Making a Business Case for PSA Software
A powerful business case requires a before-and-after story
While analyzing expected return on investment is a necessary component of any significant buying process, simply presenting ROI in isolation doesn’t work. Before decision makers can assess the value of a new solution, they need to understand the current situation and the problems you are trying to solve. Therefore to make an effective business case, tell a story: describe the current state, outline the impact of doing nothing, and provide a narrative of how things will change for the better should the proposed solution be adopted. Your ROI analysis can then play a supporting role, forecasting the financial impact of implementing a new system.
Here is a guide, created for software selection teams, on how to create a powerful before-and-after story which presents your business case for a new PSA solution.
Describe the current situation
Before you suggest the future, explain what’s happening today
In the opening of your before-and-after story, set the scene on the systems, tools, and processes currently used to manage your services organization. You’ll describe the challenges and issues later, but first of all, you should make sure that your decision makers understand what systems are under consideration for replacement or upgrade.
The description of your current situation could include:
- What systems and tools are used by sales and scoping teams are used to collaborate on project proposals.
- What methods are used to assess deal margin.
- Methods used to staff projects and track utilization.
- Process for assessing the financial impact of change orders and associated approval processes.
- Tools used for capturing billable time and expenses against projects
- Description of the period close process and what controls exist to ensure billing accuracy and completeness.
- Forecasting methods used to assess future services demand
Describe the consequences of no change
Explain the impact of doing nothing
Now you can drill-down into the operational issues, challenges and inefficiencies that your current systems create. Give decision makers your assessment of the likely outcomes should your organization decide to make no changes.
Some examples of the impact of retaining existing services systems could include:
- Delays in the sales cycle due to hold-ups in proposal preparation and approval processes.
- Missed customer expectations as unavailability of key resources results in late start of projects.
- Unacceptable levels of unbillable hours due to recording time against projects which have no PO cover.
- Recurring panic at month end as deals previously forecast to close within the current period unexpectedly are being pushed into future periods.
- Continued revenue leakage due to late timecard submission of timecards and out of policy expenses.
- Back office and operations headcount will have to grow to support growth in services business.
- Holdups in investment decisions due to track record of unreliable services forecasting.
- Competitive disadvantage by not having access to modern technological capabilities such as mobile access, customer and vendor, self service portals and machine learning insights.
Describe the benefits of implementing your recommended solution
Provide a narrative of how your business will change for the better
Having covered the before state, it’s now time to focus on how you plan to make improvements and look at life after a successful PSA implementation. Describe the processes you are looking to improve and the PSA features that will help you achieve the key goals of your proposed project.
Examples of PSA solution benefits you might use for your organization include:
Predictability of service performance:
The recommended PSA solution will provide the framework needed to build a predictable service based business. We will get the ability to see demand earlier, book resources before a deal is closed, accurately track remaining effort during project delivery and timely, consistent period closing will create the conditions necessary for confident forecasting. With this better understanding of future demand we will be able to make more informed decisions on business models, staffing levels and future hiring.
Repeatable project delivery success:
The PSA solution will provide a single, trusted platform to manage deal scoping, deliver projects and track financials which will improve outcomes and build stronger customer relationships. Overall profitability will be improved as the bidding process will include a detailed understanding of deal margin before projects are undertaken, and deals can be structured to take account of risks identified during the sales cycle.
Ability to quickly create and track new business models:
The PSA solution will provide the tools required to enable our transformation from custom to packaged offerings, from time and materials to fixed priced contracts, and from waterfall to agile implementation methodologies. PSA will provide close monitoring of profitability to help us quickly identify what’s working and what’s not, and provide insight we need to refine and manage service packages accordingly.
Services organization scalability:
As our services business grows, so does the complexity of operation: capturing the time people work and the expenses they incur, sending out bills promptly, forecasting demand, managing resources, recruiting people with the right skills at the right time, delivering projects on time and on budget. PSA will automate these resource management activities while implementing best practice processes will enable our organization to scale predictably and efficiently.
Improved resource utilization:
The PSA system will include resource management and resource planning tools to provide a clear view of availability and scheduling of resources across practices, geographies and skills. Planning tools will guide resource managers to find the best fit for a particular project activity to create the most efficient scenario for resource allocation and utilization. PSA will also monitor over-utilization of individual resources to spot potential for ‘burn out’ of key people, helping to retain top talent and avoiding the high costs and associated delays of finding a replacement.
Complete visibility throughout project lifecycle:
PSA will provide visibility to project status, projected margin, and progress against planned milestones throughout the project lifecycle. Managers will receive timely alerts to tackle issues as they arise and the impact will be understood not only to that specific project but also the knock-on effects across the whole project portfolio.
Higher customer satisfaction:
PSA will enable better client collaboration throughout the life of an engagement, significantly improving the likelihood of the project being delivered in line with customer expectations. During the delivery of the project, customer communication can take place in real-time, quickly resolving issues as they arise. Clients have self service access to a secure web portal to track project progress and approve time and expenses.
Consistent and timely period close processes:
PSA will provide clear visibility to the status of period closing activities and will guide the operations team on the priority actions required to consistently close periods accurately and on time.
PSA will enable our organization to scale without a corresponding increase in administrative overhead through automation of previously manual activities such as billing and invoicing, revenue recognition and reconciliations. The back office will be able to manage higher volumes of clients serviced, project delivery resources, and number of invoices generated without adding headcount.
Efficiency of working capital through timely, accurate billing:
Automated bill preparation will improve cash flow by reducing the number of customer disputes. Systematic application of company policies in engagement scoping, change order management and monitoring of drawdown against purchase orders will help us achieve our margin targets and reduce the risk of payment delays.
Improved data entry and forecasting accuracy:
PSA will improve the accuracy of time entry by providing intelligent recommended entries on assigned tasks and will empower project managers to consistently re-forecast revenue based on their latest understanding of delivery status.
Systematic enforcement of contract terms minimizes revenue leakage:
PSA will ensure client contract terms and approval policies are defined for each engagement to prevent booking of time and expenses that subsequently cannot be re-billed. Similarly, managers will have the control to prevent time and expense entry against assignments that have been put on hold. A clear process will be provided to handle authorization and assessment and authorization of project work performed at risk.
Document expected results
Use ROI metrics to support your argument
Now your decision makers understand how you intend to improve the operation and performance of your services organizations you can use traditional ROI metrics to give guidance on the expected financial impact of your recommended solution.
Use your ROI analysis to provide relevant supporting financial metrics to benefits you’ve described. Sample ROI metrics* for PSA include the following:
*Your results will vary, figures used are for illustrative purposes only.
Services revenue increase of 8%
Annual hiring costs reduced by $250k
Services revenue increase of $750k
Operations time saved per year 850 hours
Finance time saved per year 900 hours
Expense leakage annual reduction $250k
Stakeholder confidence 100% improved
Without an understanding of the current state, any presentation of ROI metrics is likely to fall on deaf ears, so the key to presenting an effective business case is to provide a narrative that describes the current challenges, outlines the likely impact of doing nothing, and explains what life will be like following the successful implementation of a new PSA solution. By providing that context, your ROI analysis provides the supporting metrics for the expected impact of your recommended solution, and you’ve given decision-makers the understanding they need to make the right choice.