Global research, consulting and training organization Service Performance Insight (SPI) Research's two principals, Jeanne Urich and Dave Hofferberth, bring more than 70 years of combined experience in workforce productivity from both a consulting and analyst perspective. SPI Research recently published their 2018 Professional Services Global Pricing, Compensation, and Utilization Report and their Professional Services Maturity™ Benchmark survey is open until December 1. The Benchmark will be published in February 2019. We interviewed Jeanne Urich to learn more about SPI’s history and insights regarding the services industry.
Mavenlink: Service Performance Insight has been a leading analyst, consultancy, and voice in the professional services industry for more than a decade. What has been the secret to your success and longevity?
Jeanne Urich: Dave and I founded SPI on the principle of providing actionable insights for the services industry. We knew there was a dearth of information for professional services executives to use in leading their organizations. SPI has created a PS Maturity™ blueprint to describe how services companies should be run, enabling them to measure, compare and pinpoint areas of strength and weakness so they can develop an actionable improvement plan.
Since we began our research 12 years ago, it seems like the whole world has become project and services driven. We got in on the ground floor, we’ve done good work, and our benchmarks have become the standard for the services industry. Our secret sauce is that we’ve combined years of operating experience running large-scale services organizations with key metric analytics. Any time we’ve had an idea or theory, we’ve been able to prove it or disprove it with our analytics, which you can see in our reports.
M: What drove you to conduct the new research on pricing and utilization rates? What questions were you looking to answer?
JU: When SPI created the first Professional Services Global Pricing, Compensation, and Utilization Report in 2011, it was because our clients wanted to know more about bill rates and utilization. Our mission is to serve our constituents, so we wanted to eliminate the lack of research around the fundamental revenue building blocks of pricing and utilization.
In 2011, 200 companies were part of our pricing research and it was very well received. SPI conducted the same pricing study again in 2015 and our constituents asked us to perform the research continually, leading to our 2018 PS Pricing, Compensation and Utilization study. We expect to perform this survey every three years.
In the 2018 benchmark, more than 11,000 consultants are represented, enabling us to build a comprehensive workforce model for the industry, which we call The Consulting Pyramid. The Pyramid describes the workforce structure of five industry segments and illustrates changes in both workforce composition and structure over the course of our three reports. That, for me, is the most exciting part.
M: Who did you survey to collect information for the study?
JU: We surveyed 156 companies and specifically profiled six major industry segments in our 2018 study -- management consulting, IT consulting, professional services within software companies, professional services within cloud companies, architects and engineers, and marketing/advertising firms. We have also geographically segmented respondents to illustrate the nuances between geographies.
We profiled 12 job roles and descriptions outlining four major job categories of management, project management, and business and technical consulting. The research details their target utilization, base compensation, variable compensation, and more. We also studied cost structure, including the differences between published rates and realized bill rates, along with six types of service industry contracts -- time and materials, fixed fee, managed services, subscription services, risk-sharing contracts, and any other structure that does not fall into these categories.
It’s pretty much everything you would want to know about how you should price your services.
M: What was the most interesting finding from the research?
JU: To see that the composition of the services industry workforce has dramatically changed over the course of seven years. I’ve been in technology consulting for 40 years, and for most of that time the majority of the workforce was comprised of technical consultants. But this is all changing. We’ve seen a steady decline in the percentage of the workforce that is comprised of heavy-duty technical consultants in favor of the new world order that is led by business consultants. These business consultants have industry and business process knowledge. The services industry as a whole has moved from being a custom, highly technical space to a business application space that is focused on streamlining business processes.
M: Did any of the findings surprise you?
JU: The most surprising finding to me was a decline in the percentage of the workforce that is in management roles. That’s a good thing. We’re seeing that organizations are becoming flatter, less hierarchical, more collaborative, and more egalitarian. It’s also interesting to see how different each business model is by industry segment. The marketing and advertising workforce is much younger and is paid about half of what the technology consulting workforce is paid. The marketing and advertising workforce also has a higher turnover rate. In any industry, the most successful organizations have the right workforce structure. Today, organizations are becoming deeper, not wider, in their structure, with more specialists and fewer generalists.
M: Based on what you learned, what does the future opportunity appear to be for services organizations?
JU: We believe that you can work harder or you can work smarter, and services organizations need to continue to work smarter by using professional services automation.
Our study shows a 1 to 2% increase in utilization is about equal to a 1 to 2% increase in bill rates when it comes to profit improvements. Services consultants are working fewer hours than before, but are more productive and generating the same amount of revenue. Specifically, we have found professional services automation (PSA) improves productivity. Employees find their work is more gratifying because it’s having a bigger business impact. Also, more and more work is being done off site with fewer hours wasted on travel. Instead of reinventing the wheel, technology is helping businesses streamline their processes and transform in ways we could not have imagined a decade ago.
M: Where do the right tools or systems play into working smarter?
JU: We’ve seen that while many services businesses provide great software solutions to their clients, the services industry’s use of modern technology to solve their own needs has been poor. Internal solution usage has been improving, but more than 35% of organizations still do not have a PSA solution. When they do have a PSA, the benefits are clearly visible.
The services industry is very much one of an apprenticeship model, and it will be that way forever, but modern technology is accelerating the apprenticeship curve by taking average consultants and improving their skills much faster. The next step for services firms is workforce collaboration and Mavenlink sits at the apex of that.
M: Any words of wisdom for services providers?
JU: Think about your business and constantly challenge your business model. Make sure your workforce strategy and your workforce pyramid really reflect the value of your company. How you position and perceive your differentiation should be mirrored in your workforce strategy, which will help you set yourself apart in the industry.
M: What research is up next for SPI?
JU: The 2019 Professional Services Maturity Benchmark survey is open until December 1. This is considered the bible of the industry and participants will receive this $1,495 industry report in exchange for their participation, so make sure to take the survey before it closes. After its publication, we have found that services teams can compare their business processes against the metrics measured in our survey to make informed changes. Even just a small improvement in utilization can greatly benefit business profitability.
M: Thank you for your time, Jeanne.