expense or Cost to Deliver the Services)
The gross profit generated per dollar of services delivered.
Gross Margin A company's total sales revenue minus its cost of goods or services sold.
This dollar amount represents the gross amount of money the company generated over the cost of producing its goods or
services.

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Term Definition
Gross Margin Gross Margin % = (Total Services Revenue – Expense or Cost of Services Delivered) / Total Services Revenue
Percentage Gross Margin %= Gross Margin / Revenue
Gross Profit A company's total sales or service revenue minus cost of goods or services sold, divided by the total sales revenue,
Percentage expressed as a percentage. Gross profit and gross margin are used interchangeably.
Income A financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time - usually
Statement or a fiscal quarter or year. The statement of profit and loss follows a general format that begins with an entry for revenue and
Profit and Loss subtracts from revenue the costs of running the business, including cost of goods sold, operating expenses, tax expense
Statement and interest expense. The bottom line is net income (profit).
Labor Burdened Cost per Productive Hour (or Fully-burdened Cost)
Labor Burdened (Labor Burdened Cost + gross payroll labor cost) ÷ the number of actual work (productive) hours
Cost Number of actual productive hours ÷ the total additional cost of the employee
= Employee labor burden cost per productive hour
Labor multiplier = total $ amount of labor hours billed / fully loaded (burdened) labor cost
Note: a labor multiplier of 1.0 indicates a breakeven point.
Any usability cost-benefit analysis should value people's time based on their fully loaded cost and not simply on their take-
home salary. The cost to a company of having a staff member work for an hour is not that person's hourly rate but also
includes the cost of benefits, bonuses, vacation time, facility costs (office space, heating and cleaning, computers etc.), and
the many other costs associated with having that person employed.
The simplest way to derive the average loaded cost of an employee is to add up all corporate or division expenses and
divide by the total number of productive hours worked.
Commonly, the fully loaded cost of an employee is at least twice his or her salary. This is why consultants charge so much
more than regular employees: their billable hours have to cover the many overhead costs that are implicit for full-time
employees. In fact, looking at common consulting rates for the kind of staff you are dealing with is a shortcut for estimating
Labor Multiplier
the fully loaded value of your employees' time.
EXAMPLE:
base rate/hour (BR)= dollar per hour pay for the staff category
OH multiplier (OHM) = firm's overhead (OH) percentage + 100%
Profit multiplier (PM)= profit percentage + 100%
"loaded" rate/hour = BR X OHM X PM

Base rate/hour= $45.00 per hour

overhead multiplier = 135% overhead + 100% = 235% = 2.35
Profit multiplier = 10% profit + 100% = 110% = 1.1
"loaded" rate/hour = $45.00 X 2.35 X 1.1
Investopedia explains LAGGING INDICATORS
Lagging indicators confirm long-term trends, but they do not predict them. Some examples are unemployment, corporate
Lagging profits and labor cost per unit of output. Interest rates are another good lagging indicator as interest rates change after
Indicators severe market changes.
In services, billable utilization, revenue per person and net profits are lagging indicators because they reflect changes in
market conditions after the change has already occurred.
A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading
indicators are used to predict changes in the economy, but are not always accurate. In services, leading indicators are
backlog and sales pipeline because they are predictors of future revenue.
Leading
Indicators What Does the COMPOSITE INDEX OF LEADING INDICATORS Mean?
An index published monthly by the Conference Board used to predict the direction of the economy's movements in the
months to come. The index is made up of 10 economic components, whose changes tend to precede changes in the overall
economy. These 10 components include:

