Make Professional Services Work

Taos Professional Services Team

For several years now, CIOs have been working to standardize the way they run and manage the business of IT. They are employing standards such as ITIL and COBIT and are improving the ability to tie project portfolio management into the needs of the business. CIOs are also becoming more wary about reinventing the wheel when implementing new technologies or doing technology upgrades. They are taking advantage of partner expertise when developing or implementing their IT Roadmaps. Employing the help of professional services firms is increasingly becoming a key tool in the tool kit for professionalizing the business of IT.

Professional services come in many forms. Software and hardware vendors often have a professional services group that is dedicated to the installation and integration of their specific product into a customer’s environment. In contrast, some IT professional services organizations are not tied to particular products, but focus instead on providing higher level solutions rather than technologies. They may provide services in areas such as business process, software development or IT infrastructure. Projects in these areas tend to have a top-down approach and be more directly driven by a business need, and these professional (or consulting) services groups often rely on their expertise in a variety of technologies and skills to accomplish their goal.

As the IT industry moves more and more towards a model of using IT services, Taos expects this latter type of professional services group to become more critical to helping companies accomplish their business needs in a way that supports a professionally run, efficient and effective IT operation. Already, IT services accounts for over half of IT spending. According to Forrester, the IT services and outsourcing market will grow from $184 billion in 2003 to $241 billion in 2008. IT consulting alone is expected to grow 5% per year through 2008. The key then becomes using professional services correctly. At Taos, we have encountered a wide variety of professional services problems and solutions. Our collective experience can give some insight on how to get the best out of professional services.

Our professional services team (one of three IT services delivery teams at Taos – supplemental staffing, infrastructure support outsourcing, and professional services) primarily works with customers through Taos managed or jointly managed projects of a finite duration with specific deliverables. One of the keys to success in this setup is to keep the CIO's management and key support staff involved in the project. External partners can take care of the required technological changes, but internal staff need to be involved with changes in management and corporate culture. Good communication between the partners is necessary to ensure these different aspects all come together. An article by Forrester claims, “The majority of IT service failures can be avoided if companies could learn how to properly engage and manage their consulting and outsourcing partners. Given the growth of outsourcing, the future of IT management will focus on managing service delivery contracts, not managing internal programmers.” The Standish Group has studied over 40,000 projects. With IT organizations taking project management more seriously, things have improved a lot since their initial report in 1994. However, 51% of the projects studied still get labeled as “challenged”, meaning that they are over budget, off schedule, or lacking in critical features. Working with an organization with experience in delivering projects can help improve those numbers.

In 2004 Taos completed nearly 80 professional services projects for our clients. Many of the projects were less than two weeks in duration, however, more than half the work done through the professional services team was on projects lasting a month or longer. Some of the most common requests for Taos professional services have been in the following areas:

• Sarbanes-Oxley IT process planning, documentation, project management, and remediation
• Security assessments
• Network design
• Email (including Exchange/AD design and upgrades)
• Baseline Technology Assessments
• Project Management/IT process
• LDAP/Active Directory/Single Sign On
• Web design and planning
• Tool integration
• Scripting -- IT dev prototyping
• Troubleshooting

We have found that the key to success in working with professional services regardless of the type of project is generally in the planning and decisions you make early on; even before engaging your partner.

Insource or Outsource

The first question to ask yourself is whether it is appropriate to engage a professional services partner at all. The most common reasons to outsource at the project level are:

• Access to expertise: The learning curve is too great and/or retention of the new learning is not at par value to the investment in developing it.
• Lack of internal resources: The team isn’t large enough to accomplish all the tasks that need to get done. PS allows for a dynamic staffing model.
• Leverage experience and tools: Desire to not reinvent the wheel by capitalizing on existing or broader expertise from partners who have “done it before”. Get it done more quickly or with higher quality.
• Improved project experience: Reduce the risk of failure due to less mature internal project management.

Projects which are at risk due to issues such as unclear objectives, poor business alignment, lack of documentation or understanding of current systems, may be at high risk even with the use of an experienced professional services partner. That said, an experienced consultant can help even with these business challenges if properly aware of them and their role in helping to overcome them. In fact we have been brought in on projects specifically because these issues exist and the internal team was unable to get past them to get to the execution of the project itself. For example, recently we worked with a client to gather corporate-wide requirements for a major e-commerce initiative. We then developed a mechanism to help the organization see where there was misalignment in goals and expectations, and assisted them in understanding what decisions needed to be made in order to gain alignment and then develop a common requirements document for the project; all this before ever engaging on the project itself. Getting these issues out of the way was key to getting to the point of being able to scope a properly phased and manageable technology project.

Defining the Project

Once you have decided that a project is a candidate for outsourcing, the next step is to further define the project. If the project is complex and you are looking to compare the offerings of several vendors, it will be necessary to create a Request for Proposal, which should contain the following:

• Statement of the problem and desired goals
• Scope: Description of work to be performed, Expected deliverables
• Skills or expertise required
• Additional requirements/constraints
• Contributed in-house personnel: Number, skill-set, roles, and availability
• Expectations for fee structure: Fixed fee, Time and Materials, Time and Materials with Estimate
• Deadline for submission
• Explanation of how selection will be made: Cost, time to delivery, functionality/expertise

Even when not going through a formal RFP process, it is a good idea to create an RFP or similar document to define the project and help the professional services company create an accurate Statement of Work.

