The most precious resource for consultants, architectural and engineering firms, and similar organizations is time. Revenue is generated when this time is billed to clients, and profits are generated when the cost of doing business is less than revenue. Profits are maximized when individual employees can bill more of their time, at higher rates. While this formula sounds simplistic, achieving the goal is difficult.
The business management system is the vehicle by which this precious time is tracked, applied to the right jobs at the best possible rates, and deployed in a way that efficiently manages the firm. The question then becomes: which business management system? The size of the firm may influence product selection, but in most cases project complexity is the driving force. The key then is to select a product that matches the demands of the projects in which the firm is involved. While there are any number of products that support project costing and project management, we'll focus on four leading products. In the first of a two-part series we'll look at Deltek Vision, as well as Deltek FMS, recently acquired from Wind2 Software. In the second part of the series, User Recommendations for Project-oriented Software, we'll also examine Microsoft Dynamics SL (formerly known as Solomon) and BST Enterprise.
Industry Requirements
Depending on the size of the professional service organization (PSO) (we'll use this term to describe any firm that primarily sells time and expertise), its industry niche, and its specific services, software requirements will vary widely. We'll look at twelve of the most important business functions.
General accounting: Although many people consider the general ledger function to be of little importance, one must remember that it unites all of the underlying accounting processes (paying bills, recording payments, paying employees, and generating financial statements that measure not just job-related performance, but—more importantly—a firm's ability to manage its internal affairs and generate sustainable profits). The general ledger function is in fact a critically important application.
User-defined fields: While professional service organizations all serve the same general industry, the specific industry niche and the manner in which a firm manages its business requires that the system track any number of pieces of information, which will vary from firm to firm. Thus, one of the most important methods of meeting these varying requirements is qualified by the ability of a software product to add fields of specific interest to users.
Customer relationship management (CRM): Success in any business depends on generating a constant stream of new business. While large contracts are coveted (primarily for prestige), it's the smaller projects that fill in the gaps and (in many cases) actually generate higher gross margins. Success is therefore dependent on maintaining constant consumer awareness, identifying opportunities, pursuing these opportunities, and converting them into paying projects. Contact management is important, but in itself will not meet all of the requirements listed above.
Resource management: PSOs sell knowledge, and time is just the vehicle for applying and billing this knowledge. While employee knowledge is important, this knowledge may not be available at all times, due to commitments to existing clients (or because of vacations, sicck days, and so on). Therefore, outside knowledge sources (as represented by subcontractors) must also be tracked, and be considered to be part of a firm's resource pool. And in any case, some jobs may require specific equipment that can be applied to jobs. All of these resources must be tracked and applied in such a manner that non-billable time is minimized.
Overhead management and application: While managing overhead costs is important, applying them to jobs can be very complex, particularly for government contractors. In many cases, overhead costs can become billable items, as with hours. The problem is that the method by which the costs are calculated and applied to jobs depends on what the client allows, and sometimes this calculation can become very convoluted.
Billing management: It is relatively easy to bill basic services to a client. However, the PSO market has evolved to the point where billing is an extremely complex undertaking. Rates for each resource depend on the level of knowledge applied; customers may demand preferential billing rates; and project rates will vary depending on the level of competition. All of these factors make the billing process very intricate.
Project estimating and budgeting: While most companies practice budgeting at the general ledger (GL) level, PSOs drive budgeting to individual projects because they have to capture cost information as soon as possible, in order to help control the job as well as bill customers for additional costs when possible. The estimating functions (which generate project budgets) also form the basis for customer quotes.
Project management: Small projects may not require sophisticated control systems. But some projects are so complex that manual controls become ineffective. This is where project management software is critical.
Inventory management: In many cases, materials are purchased specifically for a particular project, meaning that inventory management is not required. However, some firms perform repetitive projects, and in this case it may make sense to purchase materials in bulk, in order to obtain unit price discounts—with the savings from such purchases going straight to the bottom line.
Workflow management: As software has evolved over the past five years, complex business management processes have begun to be supported by some form of workflow management, most notably timesheets.
Exception management: In the case of PSOs, post-project review serves no useful short-term purpose, as the damage has already been done. Exception management tracks key indicators and alerts managers when an indicator crosses some defined threshold. In most cases, this notification is via e-mail, but some products are beginning to list exceptions on the employee's dashboard (if the product supports a dashboard). In some cases, vendors are beginning to tie these exceptions to workflow or task management functions.