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Term Definition

1. The average weekly hours worked by manufacturing workers

2. The average number of initial applications for unemployment insurance
3. The amount of manufacturers' new orders for consumer goods and materials
4. The speed of delivery of new merchandise to vendors from suppliers
5. The amount of new orders for capital goods unrelated to defense
6. The amount of new building permits for residential buildings
7. The S&P 500 stock index
8. The inflation-adjusted monetary supply (M2)
9. The spread between long and short interest rates
10.Consumer sentiment
Loaded Cost Base + Fringe Benefits (~25%) + Target Variable Compensation + % Corporate and Practice Overhead allocation per
per Person person. Non-billable time (bench time) must be added to calculate the actual cost per hour of productive time.
Margin % Margin % = (Revenue - Cost)/Revenue
Markup % Markup % = (Revenue-Cost)/Cost
For example, 60% markup = 40% margin
Measurement Billable Hours + Approved non-billable hours (pre-sales, Customer Satisfaction, Special Projects)/(2080 hours or 260 days -
Utilization % vacation and holidays)
Measurement Measurement Utilization = (Billable Hours + Approved non-billable hours)/ (2080 hours – Vacations – Holidays) Approved
Utilization non-billable hours are usually associated with presales, overtime not billed to clients, customer satisfaction resolution time,
internal projects or skills training.
A company's total earnings (or profit). Net income is calculated by taking revenues and adjusting for the cost of doing
business, depreciation, interest, taxes and other expenses. This number is found on a company's income statement and is
an important measure of how profitable the company is over a period of time. The measure is also used to calculate
Net Income earnings per share.
Often referred to as "the bottom line" since net income is listed at the bottom of the income statement.
Net income is calculated by starting with a company's total revenue. From this, the cost of sales, along with any other
expenses that the company incurred during the period, is removed to reach earnings before tax. Tax is deducted from this
amount to reach the net income number.
Non-billable Non-billable travel expense represents travel expense which cannot be re-billed to a client. Typically consulting non-billable
Travel travel is associated with business development or training activities.
The typical pay structure for a salesperson is composed of a fairly low basic salary with an additional amount of
On-Target commission. The package will usually be called OTE or on-target earnings, meaning that if a salesperson hits the specified
Earnings (OTE) target, they will be guaranteed that amount of money. A higher commission can be paid if the person performs beyond this
target.
Operating income would not include items such as investments in other firms, taxes or interest. In addition, nonrecurring
Operating items such as cash paid for a lawsuit settlement are often not included.
Income Operating income is required to calculate operating margin, which describes a company's operating efficiency.
Operating Income = Gross Income – Operating Expenses – Depreciation
Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of
Operating service delivery such as wages and benefits.
Margin Operating Margin = Operating Income / Net Sales
Operating Profit = (Total Service Revenue – Total cost of service delivery – Total Operating Expense)/ Total Service
Revenue
Operating Profit The amount of profit realized from a business's own operations. A ratio used to measure a company's pricing strategy and
/ Margin operating efficiency.

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Term Definition
Usually, fixed costs - a business cost that is not directly accountable to a particular function or product; a fixed cost such as
Overhead facilities.
Costs Costs incurred that cannot be attributed to the production of any particular unit of output.
The general, fixed cost of running a business such as rent, lighting, and heating expenses, which cannot be charged or
attributed to a specific product or part of the work operation.
Profit Margin = The percentage of every dollar of sales that makes it to the bottom line. Profit Margin is Net Income after Tax divided by Net
Return on Sales Sales.
(ROS) A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much
out of every dollar of sales a company actually keeps in earnings.
Project Margin
Project Revenue – Direct Cost of project service delivery
£$€
Revenue
Revenue Estimate = Billable headcount X Billable hours X Average Bill rate X Average Utilization Rate
Estimate
Revenue Revenue = Billings that can be recognized within the time period + Re-billable travel and expense
The amount of money that a company actually bills during a specific period, including sales discounts.
Revenue per
Actual Bill Rate * Billable Hours + re-billable travel and expense
person
The best revenues are those that continue year in and year out, they are often referred to as “recurring” revenue.
Recurring
Examples of recurring revenues are multi-year maintenance contracts and multi-year Software as Service (SaaS)
Revenue
subscription revenues. Temporary revenue increases, such as those that might result from a short-term promotion, are less
valuable and garner a lower price-to-earnings multiple for a company.
Run Rate How the financial performance of a company would look if you were to extrapolate current results out over a specified
period of time.
http://www.mmmlaw.com/publications/article_detail.asp?articleid=103
(Selected excerpts from the article)
Any business generating revenue from licensing, selling, leasing or otherwise marketing software will experience serious
problems from failure to recognize the significance of the New SOP. This section summarizes the importance of revenue
recognition.

