Introduction
Success requires a business to have a strong understanding of the market’s demand for its company’s goods and services along with deep insights into how well it can supply what clients are demanding.
It’s easy to see the immediate effects of capacity and demand being mismatched in an organization. But the effects grow over time, with the disparity slowly increasing until it’s difficult to maintain profitability, as can be seen in this forecasting graph.

There are a wide variety of benefits that come from accurately forecasting capacity. These include:
Understanding your current demand
Detailed insights into maximum capacity
Reliable forecasting of future demand
Effective resource management and staffing
Fast scaling for demand fluctuations

Conquering the Hierarchy of Capacity Planning Needs
This hierarchy of needs can be applied to how a company understands its capacity and begins to take steps to optimize it, moving from basic data collecting to optimization made possible through the use of Business Intelligence. In this ebook, we will walk through the five levels of the capacity planning hierarchy of needs, what you will need to do in order to reach each level and the benefits that are found at each level.
In addition, each of these levels will be paired with definitions from Service Performance Insight (SPI) Research regarding the 5 levels of Professional Services (PS) Maturity. As an organization matures and moves up its hierarchy of needs, the better it will be able to forecast and optimize its capacity.
Level 01: Initiated
A Better Understanding of Capacity
Every path toward optimized capacity planning has to start somewhere. This initial level is focused on collecting and vetting the data that is already being generated by your organization. This data will provide you with basic knowledge of your current capacity and demand, but improvements detailed in future levels are not possible without this first step. Much of what you need to understand your current capacity and demand should already be within reach, but the following steps will help you begin using and better understanding your data if you have not already begun doing so.
“At this level, business processes are ad hoc and fluid. The business environment is chaotic and opportunistic and the focus for a professional services organization is primarily on new client acquisition and reference building. Success depends on the competence and heroics of people in the organization and not on the use of proven processes, methods or tools.”
INITIATED: SPI PS MATURITY DEFINITION
How to Reach the Initiated Level
Collecting and Analyzing Needed Data
It’s more than likely that your business is already generating a massive amount of data on projects, resources and client demand, but not all of this is necessary for capacity planning. To reach the Initiated Level, a business must first identify the data it needs for resource capacity and client demand insights.
This data includes:
Demand Data

Sales Opportunity Pipeline
It’s more than likely that your business is already generating Knowing potential sales at all levels will give you insight into increases or decreases in demand for the foreseeable future.

Engagement Delivery Metrics
How well is your company communicating with potential and existing clients? These metrics will help determine changes in demand.

Historical Data And Trends
What past data shows the ups and downs in demand that your company has experienced? History and trends can help you predict the future.

Delivery Backlog
What projects have been delayed and which are about to begin? Understanding your backlog shows where resources will soon be assigned.
Supply Data

RESOURCE SCHEDULES
Having complete recordings of your resources’ tasks and project commitments for the foreseeable future will help determine the amount of availability for new projects and clients.

HIRING TIMELINES
How long will it take for your team to hire a new member? Having a timeline based on past experiences shows when your capacity for more projects will increase.

RAMP TIME
What is the average time between hiring a resource and he or she can be fully utilized? Ramp time is critical for your strategy.

ATTRITION DETAILS
The rate at which your team members leave the company is critical in knowing capacity. Use actual attrition and forecasted attrition to know when decreases are likely to occur.
Correctly Preparing Data
It’s more than likely that your business is already generating Once your organization has identified the systems that are producing these data subsets, you will need to prepare this data in effective, replicable ways.
Make sure your data collection process adheres to the following structure:

DATA GOVERNANCE
Create roles and guidelines that ensure all data being entered is of good quality, consistently inputted and assessed by the correct parties.

DATA MODELING
Organize your data into tables and accounts that determine access, performance and storage details, which will define data elements, structures and relationships.

Reference and Master Data
Create an authoritative source of master data to provide a single point of reference that removes duplicates, prepares data and eliminates incorrect information.

Data Architecture
Create models, policies and standards that through which data must be collected, stored, arranged and used in your data systems.

