My First PS Village Boston Executive Breakfast

I had a chance to attend my first PSVillage Boston Executive breakfast last week. This session, so I have been told, is the groups fifth session since its inception. Approximately 25 directors and VPs of PS from the Boston area attended.

I have to admit, I wasn't sure of what to expect. I hoped that a lot of smart PS managers would attend and that we'd have a lot of dynamic discussions. Frankly, though, I have been to other sessions like these that turned out to be more like sales and marketing pitches than discussion groups and netowrking sessions. So I was very please to find that the session was what I hoped it would be.

The agenda called for discussions of two topics: SaaS and Agile Development Models. As a whole, SaaS was the topic most top of mind for the group. Some of the participants were, like me, individuals managing a SaaS-based PSO, while others managed Enterprise-based PSOs in companies moving to (or adding) a SaaS model.

As I conduct my research pertaining to the similarities and differences of Saas-based PSOs versus non-SaaS-based PSO, the one consistent theme that I encounter is that everyone is struggling with the same questions. This is true of my fellow PS Village members as well as the many non-PS Village members with whom I have talked as part of my research. The big questions we struggle with are:

1. How do we measure our success and contribution to our customers and company?
2. How do we deliver services to customers who need them while remaining small in the eyes of executive management?
3. How do we scale our practice profitably, and what role can contractors and partners play?
4. How do we address revenue recognition concerns?
5. How do we support the custom applications we build for our customers when we do not have the "service desk" type people and systems needed? What role can the service desk play?

As I said, the Boston PS Village session was attended by managers of SaaS businesses and non-SaaS business alike. The five questions listed above were asked as often and as loudly by the non-SaaS managers as they were by the SaaS managers. In a nutshell, we are all asking the same questions. However, the answers aren't always the same. For instance, enterprise software companies expect that the PSO revenue will be much smaller than product revenue (30% of the total revenues, for instance). This allows those managers a much greater ability to grow the practice and service more customers than those of us who are managing PSOs within a SaaS company, where non-recurring revenue (i.e., PS revenue) is expected to be between 3-10% of total revenues.

Additionally, while both groups (SaaS and non-SaaS) seem to rely heavily on the traditional, operational metrics (see previous posts), the SaaS managers seem more inclined to believe that those metrics provide limited insight into the success of the practice from a corporate-contribution and customer-value perspective. Revenue growth, profit margin, and utilization still seems to be where it's at for non-SaaS companies, while SaaS-based PSO are questioning the value of those metrics for much other than capacity planning and resourcing.

I look forward to more discussions with the members of PS Village and other PSO managers.

How do you thank your customers for their business?

I'm reading The Business of Consulting by Elaine Biech. She suggests sending handwritten thank you notes and creative gifts to customers to thank them for their business and keep you top of mind. So it got me thinking...How do other PSO managers thank their customers? If you are doing anything unique, funny, or generally effective in reinforcing your team's value proposition, please share. We'll all benefit. Thanks in advance.

What do you think about KPIs for PSOs?

As you know, I am conducting research to allow me (and, ultimately, you) to better understand the similarities and differences between stand-alone PSOs, SaaS-based PSOs, and Licensed Software-based PSO. I have interviewed a dozen or so Directors and VPs of PSOs, and I have at least 5 more interviews to conduct. However, I'd like to hear from those of you who don't have time to meet with me in person or over the phone for an hour or so.

So, I have created this survey of 25 questions (included a place for you to provide your contact information). I just took it, and it can be completed in less than 15 minutes. If you provide your contact information, I will be happy to share the survey results with you.

To complete the survey, please visit:

World-class PSO Survey

Thanks in advance for your interest and help.

Critical KPIs for a SaaS-Based PSO - Update on My Research

I'm back...after a busy week followed by a busy vacation...and I'm ready to share my thoughts once again about a SaaS-based PSO.

As I mentioned in my very first post, I am actively conducting research designed to better understand how many SaaS-based PSOs are measuring their success vs. how they should be measuring their success. I have talked to PS Directors and VPs from large and small companies at various points in their evolution (see SPI's Professional Services Maturity Model at www.SPIresearch.com). When it comes right down to it, most are using the standard PSO metrics (Bookings, Revenue, Profit Margin, Utilization, etc.) to measure the health of the practice, but few feel those metrics are hitting the mark.

One of the biggest challenges we face as managers of SaaS-based PSOs is defining how our contribution should be measured. It is natural for us to gravitate toward the traditional metrics. They are easily quantifiable, and we are comfortable with them given our experiences in the non-SaaS world, but the fact is, all but only one firm I have encountered in my research is structured in such a way for the traditional metrics to make sense when the question one is trying to answer pertains to measuring the contribution the PSO is making to the organization. Most of the SaaS companies with whom I have talked have revenues smaller than 10% of corporate revenues. There is tremendous pressure in many cases to "keep the PSO small," and while the metrics would indicate a focus in selling profitable projects, the 'give away work' is refelctive of the need to keep customers happy, protect those renewals, and enable the sales teams to grow the size of the subscriptions.

Don't get me wrong, the traditional metrics have their place. Most Directors and VPs with whom I have talked agree that utilization, for instance, is an important operational metric used to understand available PS capacity and hiring needs. It is also important for evaluating your staff's competency in terms of on-time/on-budget delivery or the sales team's ability to properly scope and size an engagement. (I only talked to one firm that does not measure utilization at all.) That said, does high utilization really inform the company of the contribution the PSO is making to the organization. Is it at all refective of customer satisfaction or the value the customers realize from the product or services?

I heard, loud and clear, from most interview candidates that, for a SaaS customer, it's all about customer satisfaction and value realization. As my manager, Matt Poepsel, says...it's about making happy customers. However, only one company had a quantifiable method for measuring the value a customer realized (not just from the PSO, but from the firm as a whole) and their level of satisfaction. This firm used what appears to be a fairly sophisticated statistical approach by identifying a number of attributes that were measurable and that provide insight into customer-satisfaction levels.

Customers who hirer a general contract for their home are, for instance, buying a new kitchen or a new den. Customers who buy marketing tools are buying higher lead generation results and conversion rates. Customers who purchase web performance management software are buying performance improvement and the benefits of that improvement.

Customers have needs and wants that cause them to make a purchase. It's the company's responsibility to ensure that the customer's needs and/or wants are met, and it's the PSO's role to assist the customer in achieving that value. Therefore, there should be metrics that measure a PSO's ability to fill that role for customers and the company.

For instance, a customer purchases Gomez products to improve the performance of their web application. Therefore, a performance trend could be used as an attribute in the statistical model to determine if a customer is getting the value from their purchase. If performance is improving over time (and other metrics are also improving) one could draw the conclusion that the customer is achieving value and they are at a low-level of risk for cancelling their subscription.

As I continue with my research, I will be looking to determine what some of the standard KPIs should be for SaaS-based PSO and understanding how each company can identify its own, unique, metrics for their business. If you are doing anything non-traditional within your company or practice, I'd love to hear about it.