Collections management: A project is not complete until the final bill has been paid. Most firms—in all industries—forget this simple business truth. This is also one of the weakest functional areas for most business management systems. Aging reports are inherently inefficient and ineffective. While creating exception alerts for overdue accounts is a step forward, the actual collections process is still manual, and little improvement has been achieved. Dunning letters are really not that effective, since customers can trash the notice and further delay payment. A software-supported collections process will encourage (force) customers to pay more promptly, and thus reduce accounts receivable (AR) balances, generating what could prove to be a substantial cash flow. Even a three-day reduction in AR for a $10 million organization will generate a cash flow of $82,000.
Deltek FMS:Deltek (http://www.deltek.com/) has focused on one primary area with many subgroups: project-oriented business solutions for contractors and consultants. Originally known for its government contracting expertise, Deltek has expanded its product line to include several different enterprise resource planning (ERP) solutions to serve project-based businesses in different niches, and has created a leading position in additional sub-markets. Deltek FMS is aimed primarily at the architectural and engineering community. Most of its more than 2,500 customers have 50 or fewer employees, while some firms have over 800 employees.
Competitive Advantages
The distinguishing feature of Deltek FMS is that it is a real-time system: data is instantly available in all reports and graphs once it has been entered into the database. Written in FoxPro with a FoxBASE database, Deltek FMS uses drop-down boxes to select menu options once a module has been selected from the "tool bar." Smaller firms will find it to be a very clean product with an easy-to-understand interface. A "favorites" menu can be created, and can include any menu option as well as user-defined reports. Deltek FMS uses Crystal as its reporting engine. Deltek FMS is written in FoxPro, a long-established programming language that makes it very easy for users (or their integration partners) to make modifications (small or large). Deltek FMS also supports an unlimited number of user-defined fields, which can be assigned to each master record (card). For example, a customer can be associated with ten or more classification codes that in some instances play the same role as GL segments.
Deltek FMS supports CRM, including contacts, leads, proposals, marketing campaigns, and resumes. It also allows users to define how each section of a project will be billed. For example, one part of a project can be fixed-fee, while another part (additional work perhaps) can be billed as time and expense. Users can also define billing rate tables that can be updated on specific dates. For example, the hourly rate for a senior consultant might be set to increase from $225 to $235 on March 1. This change may be specified in February and take effect automatically on March 1.
Deltek FMS creates contract proposals that conform to standard US government proposal formats (254, 255, and SF330). It maintains an unlimited number of cost pools and indirect expense rates, distributes GL account costs across one or more target accounts, computes and invoices for cost, automatically prepares incurred cost submissions (using fifteen different schedules), and submits charges on DD250, 1034, and 1035 forms.
Finally, Deltek FMS supports both desktop and Internet time entry with user-defined comments. Users can input their time, but can also create comments that optionally carry forward to the billing process. For those firms that do not want to process payroll, Deltek FMS links with payroll systems such as ADP, Paychex, and EasyPay.
Competitive Disadvantages
Deltek FMS is geared primarily for smaller US-based organizations. It offers no multicurrency capabilities, and for larger organizations its menu structure may not be quite as attractive as products such as Deltek Vision or BST Enterprise. Deltek FMS does not support a dashboard or portal and has no plans to do so. Obviously, this is not necessarily a competitive disadvantage unless the user firm desires such functionality. Deltek FMS does support project management and control functions, but not to the extent of the other three products we'll review in this article. Deltek FMS does support a fairly robust CRM application, but this application is not integrated with the rest of the system. This can prove to be a significant disadvantage. Project proposals can be created in Award, Deltek FMS's CRM application, but project data must be exported from the business management system, imported into Award (where the proposal can be finalized), and then exported back to the business management system. Deltek FMS supports what could be called lower-level collections management, including statement printing and dunning letters.
There is some indication that Deltek FMS will not be promoted quite as vigorously as it was when it was an independent firm. Deltek Vision apparently has been selected as the go-to product in most instances. Whether this means that Deltek FMS will be phased out over a period of time is not yet clear.