Revenue recognition is a fundamental component of generally accepted accounting principles (GAAP) and is a key
consideration in maintaining the integrity of financial statements. The central issue is one of timing and amount :
When should revenue generated in a software transaction be recognized in a software company’s income statement, and in
what amounts?
In most cases, companies strive to recognize revenue as quickly as possible, thereby improving their financial performance.
Revenue Even private software companies generally try to improve financial performance by accelerating revenues whenever
Recognition possible. Before issuance of SOP 91-1 in December 1991, there was no specific guidance for recognizing revenue in
software transactions. The ensuing lack of uniformity among software companies in their revenue recognition policies led to
the inability of third parties to make meaningful comparisons among companies. Similarly, the New SOP is designed to
provide even greater uniformity by addressing inconsistent applications of SOP 91-1 in software transactions.

Basic Revenue Recognition Criteria. SOP 91-1 and the New SOP each define basic criteria that must be satisfied before
revenue can be recognized. Under the New SOP if an arrangement to deliver software does not require significant
production, modification, or customization of the software, then the New SOP specifies four criteria which must be met prior
to recognizing revenue from a single-element arrangement or for individual elements in a multiple-element
arrangement.1 These four criteria are:
1. persuasive evidence of an arrangement exists;
2. delivery has occurred;
3. the software vendor’s fee is fixed or determinable; and

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Term Definition
4. Collectability is probable.
Although these basic revenue recognition criteria are substantially the same as those contained in SOP 91-1, the New SOP
takes a fundamentally different approach in certain areas such as: (1) providing detailed guidelines for recognition of
revenue in "multiple-element arrangements," and (2) eliminating the concept of remaining "significant vendor obligations"
under SOP 91-1.
Changing Sales Behavior. A software company’s sales force will be critical to implementation of the New SOP. As a general
rule, software companies tend to bundle software and services together in order to offer a turn-key software solution to the
buyer. Additionally, the description of and the fees for the software and services being offered are typically combined. This
bundling makes the sale easier for a sales representative because it makes the offering easier for the buyer to understand
and it prevents the buyer from removing elements of the transaction that the buyer might not otherwise pay for if they knew
the individual price for the element. However, the result of this bundling could be a deferral of revenue recognition.
Therefore, many software companies will have to change the manner in which their sales personnel work in order to
achieve their revenue recognition goals.

Sales Force Compensation. From an internal perspective, many companies base compensation and bonus arrangements,
at least in part, on recognized revenue within a specified time period. If revenue recognition policies are changed, bonus
plans may be affected. With the adoption of the New SOP, benefit plans will require further examination to verify the
suitability of these plans in achieving a company's objectives and motivating employees to complete all the requirements for
revenue recognition as a basis for earning a bonus.
Subcontractor Subcontractor Margin = (Total subcontractor generated revenue – total subcontractor cost)/ Total subcontractor generated
Margin revenue
Variable costs are costs that vary based upon usage. Training, travel and business expenses are variable, whereas costs
Variable Costs for facilities are treated as a “fixed” cost because they do not vary based on use. Commonly variable costs may also be
termed “discretionary” because management can make decisions to make or not make the expenditure.
VSOE = Vendor-Specific Objective Evidence (accounting/contracting)
VSOE is the price established by management having relevant authority. Once a firm has established the VSOE price and
officially acknowledged it as such, that price must not be expected to change prior to the introduction of that element into
the marketplace. The introduction of that deliverable into the marketplace on a separate basis ought to be within a very
short period of time after the VSOE price is set. Accounting firms have differing opinions on how long is too long, so make
certain you are aware of your accounting firm’s guidelines.
VSOE Vendor Specific Objective Evidence (VSOE) is an agreed-upon value for goods and services. For service organizations,
VSOE is usually established by the company’s auditors based on historical bill rates or actual realized revenues from
service packages. When VSOE service prices are set the effect can be very painful because the firm’s auditors review past
engagements to set current VSOE rates. This means if a firm’s services were significantly discounted in the past the
service organization will be penalized with “Past sins” when auditors calculate current VSOE rates. With software
companies the accepted practice is to amortize each sale across the contract's lifetime and to apply all labor hours whether
billable or not.