Database Storage
Ensure that the system used to store your data and the administration in charge of it is secure and working in the way your business needs.
Abilities Granted by This Level
Measure Your Current Demand
LEVEL 02: PILOTED
The Establishment of Trustworthy Insights
After the basic knowledge granted by Level 1’s data collection, businesses are able to advance to trustworthy, actionable insights granted by integration. It’s likely that your organization’s data is still siloed before reaching this level, but by integrating your different solutions, the data they produce can be combined and either confirm the insights being generated, or highlight incongruities or flaws. Make sure to include leaders from different departments during strategy planning to ensure they will understand the thought process behind integration and support the efforts to make this process a success.
“A company’s processes have started to become repeatable. Best practices may be demonstrated in discrete functional areas or geographies, but they are not yet documented and codified for the entire organization. Basic processes have been established, but they are not yet universally embraced.”
PILOTED: SPI PS MATURITY DEFINITION
How to Reach the Piloted Level
An effective integration strategy will need to catalog all of the data being generated by a company’s systems and ensure that these are all properly flowing into a system of record that orchestrates them all, or are effectively replaced by a new system that does not lose valuable data. When done correctly, integration will validate a business’ data to better understand current capacity and begin creating insights that forecast future capacity.
Building on Flexible, Trustworthy Tech
Insightful data and strong integration strategies rely on trustworthy technology. The following are must-haves for tech integration.

Scalability
Growing businesses mean more complex data. Make sure your technology can grow to accommodate expanding data.

New Data Sources & Throughput
A new integration solution is more than just storage, it will need to be able to connect with both your existing data sources and any new sources that you are currently implementing or will be using in the future. Also, consider if you will be using streaming data sources and if the potential integration solution can handle these.

Suitability for your unique case
What is the right integration strategy for your business? Some organizations will need a completely on-premise solution while others will need a full-scale data move to the cloud. Make sure that your solution, data and resources are aligned during your choice.

Security and Compliance
Your solution should have a high degree of security and privacy safeguards in place, as well as formatting that complies with your country’s security laws, as there will be large amounts of sensitive data flowing through it.
Abilities Granted by This Level
With your understanding of capacity, future levels will help you make informed decisions and have the basis for process improvements.
Forecasting Future Demand
Define your market and forecast the drivers of demand in each of its segments to understand how the market is likely to change in the future. In addition, review past trends regarding your demand to determine whether there are patterns, increases or decreases, that are likely to impact your business in the coming months. In addition, determine systemic patterns, which repeat over time, versus trends, which are demand behaviors that do not repeat. An analysis tool that combines these data points for more actionable information can help you create a forecast that you can trust.
Defining Your Capacity
Every business must know its own current capacity to better understand the limitations and potential of the organization. Doing so means that managers can prevent overcommitment to support healthy employee utilization, hit deadlines and keep clients happy.
In order to accurately determine your current capacity, follow these steps to gauge resource availability:

FIND THE BOTTLENECK
You must understand the services that the slowest point in your process can deliver. This is also known as the process bottleneck and is what will con- sistently throttle your output, no matter how quickly the rest of your business processes can complete their parts of a project.

DETERMINE WORK PER PROJECT
All the projects currently in your portfolio and the forecasted utilization for each role for each project in the portfolio for a given timeframe.

MEASURE TIME & SKILLS
Review the average amount of non-project work time and needed skills for a given timeframe and the standard available working time for that role to see how much work each resource can take on.

COMBINE TIME AND PROJECTS
Divide the total amount of working time by the total amount of time required for your projects to discover your total capacity. With this information, ask yourself if you have the capacity to commit to additional work and if there are resources available to complete your committed work.
LEVEL 03: DEPLOYED
The Art and Science of Demand and Capacity
Now that your business has data that it can rely on after being refined through the previous level, it can begin to take action through informed capacity planning. By placing these capabilities in the hands of informed, effective leaders throughout the organization, capacity planning and successful decision making can begin to make a positive difference that slowly eliminates unexpected complications that negatively affect the organization. While future levels will support capacity planning through more advanced solutions, the use of your best team members is critical in making this level a success.
“The organization has created a set of standard processes and operating principles for all major service performance pillars. Project delivery methodologies and quality measurements are enforced across the organization. Management has started to enforce financial and quality objectives and processes have been established for effective execution and alignment.”
DEPLOYED: SPI PS MATURITY DEFINITION
How to Reach the Deployed Level
Having a resource manager who understands the company’s capacity and can match resources with that capacity is critical for executing and improving capacity planning. In future levels, technology solutions will aid in making these decisions, but at this level, execution of capacity planning and implementation in resource strategy will rely almost exclusively on managerial decisions. These decisions will enact your capacity planning across the many different team members and project plans that rely on it, so that your processes will be executed on time and under predictable circumstances.
Capacity and demand need to be effectively interlinked within your systems instead of being in separate solutions.