The goal of the RFP is to get an apples-to-apples comparison of the services offered by various companies. By far, the largest room for discrepancy between proposals is in the interpretation of the scope. In other words, if one company allocates 20 hours for documentation and another company allocates 80 hours, it’s probably not the case that the first company can generate documentation at four times the rate of the second. It’s more likely that the two companies just have a different idea of what you are expecting for documentation. Explain whether you are looking for a 75 page formal document with ROI analysis to deliver to a steering committee or a 10 page feature / price comparison for your engineers to use in making orders. The goal is to evaluate the services organizations equally and not have the results of your comparison washed out because they made different guesses.

Perhaps you don’t have enough information to fully define the project for an RFP, such as the scope, or another aspect of the project. In this case, meet with the candidates in advance and paint a picture of what you’re looking for and the corporate culture. Explain the primary drivers for the project. An approach that we have found to be very successful is to do an initial discovery project to define the scope for the execution of the project. These discovery projects have been as short as a couple of days, bringing all the relevant parties together with an expert from PS to explore the various options.

Framing the Engagement

After the scope, the next hardest part of the RFP to define is the commitment of internal resources. This is because you need to determine how your teams will engage with the professional services team. For instance, if you have a strong project management team and process in your organization, you may want to do more of the project management internally. Or if you have a very senior architect and the project is mostly about integrating with existing systems, you may want him to have a lot of involvement in the project. In framing the engagement, start of by looking for what are going to be the most difficult parts of the project (sources of risk):

• Implementing the technology
• Integrating with existing systems
• Interacting with multiple stakeholders
• Interacting with end users
• Creativity of a new architecture
• Creating new policy, process

A project such as installing new firewalls could involve creating a new network architecture and interacting with several stakeholders to create a new policy. Or, if the installation is fairly isolated, may be as simple as finding someone with the right expertise to implement the technology. The better the scope is defined, the easier it will be to identify the risk areas of the project.

For each of the difficult areas determine if an internal resource would substantially help reduce the risk over an external resource. Then determine the level of availability to the project for each internal resource. Choose somebody internally to be the primary representative of the project. They will accept deliverables, review status reports, represent your company in defining discrepancies of scope, and provide a point of escalation for the professional services group.

After determining the availability of internal resources and the level of internal project management, try to determine what the fee structure should look like. Start off by determining the most critical driver for the project: cost, time, or quality/functionality. Make it explicit before the project begins who bears the ownership of the risk if the project experiences problems, without fault on either side. In other words, who will pay to fix things, if the project has problems? Having the PS group own the risk can guarantee that you stay within your budget, but you will be charged a premium for that insurance. On difficult to scope projects, that premium can be large.

Generally, on fixed bid projects, the PS group bears ownership of the risk and on a T&M project you will bear the risk. On a T&M project with an estimate, talk to the service vendor about how confident they are in their estimate and where the risks are. Make sure they know which of the three drivers (cost, time, quality/functionality) they should be managing to most closely. Make sure that their status reports emphasize metrics for this driver. A good model for pricing more complex projects is T&M plus an incentive targeted at your primary driver. For example, if cost is your primary driver, you could agree to an estimated cost and splitting the difference for any amount above or below the estimate. This acts as a bonus if the project is completed early or a penalty if the project is completed late.

Regardless of how you establish the fee structure for the relationship, as you develop the contract further, try to anticipate as many of the “what ifs” as possible and build in language around what to do when things go differently than planned. Some common things to think about are:

• Change in requirements for the project itself
• Change in desired scope for the work to be performed by your partner
• Timeframe acceleration or delay
• Ownership of intellectual property
• Clear acceptance criteria

Hold a Spirit of Partnership

Outsourcing projects to external Professional Services groups can be a great way to supplement the expertise of your team and take advantage of the experience of other organizations. As the types of projects become more complex and integrate more closely with your business, the level of interaction with your PS partner becomes more critical.

There is some extra overhead to going through project definition phase with external PS groups, but much of this overlaps with what needs to be done for good project management in general. And there is the ramp up time for external teams to learn your technical environment, process, and corporate culture. Gartner, for example, recommends picking a couple of primary vendors for sourcing and services and having them become intimately familiar with your environment.

By making use of IT services, organizations are redistributing where they spend money that would traditionally go towards their biggest IT expense: headcount. Although other types of outsourcing are getting most of the press, professional services is also on the rise. Making use of PS can provide some of the economies of scale of outsourcing, but still allow for the highest level of flexibility. To gain this flexibility, some organizations are taking 10% to 25% of what they spend on headcount and using it on Professional Services partnerships.

By adopting this kind of staffing model of using PS partners as an extended arm of their IT organization, these companies are able to leverage resources and accomplish much more than they could using only their internal resources.

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