Source: Investopedia, Wikipedia, Morris, Manning and Martin, LLP, a nd SPI Research, February 2019

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Appendix C: Professional Services Maturity™ Benchmark Survey Tool

180901 SPI Research

The information you supply will be kept strictly confidential
Thank-you for your time and participation, please email back to:
david.hofferberth@spiresearch.com

Section 1 — Survey Respondent

1 Name John Doe
2 Title CEO
3 Company Consulting Rus
4 Email john.doe@consultingrus.com
5 Telephone 617.555.4444

Section 2 — Firm Demographics — Fiscal Year 2018

6 Headquarters location North America
7 Professional Services (PS) sub-vertical Management Consulting
8 Size of Professional Services Organization (total employees) 31 - 100
9 Annual company revenue (for the entire company, not just PS) $5mm - $10mm
10 Total annual Professional Services revenue $5mm - $10mm
11 Year-over-year change in Professional Services revenue 10% - 15%
12 Year-over-year change in Professional Services employee headcount 5% - 10%
13 Percentage of Professional Services employees billable or chargeable 70% - 80%
14 Percentage of PS revenue delivered by third-parties (subcontractors, offshore) 1% - 5%
15 Number of mergers and acquisitions your organization has been involved in over the past three years None

What percentage of your PS revenue comes from the following:

16 Business / Management Consulting 92%
17 Technology or IT Consulting 5%
18 Subscription Services (Services sold on a subscription basis) 0%
19 Managed services 0%
20 Staff augmentation 2%
21 Hardware, software or other equipment resale 1%
22 Other 0%
Total 100%

Information Technology
Is it Integrated
Business Solutions Solution Used Satisfaction Level w/Financials
23 - 24 Accounting / Financial Management Solution (ERP) Intacct Very Satisfied
25 - 27 Client Relationship Management (CRM) Salesforce.com Somewhat Satisfied Partially
28 - 30 Professional Services Automation (PSA or Proj. Mgmt.) Kimble Very Satisfied Yes
31 - 33 Human Capital Management (HCM) Unit4 Somewhat Satisfied No
34 - 36 Business Intelligence (BI) None
37 - 38 Knowledge Management (KM) Oracle/RightNow Somewhat Satisfied
39 - 40 Work Mgmt. (proj. mgmt/remote service delivery/collaboration) Microsoft Somewhat Satisfied
41 - 42 Primary Social Networking Tool LinkedIn Indifferent
43 Is CRM integrated with PSA? Yes

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Section 3 — Performance Pillars - PS Organization only

Leadership
44 Which of the following terms best describes your organization's culture? Collaborative

Rate the following aspects of your organization in terms of how well they operate (1: very ineffective - 5: very effective)
45 The vision, mission and strategy of the PSO is well understood and clearly communicated 5
46 Employees have confidence in PS Leadership 4
47 It is easy to get things done w/in the PS organization 2
48 Goals and measurements are in alignment for the service organization 4
49 Employees have confidence in the future of the PS organization 5
50 PS effectively communicates with employees 3
51 PS embraces change, we are nimble and flexible 4
52 PS focuses on innovation and is able to rapidly take advantage of changing market conditions 2

