Foreword |
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By
Ted Kempf
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Principal Analyst,
Gartner Dataquest
This book describes a new suite of software applications designed specifically for organizations whose work is project based and human resource intensive, to make their operations more efficient and their resources more productive. While these applications currently are referred to using many acronyms, the three most widely used being Professional Services Automation (PSA), Service Process Optimization (SPO) and Enterprise Services Automation (ESA) they all have one common goal; to improve the workflow surrounding the management and delivery of project based services. The true test of value for these applications lies in their ability to either reduce costs or increase services revenue for the end user.
Gartner Dataquest defines these products as software designed to track and allocate the major resources of externally focused services companies or internally focused services departments, namely people, intellectual capital, and time to their output. Examples of externally focused services companies include IT professional services providers, engineering and construction companies, and healthcare providers. Alternatively, examples of internally focused services departments include the IT department of any large enterprise or the research and development arm of a pharmaceutical company. Some market observers have likened these applications to ERPs for service-based organizations.
These applications first emerged on the North American market in 1998 and were primarily targeted toward IT professional services providers. In fact, many of the vendors who now create and sell these applications actually worked for IT professional services firms where they witnessed first hand the need for a tool to improve their ability to manage and deliver IT professional services. This need stretched far beyond the capabilities of available project management software.
Over the past two decades the IT services market has marked the emergence of more specialized professional services providers who have moved from simply integrating software and communication systems, to creating IT solutions that help manage an enterprise, to business process solutions that manage an entire business process workflow. What is truly fascinating about this transformation is that IT professional services providers are directly responsible for making many of these firms more efficient and profitable, yet they have largely not used technology as an enabler to increase their own internal business processes.
As these applications gained traction, and given the somewhat limited size of the IT professional services market, a number of vendors began targeting new market segments, specifically the internal IT departments of enterprises and other embedded services based departments. This new marketing focus began in earnest around the second quarter of 2000. Again, the purpose of these applications, in this instance, is to improve the workflow of specific business processes related to internal service delivery. In the future, these two new segments will likely represent the greatest market opportunity.
In terms of market validation for these applications there are three points to consider:
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Some of the largest internally and externally focused services organizations have deployed these applications. Two of the largest deployments to date include two IT professional services providers with approximately 6,000 users and 75,000 users, respectively.
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Numerous large enterprise software vendors see tremendous opportunity in this space and have, or are in the process of, developing or acquiring competitive applications.
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Gartner Dataquest projects that the worldwide market for new software licenses will grow from $177 million in 2000 to $1.2 billion by 2005, at a CARG of 46%.
Looking ahead four scenarios that are likely to play themselves out include:
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Industry analysts as well as software vendors will increase their evaluation and analysis of the ROI delivered by these applications. This market has matured to the point whereby the proposed workflow efficiencies of these applications can now be measured on a broader scale.
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To date there are approximately 28 software vendors who claim to have an PSA/SPO/ESA product, which has created a very crowded playing field. In order to stand apart from the crowd, most software vendors will differentiate their products by focusing on solving the services management and delivery inefficiencies of specific vertical markets (i.e. IT professional services, engineering and construction, and pharmaceuticals).
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Even with a new focus on differentiation via verticalization, the market is unlikely to sustain approximately 28 software vendors. Should this hold true, the market will see an increase in mergers, acquisitions, and in some cases company closures.
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Over the next few years the bulk of functionality offered by these applications will become relatively commoditized, particularly around time and expense capture, resource management and project management. As such, leading software vendors will likely focus a significant amount of investment on improving three key areas of functionality, portfolio management, knowledge management, and the strategic sourcing of external resources.
No matter what name is assigned to these applications, PSA, SPO, ESA etc. if you are an executive or project manager in a services organization chances are this software can help improve your business process efficiencies. While some may believe that these applications will provide them with a competitive advantage, Gartner Dataquest believes that these applications will soon be viewed as a competitive necessity for services organizations. Never before has there been a fully integrated suite of products that centralizes all the key data points for the management and delivery of services. The following pages offer a detailed look at the genesis of these applications and the specific business workflow inefficiencies they address for both internally and externally focused services organizations. Anyone interested in learning more about these applications will find this book an excellent resource.
Ted Kempf
Principal Analyst
Gartner Dataquest
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