Utilize the Art and Science of Demand and Capacity
It is critical that your team adopts a purpose-built professional services SaaS solution that will measure your current capacity based on past and current resource availability, project timelines and utilization while also forecasting upcoming projects and client requests based on past trends and data. These solutions will allow your team to compare and contrast forecasted demand and capacity in your organization, interlinking these two predictions to make necessary resource adjustments to maximize your ability to meet demand and prevent excess resources.
The result is that “Just in Time” resource planning can be made possible for you through forecasting insights regarding changes in demand and capacity before they occur.
Abilities Granted by This Level
Reliable Forecasting
The data analysis present at this level should allow for more effective forecasting of both demand and capacity by not only understanding what these two factors currently are, but what they will be in the near future through communications, pipeline and resource availability. Seeing the future availability of your resources in comparison to upcoming changes in demand can help the business take more effective steps in bringing on more or cutting back on resources, as is appropriate.
Visualizing Demand-Capacity Curve
Being able to create a Demand-Capacity Curve will help your organization understand its maximum current capacity limited by current bottlenecks over a long-term forecast. This can then be compared against predicted demand, which shifts from month to month or week to week to better understand where your capacity and demand are not synchronized. Failure to do so may lead to overutilized resources or the inability to meet increased client needs. This knowledge will be crucial in refining your resources and business processes.
Which Forecasting Model is Right for You?
There are three potential forecasting models that your business can adopt, each with their own approach, benefits and drawbacks.

TOP DOWN
In this model, a business’ raw headcount number is derived from a financial forecast that computes headcount based on revenue or revenue growth, factoring in average daily rate (ADR), billable utilization and estimates related to the delivery backlog.

MIDDLE OUT
Today, data scientists can model key areas in the overall professional services workflow to address data gaps and/or quality issues. Many professional services automation (PSA) tools are incorporating advanced data modeling with dashboards in support of business demands for better visibility into resource supply and demand. This Middle Out model can effectively be used to validate the Top Down and Bottom Up models, strengthening your forecasting approach.

BOTTOM UP
This model typically originates from resource staffing calendars. As a result, data regarding resource allocation and calendar data is fairly accurate for four to eight weeks into the future, but loses quality and accuracy beyond the eight-week window.
LEVEL 04: INSTITUTIONALIZED
Equipping the Entire Company
This level is all about pulling the most value possible from your data insights and applying them to the largest number of applicable parties. Today, data can inform and strengthen everything from project management to hiring decisions to solution adoption by providing proven metrics that shape better decisions. Here, we can see how organizations can make a positive impact on their capacity at a person-by-person level, which, when deployed well across the company, can quickly improve capacity.
“Management is using precise measurements, metrics and controls. Each service performance pillar contains a detailed set of operating principles, tools and measurements. Organizations have set quantitative and qualitative goals for customer acquisition, retention and penetration, in addition to a complete set of financial and quality operating controls.”
DEPLOYED: SPI PS MATURITY DEFINITION
How to Reach the Institutionalized Level

Skills Assessment
Effective capacity planning must go beyond simple availability and roles. It must reach into each individual resource’s skills. A database and ranking of resource skills must be compiled, preferably with a detailed assessment for each team member, in order to understand individual and company-wide strengths and abilities. Every organization needs to understand what abilities are provided by their current resources, as well as what resources need to be brought in to provide a greater depth of skills, where current team members need to improve their skills and what resource pools the company use. This will help an organization effectively improve by and understanding what resources, training and solutions to invest in.
Your business and the effectiveness of your capacity planning strategy, cannot progress to a greater level of success until a standardized approach to capacity planning and data entry has been adopted across the entire organization.

