What Red Flags Show a Gap Between Your Front and Back Office Systems?

This is an excerpt from the new whitepaper “Mind the Gap: How to Bridge Front & Back Office Systems for Professional Services” by Roy Edwards and Steve Brooks from Enterprise Times, in collaboration with Kantata. To learn more about the causes of major internal gaps in businesses and their solutions, check out the full whitepaper here.

Is there a fundamental flaw in the tech stack of professional services organizations (PSOs)? New research from Kantata and Salesforce, conducted by Forrester Consulting, suggests this may be the case.

The survey of 383 global technology decision-makers at professional services firms found that at least half of services businesses still face major difficulties across both basic and complex tasks that are fundamental to long-term services success. Key activities that the majority of respondents said were very challenging with their current tech stack include:

• resource planning across the entire services workforce (51%),
• project budgeting and project accounting (51%),
• collaborating directly with clients on engagements (51%)

All these activities are core workflow activities that occur between the typical purview of the front and the back office in PSOs. Tellingly, 50% of decision-makers in Kantata’s research also said that integrating the solutions in their tech stack so that relevant information could be shared across the organization in an accurate and timely manner was very challenging. It seems clear that gaps are emerging between various parts of PSOs – perhaps none wider than the gap between the front and back offices – and the technology solutions many businesses are using to bridge gaps are not coming together to drive the clarity, control, and confidence decision-makers need.

Five Red Flags To Look Out For

There are several operational red flags that suggest a possible issue is emerging between your front and back office systems. These include:

1. Declining KPIs

Declining key performance indicators (KPIs) are a classic warning signal that there are issues or gaps between your front and back office systems. When KPIs begin to trend downward, it suggests that the essential workflows that ensure the business is able to consistently perform up to expectations and achieve targets are not being proactively monitored or optimized. This flagging performance can be reflected by the following:

• Poor or falling employee utilization rates
• Margin dilution
• Revenue leakage

Poor or falling utilization rates may develop because too many employees are sitting on the bench or because people with the wrong skill sets are working on projects. As a result, projects fail to line up with revenue forecasts and struggle to live up to the expectations of clients. A fixed-price project overrun can often result in higher utilization but a lower project margin. Another scenario that might lead to falling utilization is one where proposal management and resourcing systems work in isolation. This means that supply and demand cannot be balanced, leading to poor utilization or revenue leakage.

2. Overreliance on Spreadsheets

Evidence of overreliance on spreadsheets in a mature PSO is also a potential red flag. Spreadsheets still dominate many aspects of many professional services businesses. In a 2021 Kantata-commissioned study, “Resource Management Tools Solve Critical Issues,” Forrester Consulting found that half of respondents were using spreadsheets for their resource management end planning, the most widely used tool among respondents.

As Tom Schoen, CEO and President at BTM Global, describes, spreadsheets are a natural starting place for keeping information organized in a PSO, though one that becomes cumbersome and limiting as the business grows: “When I first started BTM, we ran it on spreadsheets that were all interlocked. It was pretty easy to do, when you have only half a dozen projects running at the same time. It doesn’t work when you have 70 to 80 projects running. We needed a professional services tool to be able to help manage that workload.”

One example of where spreadsheets can limit an organization and create gaps is at the project proposal stage – many professional services firms continue to use spreadsheet-based proposal tools.

3. Critical Information Falling Through the Gaps

With the emergence of digital transformation and the rise of remote and flexible working, the number of tools being used in PSOs continues to increase, making the tech landscape for services challenging. It’s a complex and chaotic cocktail of different software systems serving different purposes, hosting different and overlapping inputs that often don’t talk to each other. This is exacerbated by the fact that these systems are sometimes geographically dispersed. Frequently, no system binds them together and delivers the oversight that allows the business to improve utilization rates and profitability. Furthermore, they are costly to maintain and may not include key capabilities like resource planning. Today’s business managers and stakeholders need visibility and access to information that will support their decision-making.

This complex and fragmented landscape can undermine efficient business processes in various ways. Core workflows remain disjointed and disconnected, which makes it easy for critical information to fall through the cracks. Without proper visibility of key metrics and workflows, companies are significantly limited in their ability to achieve next-level business objectives.

4. Increase in Workarounds and Homegrown Solutions

An increase in workarounds or homegrown systems designed to fill the gaps between point solutions is also an indicator to monitor. Professional services firms have plenty of options when it comes to time management solutions, expense management solutions, project management applications, and project accounting software.

However, the plethora of tools is like having pieces from different puzzles. They are not designed to fit together. That means that on top of investing in these tools, PSOs often need to use various methods to bring data together from these different systems. And it’s those reconciliation workarounds that often become a homegrown system, which often evolves around CRM systems, ERP, and specialist point solutions like expense and time management.

5. Unhappy Clients

Jacqueline Stanley, Director of Delivery at Hero Digital, suggests unhappy clients are also an indication of a problem between the front office and back office. She confirms the scenario, typical in agencies, where the account team is brought into the discussions at the later stages of discussions, possibly with unrealistic goals set. “We have to translate those high-level requirements into deliverables to get on a good foot with the client.”

The delivery team then must renegotiate those goals or may fail to meet those objectives. “When an agency misses the mark with a client, it’s always the delivery team’s fault. We will be responsible for the revenue leakage, and our margins will go down. The delivery team will be upset despite the fact that the team worked hard to develop work for this client, and the client remains unhappy.”

Start Bridging The Gap

Even the best-run businesses can have disconnects that negatively impact their performance. Learn more about what could be creating harmful gaps in your organization as well as how to find and close those gaps in the new Enterprise Times and Kantata whitepaper, “Mind the Gap: How to Bridge Front & Back Office Systems for Professional Services.”