AUTOMATING THE Service Chain

Software Magazine, June, 2000 by Dan Kara

Professional services automation suites do for the IT services industry what supply chain products did for manufacturers.

A number of different links, relationships, and processes exist among business partners. The supply chain, a concept very well known to manufacturers, distributors, and retailers, describes the process of moving goods from the customer order through the raw materials, supply, and production stages, as well as the distribution of products to the consumer. Years ago, software vendors realized that many of the business processes that make up supply chains could be automated, and with automation came reduced costs and increased efficiencies. The resulting supply chain management (SCM), material resource planning (MRP), and enterprise resource planning (ERP) applications have had a huge impact on the manufacturing and distribution sectors.

The service industries-government, telecommunications, energy, diversified financials, healthcare, independent consultants, and professional services organizations (PSOs)-differ dramatically from traditional manufacturers. Still, like supply chain companies, service organizations have their own set of integrated processes and dependencies for setting, managing and delivering services-often referred to as the service chain. Could not service chain business processes be automated as well?

The answer, of course, is yes. But until quite recently, these efforts were piecemeal, using a number of cobbled together tools such as spreadsheets and project management software. No single software product suite was dedicated to that problem. Now all that is changing... and in a big way.

A new software niche has emerged that is the service chain analogue to supply chain automation applications. These products, referred to as service chain automation software, or more typically, professional services automation (PSA) packages, are designed specifically to automate the services supply chain.

PSA software suites differ dramatically from their supply chain automation counterparts, which emphasize logistical actions taken on specific physical goods--a process that can be summarized as "buy, build, distribute, and sell." Central to PSA software suites is the automation of processes and formalisms that optimize personnel utilization and the sharing of information between contractors, customers, and all other service chain participants. Typically, PSA vendors also toss into their packages a variety of ancillary management and administrative functions. At the most basic level, then, supply chain tools act upon and manage manufactured goods, while PSA software accomplishes the same for human resources and information.

PSA software differs in other ways from supply chain automation products. The very act of automating supply chains increases their overall productivity and throughput, but supply chain automation software itself was not specifically designed to optimize processes (simply to automate them). PSA tools typically include functionality designed to streamline and optimize processes, or to remove redundant and unnecessary ones. Also, supply chain automation products were built on a client/server execution architecture. In contrast, most PSA software has been engineered from the ground up to exploit the ubiquity and global reach of the Internet, including employing a Web-hosted subscription model for delivery. And while most supply chain packages are proprietary constructs, PSA tools are founded on de facto industry standard technology such as Java, CORBA, XML, and Internet standards.

The Players

The term "services industry" denotes a wide variety of business types across an equally wide-ranging number of vertical market segments. Currently, most products that are recognized as true PSA software are designed to support independent IT consultants and professional services organizations, and that is the type of product that will concern us here. You can expect that as the market saturates, PSA software suites will be released that target other service-oriented vertical markets.

The leading lights among PSA vendors are a number of high-profile, venture-funded start-ups, some of which have gone public recently, with the remainder hoping to do so soon. Niku, Evolve Software, Changepoint, and Opus360 provide examples (see the Table, p. 44). The ranks of PSA suppliers are expected to expand rapidly. Traditional ERP vendors have announced their intentions to enter the market, and the vendors who own pieces of the PSA pie with standalone products will quickly rework and remarket their wares to enter the PSA fray.

It is easy to understand the growing interest among vendors in the PSA market, particularly with regard to the IT services market. First, the IT professional services market is huge and is expected to exhibit continued strong growth. Marker research firm Dataquest, San Jose, Calif., estimates that the market will exceed $630 billion by 2002 in the U.S. alone.

While IT consultancies and services firms are among the earliest of the early adopters of most forms of information technology, and are quick to recommend the latest technologies to their customers as a means of achieving competitive advantage, little headway has been made by these same organizations when it comes to automating their own business processes. Now, though, services organizations and consultancies are finally heeding their own advice and taking their own medicine in the form of technology that can increase efficiency and productivity, while reducing operational expenses. Dataquest, to illustrate, estimates that the approximately 3,000 North American professional services organizations and consultancies could potentially spend nearly $3.3 billion on software for IT service delivery management. The picture gets rosier for PSA suppliers when one considers that many larger IT shops, many of which act as internal IT consultancies, are also expected to take a long, hard look at the products.