Rate the following challenges facing your business. (1: not important - 5: very important)
53 Clarity - Vision and strategy 4
54 Communication - Clear, consistent across organization 2
55 Growth - ability to support rapid growth and expansion 5
56 Sales and Marketing - improving sales and marketing effectiveness and collaboration 3
57 Solution portfolio - focus on improving/expanding our portfolio and markets 4
58 Alignment - between functions or groups 2
59 Quality - focus on improving quality and consistency 1
60 Talent - attracting, retaining and energizing high-quality staff 5
61 Financial performance - achieving revenue and margin targets, cutting costs, IT investments 5

For the coming year, please rate the following steps you will take to improve profitability (1: very unlikely – 5: extremely likely)
62 Improve solution portfolio - service packaging, new offers 5
63 Improve marketing effectiveness - brand awareness, lead generation, events 3
64 Improve sales effectiveness - higher close ratio, on-target performance, training 4
65 Rate increases - increase bill rates 2
66 Improve hiring, ramping, skill-building, training 3
67 Improve methods and tools for reuse, consistency, quality 4
68 Improve billable utilization - increase billable utilization 5
69 Reduce non-billable time - presales, write-offs, admins 5

Client Relationships
70 Total annual number of active clients 55
Existing Services New Services Total
71 - 72 Service revenue breakdown by new vs. Current Clients 65% 10% 75%
existing clients and new vs. existing
73 - 74 New Logo Clients 20% 5% 25%
services
Total 85% 15% 100%

75 Service Sales people are primarily measured on Service Bookings

76 Primary target buyer for your services COO
77 Win-to-Bid ratio (per 10 bids) 5 - 6 wins
78 Size of deal pipeline in comparison to your quarterly bookings forecast 2X forecast
79 Length of sales cycle from qualified lead to contract signing 60 - 90 days
80 Average service discount given clients Under 5%
81 Rate the effectiveness of your solution development process (1 poor - 5 great) 5
82 Rate your service sales effectiveness (1 poor - 5 great) 3
83 Rate your service marketing effectiveness (1 poor - 5 great) 3
84 Percent of referenceable clients 50% - 60%

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What is the percentage of work sold in the following categories?

85 Time & Materials 10%
86 Fixed time / fixed fee 85%
87 Shared risk / performance-based 5%
88 Managed Services 0%
89 Other 0%
Total 100%

Human Capital Alignment

What is the percentage of your PS workforce is in the following age categories?
90 Under 30 22%
91 30 - 40 40%
92 40 - 50 20%
93 Over 50 18%
Total 100%

94 Percentage of your workforce that is male? 50% - 80%

95 Please describe your primary organization structure Line-of-business/product
96 The primary reason employees leave Money
97 Professional Services employee voluntary annual attrition 5% - 10%
98 Professional Services employee involuntary annual attrition 1% - 5%
99 How strongly would you recommend your company as a great place to work (1=not at all – 5=very) 4
100 Approximate management-to-employee ratio 1:10
101 Length of time to recruit and hire for standard positions 60 - 90 days
102 Once hired, how long until fully billable? Under 1 month
103 Annual number of training days per employee 5 - 10 days
104 There is a well-understood career path for all employees (1-strongly disagree, 5-strongly agree) 4
105 What is your average annual consultant billable utilization percentage (2,000 hr. base)? 70% - 80%
106 What is your average annual fully loaded cost per consultant (salary, bonus, fringe benefits) $120k - $150k

How many annual hours are spent in the following categories for your average billable employee?
107 Vacation/personal/holiday 120
108 Education/training 55
109 Administrative 200
110 Non-billable business development/sales support 300
111 Non-billable project hours 250
112 Billable hours on-site 230
113 Billable hours off-site 950
(Hours do not have to add up to 2,080 ) Total annual hours per consultant 2,105

Where are your PS employees located? Service organization employee count by location
114 Headquarters 38
115 Branch offices 35
116 Home based 15
117 Offshore / nearshore 0
(Should be in the range answered in question 8) Total PS Employees 88