Deltek Vision (http://www.deltek.com/), released in 2002 as a fully Web-enabled (.Net) product, serves the needs of project-based PSOs, including consulting firms, IT service system integrators, and architectural and engineering firms. This solution offers users all the features they might require to manage the entire project lifecycle, from client acquisition and retention, to proposal generation, project planning and management, billing, and back-end financial management. Deltek and Deltek Vision have been successful because the company and product are focused on very specific market segments, offering users the technology, terminology, and functionality required only by these specific segments. While 50 percent of Deltek Vision customers are firms with 50 or fewer employees, Deltek's target market is small and medium businesses (SMB) with revenues of $2 million to $200 million (USD).
Competitive Advantages
Deltek has always been known for its expertise in the government contractor market, and in some respects "owns" this market space. Firms in this niche will know about Deltek Vision, and will automatically place it on their short list. This is of course a significant competitive advantage.
Unlike the many other products that adhere to a modular design, Deltek has created a system where specific applications are seamlessly integrated. For example, CRM functions (opportunities, proposals, contacts, projects, and so forth) can be accessed directly from a customer card, so that everything relating to that customer is available to the user without having to open the CRM module or another application. The Vision dashboard is a completely customizable web page that in some respects looks and acts like a standard windows form. The left side of the screen displays standard and user-defined menu options. Key financial indicators (data and graphs) are displayed in the center section. Alerts and workflow tasks are displayed in the right-hand column. As additional dashboard components are added, the web page expands automatically, supporting both horizontal and vertical scrolling.
Vision CRM's strength lies in the fact that it has been created specifically for project-driven businesses, in terms of both functionality and language. It includes marketing and business development, client and prospect contact management, opportunity tracking, activity scheduling, and proposal development and tracking. Like many other CRM systems, Vision allows users to create additional tables and fields to suit their requirements. The project proposal suite of functions allows users to create effective graphical proposals with content that addresses the prospect's specific requirements. Users create and retrieve template proposals for private sector prospects, cost proposals, and request for proposals (RFP) responses. In addition, the applications support US government forms, including the SF330 form. One of the unique aspects of the proposal suite is Vision's ability to maintain resumes of key employees that will be included in a proposal or some other communication to a prospect. Once all this information has been created for a specific proposal, it can be exported to Microsoft Word for fine-tuning and final presentation.
Deltek Vision's project planning functions are quite strong. Users start with a project plan, and then tap into resource management to populate the project with appropriate skill sets. The resource management module also includes a number of functions: skills definitions; skill searches to identify resources that can be assigned to a project; resource utilization reporting; and over- and under-utilization alerts. The project plan can be created in the opportunity stage, and modified until the actual project has been awarded. All costs associiated with both the active project and the opportunity can be assigned to the project, thus letting managers assess the entire project (opportunity to completion), not just the aspect associated with revenue generation.
Using the Microsoft SharePoint platform, Deltek Vision provides a robust document management system that can be accessed by employees, partners, and clients. Documents can be sorted by project, employee, contact, opportunity, or other key Vision record. A document can be associated with a single record or multiple records (and can thus be used for multiple projects), and documents can be organized into libraries and folders. The system supports check-in/check-out capabilities to prevent two people (say) from editing the same document simultaneously. A complete audit trail, including version numbering, is supported (as are cross-document and document-type searches including Microsoft Word, Excel, and Adobe PDF).
Competitive Disadvantages
Deltek Vision plays very well in a sophisticated government contractor or international market. But it probably is not quite as appropriate for smaller US-based firms. Although smaller firms may be technologically savvy, the learning curve for a product such as Deltek Vision may be a bit of a challenge. In addition, these firms may not require all of the functionality typically utilized/required by a larger firm.
Deltek Vision will be introducing an inventory application later this year, and will in all likelihood be able to compete fairly well with Microsoft Dynamics SL after its next release in 2007. Currently, it does not compete well. It does not support service management functions and will not be able to compete against a product such as Microsoft Dynamics SL in a mixed-mode project or service opportunity. Deltek Vision also does not support collections management, and has no plans to do so immediately. It does support alerts and an aging report but this does not compare favorably with the offerings of Microsoft Dynamics SL.
