And who really needs timesheets any more...
Professional Services have always been paid for on the basis of how much time was spent on the work involved. This is obvious for T&M billing, but even when selling fixed price it's typically been priced as a factor of the time to be spent plus contingency plus margin. We called it effort, but we really meant presence. With the new tools available, and the changing ways of working, customers are rightly starting to ask why they are paying for hours of someone's time. "Can't you use AI?"
Every PS business runs on timesheets. The amount of time booked is directly related to the amount the customer is billed, the revenue that is recognised, an indicated completion percentage, and the utilisation and capacity of the PS team. The timesheet is behind the management operations of the business and the money coming in, which is why every Monday's tedious timesheet DQ check is crucial - everything about the PS business relies on it.
But the shift in customer mindset means we need to move our thinking to outcomes. Customers won't care about the exact effort, they will focus on successful, provable outcomes. You may think that historically this was implied through fixed-price milestone-based deliveries, but going live is not an outcome. Outcomes must be a meaningful measure of success to the customer. A reduction in fraud rates using the new platform, a sustained increase in capacity on the migrated cloud environment, a measured improvement in user adoption.
I've spent much of my time running PS being focussed on the data that impacted the financials, looking for revenue leakage:
- Overburn - a project is expending more effort than planned, do you absorb it or will the customer pay?
- Underburn - a project is expending less effort than planned, is that additional margin or lost revenue?
And asking questions about capacity and utilisation: are we getting the right balance of the team's work paid for, can we take on more work? In a scaling business, that meant building the system, processes, data capture and discipline. Finance were no longer forecasting off best guesses, and project managers became revenue conscious. Alongside watching timelines, RAG and customer satisfaction, we ultimately got to a consistent actuals plus forecast equals budget.
Professional Services has always been selling availability as effort. AI makes effort irrelevant to the buyer. Going live is not the end of the project, and the human effort expended is not related to the invoice. If the real delivered value, and the crux of the pricing, is in post go-live business outcomes to the customer, then does the business still need to measure the usage of time? If not, what is the new unit of individual value, or how do we measure the team?