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Service Execution
118 Describe your resource management process Centrally Managed
119 Length of time to staff projects (in days) Under 5 days
120 Number of projects delivered per year 250
121 Average revenue per project $25k - $50k
122 Average number of projects a project manager (PM) manages at one time 6-8
123 Average number of people working on a project 3-5
124 Average project duration (in months) 1-3
125 Percentage of projects delivered on-time, on budget 80% - 90%
126 Percentage of projects canceled 0% - 1%
127 Average project overrun 0% - 5%
128 Percentage of projects where a standard delivery methodology is used 40% - 60%
129 Project margin for time and materials projects 30% - 40%
130 Project margin for fixed price projects 40% - 50%
131 Margin for subcontractors and/or offshore resources Under 20%
132 Effectiveness of resource management process (1 very ineffective - 5 very effective) 3
133 Effectiveness of estimating processes & estimate reviews (1 very ineffective - 5 very effective) 4
134 Effectiveness of change control processes (1 very ineffective - 5 very effective) 2
135 Effectiveness of project quality processes (1 very ineffective - 5 very effective) 4
136 Effectiveness of knowledge management processes (1 very ineffective - 5 very effective) 3

Finance and Operations

137 Annual revenue per billable employee $200k - $250k
138 Annual overall revenue/person yield (for the entire PS organization) $150k - $200k
139 Percentage of the quarterly revenue target in backlog at the beginning of the quarter Over 70%
140 Percentage of annual revenue target achieved 80% - 90%
141 Percentage of annual margin target achieved Under 80%
142 Percentage of overall revenue unable to bill (Revenue Leakage) 5% - 10%
143 Percentage of invoices that must be redone due to error or client rejections Under 1%
144 Days Sales Outstanding (DSO) 30 - 50 days
145 Quarterly non-billable discretionary expense per employee (cell phones, non-billable travel, training) $2,500 - $5,000
146 Percentage of billable work written off 5% - 10%
147 Do PS execs. have real-time visibility into all business activities (sales, service, marketing, finance, etc.)? 3 - Some

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2018 Professional Services Income Statement (in $Millions [US dollars]) ($millions)
148 Direct gross PS revenue $6.50
149 Indirect gross PS revenue (revenue delivered by subcontractors, outside resources etc.) $0.00
150 Pass-thru PS revenue (hardware, software, materials, etc.) $0.50
151 Revenue from reimbursable PS travel and business expense $0.10
Annual Gross PS Revenue (Should be in the range answered in question 10) $7.10
($millions)
152 Total direct billable labor expense for billable PS headcount (does not include fringe benefits, vacation, sick time or overhead) $2.90
153 Total fringe benefit expense as a % of direct labor (for healthcare, pensions, vacation and sick pay) 10% - 15%
154 Total subcontractor/outside consultant expense (compare to question 149) $0.00
155 Pass-thru equipment cost (hardware, software, materials, etc.) (compare to question 150) $0.30
156 Total billable travel and business expense (compare to question 151) $0.00
157 Total non-billable travel and business expense $0.08
158 Total Recruiting expense (recruiters, fees, signing bonus, referrals, etc.) $0.08
159 Total Sales expense (includes fully loaded headcount expense, bonus and non-reimbursable sales expense) $0.60
160 Total Marketing expense (includes all headcount, bonus and marketing program expense) $0.23
161 Total education, training and certification expense for the entire PS organization $0.15
162 Professional Services IT expense (fully loaded IT headcount, capital, depreciation, IT-specific facility exp.) $0.30
163 All other G&A expense - fully loaded non-billable headcount, general and administrative, facilities, legal, etc. $1.50
Annual PS Expenses $6.50
Earnings before Interest, Taxes, Depreciation, Amortization (EBITDA) $0.60
Earnings before Interest, Taxes, Depreciation, Amortization Percentage (EBITDA%) 8.4%
Please check your EBITDA