Deltek Vision is sold directly as well as through business partners. This will enable it to compete against the full reseller channel supported by Microsoft Dynamics SL, but as with Deltek FMS, some opportunities may be lost simply because the Microsoft Dynamics SL resellers are located in every city in the US.
The business management system is the vehicle by which this precious time is tracked, applied to the right jobs at the best possible rates, and deployed in a way that efficiently manages the firm. The question then becomes: which business management system? The size of the firm may influence product selection, but in most cases project complexity is the driving force. The key then is to select a product that matches the demands of the projects in which the firm is involved. While there are any number of products that support project costing and project management, we'll focus on four leading products. In the first of a two-part series we'll look at Deltek Vision, as well as Deltek FMS, recently acquired from Wind2 Software. In the second part of the series, User Recommendations for Project-oriented Software, we'll also examine Microsoft Dynamics SL (formerly known as Solomon) and BST Enterprise.
Industry Requirements
Depending on the size of the professional service organization (PSO) (we'll use this term to describe any firm that primarily sells time and expertise), its industry niche, and its specific services, software requirements will vary widely. We'll look at twelve of the most important business functions.
General accounting: Although many people consider the general ledger function to be of little importance, one must remember that it unites all of the underlying accounting processes (paying bills, recording payments, paying employees, and generating financial statements that measure not just job-related performance, but—more importantly—a firm's ability to manage its internal affairs and generate sustainable profits). The general ledger function is in fact a critically important application.
User-defined fields: While professional service organizations all serve the same general industry, the specific industry niche and the manner in which a firm manages its business requires that the system track any number of pieces of information, which will vary from firm to firm. Thus, one of the most important methods of meeting these varying requirements is qualified by the ability of a software product to add fields of specific interest to users.
Customer relationship management (CRM): Success in any business depends on generating a constant stream of new business. While large contracts are coveted (primarily for prestige), it's the smaller projects that fill in the gaps and (in many cases) actually generate higher gross margins. Success is therefore dependent on maintaining constant consumer awareness, identifying opportunities, pursuing these opportunities, and converting them into paying projects. Contact management is important, but in itself will not meet all of the requirements listed above.
Resource management: PSOs sell knowledge, and time is just the vehicle for applying and billing this knowledge. While employee knowledge is important, this knowledge may not be available at all times, due to commitments to existing clients (or because of vacations, sicck days, and so on). Therefore, outside knowledge sources (as represented by subcontractors) must also be tracked, and be considered to be part of a firm's resource pool. And in any case, some jobs may require specific equipment that can be applied to jobs. All of these resources must be tracked and applied in such a manner that non-billable time is minimized.
Overhead management and application: While managing overhead costs is important, applying them to jobs can be very complex, particularly for government contractors. In many cases, overhead costs can become billable items, as with hours. The problem is that the method by which the costs are calculated and applied to jobs depends on what the client allows, and sometimes this calculation can become very convoluted.
Billing management: It is relatively easy to bill basic services to a client. However, the PSO market has evolved to the point where billing is an extremely complex undertaking. Rates for each resource depend on the level of knowledge applied; customers may demand preferential billing rates; and project rates will vary depending on the level of competition. All of these factors make the billing process very intricate.
Project estimating and budgeting: While most companies practice budgeting at the general ledger (GL) level, PSOs drive budgeting to individual projects because they have to capture cost information as soon as possible, in order to help control the job as well as bill customers for additional costs when possible. The estimating functions (which generate project budgets) also form the basis for customer quotes.
Project management: Small projects may not require sophisticated control systems. But some projects are so complex that manual controls become ineffective. This is where project management software is critical.
Inventory management: In many cases, materials are purchased specifically for a particular project, meaning that inventory management is not required. However, some firms perform repetitive projects, and in this case it may make sense to purchase materials in bulk, in order to obtain unit price discounts—with the savings from such purchases going straight to the bottom line.
Workflow management: As software has evolved over the past five years, complex business management processes have begun to be supported by some form of workflow management, most notably timesheets.
Exception management: In the case of PSOs, post-project review serves no useful short-term purpose, as the damage has already been done. Exception management tracks key indicators and alerts managers when an indicator crosses some defined threshold. In most cases, this notification is via e-mail, but some products are beginning to list exceptions on the employee's dashboard (if the product supports a dashboard). In some cases, vendors are beginning to tie these exceptions to workflow or task management functions.