Project Metrics
In coordination with a better understanding of team member abilities, a business must be able to gauge the success of a project, both after its completion and while in progress. Understanding what is both positively and negatively affecting the project, how the budget is being used and if it is not on track to be completed by the deadline will help the company make needed changes while in progress and refine workflows for improved capacity.
Consider a project management solution that provides detailed insights regarding budget burn rates and timelines managed through Gantt charts to understand how a project is progressing in real time in relation to its costs and interdependent tasks. This will provide your project managers with metrics that help them understand if they are progressing well and give them the ability to make informed changes, should fast adjustments be needed for in-progress projects. Once a project has been completed, these insights can be further examined to see what held back a project or led to its success so that future tasks can either replicate or avoid these elements.
Abilities Granted by This Level
Skill Insights
Having a skill database means that your managers can more fully understand the skills of each team member. These insights help them match their people to the best potential projects based on skill and interest for a more predictable project outcome. In addition, it can highlight which skills are not being fully utilized, as well as what areas the company is weak in, leading to informed hiring decisions and contract work. These insights will be capitalized on to an even further degree in the next, final level.
Addressing the Process Bottleneck
As discussed earlier, your business’ capacity is dictated by your process bottleneck. However, this limitation can be hard to find and correct without proper insights. This is the level in which your company is finally able to understand what needs to be improved through utilization rates, time to value for projects and complications within projects. The result is the end of your bottleneck.
Limitless Capacity
The flexibility and speed now possible for both recruiting new resources and utilizing them well at this level means that your organization has now achieved limitless capacity. Time, resource skills, trust and collaboration have all improved to the point where you are not limited in what you can do, only by what is available for you to do.
Effectively Acting on Your Forecast
While you may have been able to forecast your demand in previous levels, the Institutionalized Level allows you to act on it. Use your forecast and capacity insights to pull specialized skills from global resources, using distributed contract work to gain skills as needed. In addition, you will be able to see capacity around the clock, using resources in different timezones to get work done when it needs to get done, keeping pace with shifting demand for success.
Addressing Demand-Generation Obstacles
In coordination with your efforts to improve capacity, better demand insights allow you to understand what may be limiting your ability to generate demand. Win/ loss data can also help highlight where your sales team can improve their processes to capitalize on demand in quantifiable ways.
LEVEL 05: OPTIMIZED
Preparation for the Future
After gaining the ability to improve capacity in Level 4, organizations must move beyond the limitations of human analysis and embrace Business Intelligence solutions to leverage data to its greatest degree and create capacity planning that can adjust and improve in specific yet significant ways. As demand fluctuates and team structure evolves, Business Intelligence solutions can help you react faster and more effectively for long-term success, no matter what changes affect the industry.
“Executives focus on continual improvement and a disciplined, controlled process is in place to measure and optimize performance through incremental and innovative technological improvements. Quantitative process improvement objectives for the organization are established and continually revised to reflect changing business objectives. Initiatives ensure quality, cost control and client acquisition.”
OPTIMIZED: SPI PS MATURITY DEFINITION
How to Reach the Optimized Level
With the right implementation process, your BI solution will make the most of the data that you have already been collecting and remove a large amount of time-consuming analysis work for your team. In addition, your BI solution will provide insights that are either not possible to reach or too time consuming to do given your team’s schedule.

Understanding Optimized Capacity
Beyond having a strong and consistent capacity, a business must understand what its actual optimized capacity is to become as efficient as possible at all levels of demand without overburdening their workforce.
The data concerning optimized capacity will look different at each organization, but will always include the right resources working on the right projects for their skills, no major bottlenecks slowing down your capacity and having the right team size for your ongoing demand. As a result, optimized capacity will be consistently correct for its current demand, shifting concurrently with demand changes, preventing excessive amounts of benchtime and quickly adding more resources to take on a new project at the right time. This optimized capacity fluctuates with consistently shifting demand.

Continual Refinement and Long-Term Planning
Reaching this level of truly dynamic resource optimization takes continual refinement, which is a necessity due to the fact that demand and capacity are both in states of constant, often mismatching flux. In addition, this level requires continual refinement and long-term planning to keep your company as effective as possible.
Capacity planning at this level moves past “Just in Time”resource planning and moves toward long-term success. In addition, managers can become aware of upcoming projects that resources are better suited for instead of their current assignments, which could overlap and prevent them from doing more effective work. The result is that your team can better plan for reassignments and use each member in his or her most effective manner. Machine learning and more effective resource management can be used at this level to create a cycle of refinement at your organization.
Abilities Granted by This Level
Your resources can be continually matched for more effective and predictive capacity planning.
Taking Control of Your Capacity
Collecting Data in Effective, Replicable Ways
BENEFITS
- The Ability to Determine Current Demand
- Initial Forecasting of Future Demand
- Initial Forecasting of Future Demand
Robust Solution Integrations and Use of Strong, Trustworthy Tech
BENEFITS
- Robust Solution Integrations and Use of Strong, Trustworthy Tech
- Detailed Definition of Current Capacity
Dedicated, Informed Resource Managers Who Balance Demand and Capacity
BENEFITS
- Dedicated, Informed Resource Managers Who Balance Demand and Capacity
- Visualization of the Demand-Capacity Curve
- Selecting the Right Forecasting Model for You
Company-Wide Adoption, Team Member Skills Database and Project Metrics
BENEFITS
- Team Member Skill Insights
- Actionable Forecasting Data
- Process Bottleneck and Demand Generation Improvements
- Reaching Limitless Capacity
BI Capacity Analysis for Consistent Optimization and Refinement
BENEFITS
- Machine learning for continual refinement
- Scalable capacity for business growth
- Insights into team dynamics
Ready to understand your resource capacity in detail and start making critical improvements? The Kantata Industry Cloud for Professional Services provides you with the ability to understand, allocate and optimize your resources in detail, which is critical for long-term success in capacity planning.