Thank-you for your time and participation, please email back to:
david.hofferberth@spiresearch.com
The information you supply will be kept strictly confidential

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Appendix D: Related SPI Research

SPI Research has produced several publications for services-driven organizations that include:

 2018 Professional Services Global Pricing, Compensation and Utilization Report (October
2018): The 2018 Professional Services Global Pricing, Compensation and Utilization Report is the
largest and most comprehensive PS pricing study ever published based on pricing information
provided by 156 PS organizations representing almost 11,000 consultants worldwide. The study
provides analysis of list price, realized bill rates, compensation and utilization across a broad
range of professional service verticals, geographies and job levels around the globe.
 2017 Professional Services Automation End-user Survey (September 2017): For the first time in
over a decade, during the second quarter of 2017, SPI Research conducted a Professional
Services Automation (PSA) end-user survey. This examination of 68 billable organizations using
PSA is truly an independent research study – the PSA solution providers had no input or control
over the survey or respondents. The survey asked both quantitative and qualitative questions
regarding why firms selected PSA, which attributes were most important, and how buyers
perceived their benefits. Most importantly, this study looked at both pre- and post-PSA
deployment. The report contains: PSA definition and core modules, why PSA was purchased,
how PSA is used, user satisfaction with various components and aspects of PSA, pre- and post-
PSA deployment benchmarks, and participant interviews, and long with 36 insightful figures and
tables.
 2017 Professional Services Automation Buyers Guide (July 2017): The growth engine of the
world’s economy has shifted from manufacturing to project-based, people-centric services
businesses. These businesses rely on Professional Services Automation (PSA) solutions. PSA
automates core business processes such as quote-to-cash, resource management, project
management, time capture and billing. It provides the real-time visibility necessary to improve
organizational efficiency and effectiveness. This PSA Buyer’s Guide provides an overview of
important trends, business processes and selection criteria to help project- and services-based
businesses evaluate and choose PSA applications, which will provide the level of insight,
management and control needed to improve productivity and profitability.
 2013 Professional Services Sales and Marketing Maturity™ Benchmark (October 2013): Most
professional services organizations are dissatisfied with their sales, marketing (and packaging)
effectiveness. For the past eight years, over 1,500 PS organizations that have completed SPI
Research’s benchmark surveys have consistently given their sales and marketing efforts failing
marks. The results for the very few firms that have successfully implemented PS sales, marketing
and packaging disciplines, and made these activities central to their value proposition are
extraordinary with 47 percent of all services sold as packaged solutions, 28.6 percent net profit
and $255,000 annual revenue yield per consultant.
Information on these and any other SPI Research publications can be found at www.spiresearch.com or
by e-mail at info@spiresearch.com.

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About Service Performance Insight

R. David Hofferberth, PE, Service Performance Insight founder, managing

director and licensed professional engineer has served as an industry
analyst, market consultant and product director. He is focused on the
services economy, especially productivity and technologies that help
organizations perform at their highest capacity.
Dave’s background includes application and analytical tool development to
support business decision-making processes. He has more than 30 years of
domestic and international information technology experience with firms
including the Aberdeen Group and Oracle. Contact Hofferberth at
david.hofferberth@spiresearch.com or 239.304.2998.

Jeanne Urich, Service Performance Insight managing director, is a

management consultant specializing in improvement and transformation for
project- and service-oriented organizations. She has been a corporate
officer and leader of the worldwide service organizations of Vignette, Blue
Martini and Clarify, responsible for leading the growth of their professional
services, education, account management and alliances organizations.
Jeanne is a world-renowned thought-leader, speaker and author on all
aspects of Professional Services. Contact Urich at
jeanne.urich@spiresearch.com or 650.342.4690.

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 developed the PS Maturity Model™ as a strategic
planning and management framework. It is now the industry-leading performance improvement tool used by over 25,000 service and project-
oriented organizations to chart their course to service excellence.

SPI 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 www.SPIresearch.com for more information on Service Performance Insight, LLC.

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