Collections management: A project is not complete until the final bill has been paid. Most firms—in all industries—forget this simple business truth. This is also one of the weakest functional areas for most business management systems. Aging reports are inherently inefficient and ineffective. While creating exception alerts for overdue accounts is a step forward, the actual collections process is still manual, and little improvement has been achieved. Dunning letters are really not that effective, since customers can trash the notice and further delay payment. A software-supported collections process will encourage (force) customers to pay more promptly, and thus reduce accounts receivable (AR) balances, generating what could prove to be a substantial cash flow. Even a three-day reduction in AR for a $10 million organization will generate a cash flow of $82,000.
Deltek FMS:Deltek (http://www.deltek.com/) has focused on one primary area with many subgroups: project-oriented business solutions for contractors and consultants. Originally known for its government contracting expertise, Deltek has expanded its product line to include several different enterprise resource planning (ERP) solutions to serve project-based businesses in different niches, and has created a leading position in additional sub-markets. Deltek FMS is aimed primarily at the architectural and engineering community. Most of its more than 2,500 customers have 50 or fewer employees, while some firms have over 800 employees.
Competitive Advantages
The distinguishing feature of Deltek FMS is that it is a real-time system: data is instantly available in all reports and graphs once it has been entered into the database. Written in FoxPro with a FoxBASE database, Deltek FMS uses drop-down boxes to select menu options once a module has been selected from the "tool bar." Smaller firms will find it to be a very clean product with an easy-to-understand interface. A "favorites" menu can be created, and can include any menu option as well as user-defined reports. Deltek FMS uses Crystal as its reporting engine. Deltek FMS is written in FoxPro, a long-established programming language that makes it very easy for users (or their integration partners) to make modifications (small or large). Deltek FMS also supports an unlimited number of user-defined fields, which can be assigned to each master record (card). For example, a customer can be associated with ten or more classification codes that in some instances play the same role as GL segments.
Deltek FMS supports CRM, including contacts, leads, proposals, marketing campaigns, and resumes. It also allows users to define how each section of a project will be billed. For example, one part of a project can be fixed-fee, while another part (additional work perhaps) can be billed as time and expense. Users can also define billing rate tables that can be updated on specific dates. For example, the hourly rate for a senior consultant might be set to increase from $225 to $235 on March 1. This change may be specified in February and take effect automatically on March 1.
Deltek FMS creates contract proposals that conform to standard US government proposal formats (254, 255, and SF330). It maintains an unlimited number of cost pools and indirect expense rates, distributes GL account costs across one or more target accounts, computes and invoices for cost, automatically prepares incurred cost submissions (using fifteen different schedules), and submits charges on DD250, 1034, and 1035 forms.
Finally, Deltek FMS supports both desktop and Internet time entry with user-defined comments. Users can input their time, but can also create comments that optionally carry forward to the billing process. For those firms that do not want to process payroll, Deltek FMS links with payroll systems such as ADP, Paychex, and EasyPay.
Competitive Disadvantages
Deltek FMS is geared primarily for smaller US-based organizations. It offers no multicurrency capabilities, and for larger organizations its menu structure may not be quite as attractive as products such as Deltek Vision or BST Enterprise. Deltek FMS does not support a dashboard or portal and has no plans to do so. Obviously, this is not necessarily a competitive disadvantage unless the user firm desires such functionality. Deltek FMS does support project management and control functions, but not to the extent of the other three products we'll review in this article. Deltek FMS does support a fairly robust CRM application, but this application is not integrated with the rest of the system. This can prove to be a significant disadvantage. Project proposals can be created in Award, Deltek FMS's CRM application, but project data must be exported from the business management system, imported into Award (where the proposal can be finalized), and then exported back to the business management system. Deltek FMS supports what could be called lower-level collections management, including statement printing and dunning letters.
There is some indication that Deltek FMS will not be promoted quite as vigorously as it was when it was an independent firm. Deltek Vision apparently has been selected as the go-to product in most instances. Whether this means that Deltek FMS will be phased out over a period of time is not yet clear.
Deltek Vision (http://www.deltek.com/), released in 2002 as a fully Web-enabled (.Net) product, serves the needs of project-based PSOs, including consulting firms, IT service system integrators, and architectural and engineering firms. This solution offers users all the features they might require to manage the entire project lifecycle, from client acquisition and retention, to proposal generation, project planning and management, billing, and back-end financial management. Deltek and Deltek Vision have been successful because the company and product are focused on very specific market segments, offering users the technology, terminology, and functionality required only by these specific segments. While 50 percent of Deltek Vision customers are firms with 50 or fewer employees, Deltek's target market is small and medium businesses (SMB) with revenues of $2 million to $200 million (USD).
Competitive Advantages
Deltek has always been known for its expertise in the government contractor market, and in some respects "owns" this market space. Firms in this niche will know about Deltek Vision, and will automatically place it on their short list. This is of course a significant competitive advantage.
Unlike the many other products that adhere to a modular design, Deltek has created a system where specific applications are seamlessly integrated. For example, CRM functions (opportunities, proposals, contacts, projects, and so forth) can be accessed directly from a customer card, so that everything relating to that customer is available to the user without having to open the CRM module or another application. The Vision dashboard is a completely customizable web page that in some respects looks and acts like a standard windows form. The left side of the screen displays standard and user-defined menu options. Key financial indicators (data and graphs) are displayed in the center section. Alerts and workflow tasks are displayed in the right-hand column. As additional dashboard components are added, the web page expands automatically, supporting both horizontal and vertical scrolling.
Vision CRM's strength lies in the fact that it has been created specifically for project-driven businesses, in terms of both functionality and language. It includes marketing and business development, client and prospect contact management, opportunity tracking, activity scheduling, and proposal development and tracking. Like many other CRM systems, Vision allows users to create additional tables and fields to suit their requirements. The project proposal suite of functions allows users to create effective graphical proposals with content that addresses the prospect's specific requirements. Users create and retrieve template proposals for private sector prospects, cost proposals, and request for proposals (RFP) responses. In addition, the applications support US government forms, including the SF330 form. One of the unique aspects of the proposal suite is Vision's ability to maintain resumes of key employees that will be included in a proposal or some other communication to a prospect. Once all this information has been created for a specific proposal, it can be exported to Microsoft Word for fine-tuning and final presentation.
Deltek Vision's project planning functions are quite strong. Users start with a project plan, and then tap into resource management to populate the project with appropriate skill sets. The resource management module also includes a number of functions: skills definitions; skill searches to identify resources that can be assigned to a project; resource utilization reporting; and over- and under-utilization alerts. The project plan can be created in the opportunity stage, and modified until the actual project has been awarded. All costs associiated with both the active project and the opportunity can be assigned to the project, thus letting managers assess the entire project (opportunity to completion), not just the aspect associated with revenue generation.
Using the Microsoft SharePoint platform, Deltek Vision provides a robust document management system that can be accessed by employees, partners, and clients. Documents can be sorted by project, employee, contact, opportunity, or other key Vision record. A document can be associated with a single record or multiple records (and can thus be used for multiple projects), and documents can be organized into libraries and folders. The system supports check-in/check-out capabilities to prevent two people (say) from editing the same document simultaneously. A complete audit trail, including version numbering, is supported (as are cross-document and document-type searches including Microsoft Word, Excel, and Adobe PDF).
Competitive Disadvantages
Deltek Vision plays very well in a sophisticated government contractor or international market. But it probably is not quite as appropriate for smaller US-based firms. Although smaller firms may be technologically savvy, the learning curve for a product such as Deltek Vision may be a bit of a challenge. In addition, these firms may not require all of the functionality typically utilized/required by a larger firm.
Deltek Vision will be introducing an inventory application later this year, and will in all likelihood be able to compete fairly well with Microsoft Dynamics SL after its next release in 2007. Currently, it does not compete well. It does not support service management functions and will not be able to compete against a product such as Microsoft Dynamics SL in a mixed-mode project or service opportunity. Deltek Vision also does not support collections management, and has no plans to do so immediately. It does support alerts and an aging report but this does not compare favorably with the offerings of Microsoft Dynamics SL.
Deltek Vision is sold directly as well as through business partners. This will enable it to compete against the full reseller channel supported by Microsoft Dynamics SL, but as with Deltek FMS, some opportunities may be lost simply because the Microsoft Dynamics SL resellers are located in every city in the US.
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