Episode 11 Transcript
The 5 Biggest IT Trends Shaping the PS Space w/Brian Sommer
Matt: Hello everybody and welcome to The Professional Services Pursuit, a podcast, featuring expert advice and insights on the professional services industry. As always, my name is Matt Finch and I'm so excited to introduce our guest today, who is none other than Brian Sommer. One of the titans of the technology services arena. Brian, welcome to the show.
Brian: Hi and I'm not sure about being a titan, but I'll take the compliment anytime, but thank you.
Matt: So Brian has more than two decades of experience in the field. And one of those decades, he served as senior director of Andersen Consulting's Global Software Intelligence Unit. Of course anderson Consulting now being Accenture. Brian, you're a wealth of insight and we're so thrilled to have you. Tell us a little bit about yourself and what you do in the world so our audience can get to know you a little better before we jump in.
Brian: Yeah, so I did 18 years actually with Accenture and you're right, 10 of those running their software intelligence unit. I was a field hand with a company down in Houston, in San Antonio for a while, but then they moved me up to world headquarters. I left the company about 20 years ago, believe it or not, I'm really dating myself here, but I did that to spend a little bit more time with my kids. My last year at Accenture, I did 48 international round trips and so I was looking for something a little bit different to do. So what did I do, I ended up being an industry analyst and I traded some of those international trips for quite a few domestic ones. I've been covering the ERP and PSA space for quite some time now.
Matt: Fantastic, excellent. Well perfect guest for our podcast. Of course, that services space is exactly our target audience here, so I'm sure our audience will be really delighted to hear some of the things you've got to say today. So let's get to it. We were doing a prep call for this show and normally we talked through the sort of Q and A and what we're going to go through. But Brian you came up with a really great idea, this feels like taking me back 20 years, we're jumping into the top five. Now you remember probably taping the top five from the radio. You've got to avoid the adverts, you've got to hit record and then you're going to play all those great tunes from five to one, right? That's the style we're going to do today, but instead of eighties music, we're going to hit the top five trends in the services and technology industry today. So Brian, we're going to jump in on number five. We're going to build suspense by the way, everyone, five to one. I can't wait to hear what number one is Brian. By the way, this is going to be a lot of fun. So Brian, do you want to take us away with trend number five, what do you think is going on?
Brian: Well, I think what's interesting in the services space is we're going to see something I call consumer reports comes to services. What this is all about is there hasn't been a whole lot of transparency around service firms and the kind of companies that a client might want to hire. And I've certainly lived that in spades, I’m what's called a buy-side industry analyst. I get my money from helping buyers of technology, not necessarily the sellers. As a result, clients often struggle when they can pick some new technology, but then when they're ready to get it implemented or integrated, what have you, they really are lost as to who to pick. And when they look at the different proposals and RFP responses, whatever from different implementers, they all kind of look the same. You know everyone says people are our number one asset and we're all about customer service and they're long on platitudes and short on real proof points.
It's gotten to the point where a lot of my clients want some objective survey-based, whatever kind of tool that helps them understand who really does deliver when it comes to working with clients. And that's why there are companies like Raven Intel out of Chicago that are doing all of that kind of work. And now they're focused right now initially on the HR market and moving into other horizontal amps including a little bit in the professional services space. And they're a godsend, I can tell you firsthand, I've called them in, it doesn't cost you anything to give me their rankings and different integrators when doing software selection projects. I think we're going to see more and more of this in the space. And if I were an integrator or implementer right now in a service firm, I'd want to get ahead of this trend. Companies are tired of integrators not exposing their conflicts of interest, they're tired of getting referrals from software companies of somebody's brother-in-law that has a service company. And a whole bunch of other kinds of behaviors that are not necessarily geared toward helping the customer be successful and pick an economically viable candidate here for an implementer. It's all about connections, relationships and things that really don't matter when it comes to project success. So we're going to see more and more of this coming. I hope the Raven Intel folks keep moving into more and more areas, but they're definitely already starting to move into professional services a bit.
Matt: Yeah, definitely. I think the interesting trend I've seen over the years, you know, having grown up certainly from a software perspective like the Gardeners and the Foresters and great people like that. But also the emergence of this crowdsourcing, you know, this true opinion of what my implementation of the software was like. There are no bells and whistles or filters through anything. I get to put a review on a website and people read that review. What are your thoughts on that crowdsource-style of reporting and analyst work?
Brian: It has value and it also has a few problems and I'll give you one example. If you ask somebody who recently bought, let's say a big software package from one of the major vendors, it turns out that most people's marriages don't even last as long as how long people will hold on to a particular major software product. So it's not uncommon to talk to people who've been using the same piece of software at their company for 10, 15, 20 years. They haven't looked at what other alternative products you have available. So it's hard for them, I think, to give an objective assessment sometimes of what's going on there. So when you crowdsource, there is going to be some bias in the answers. But I think the key thing and this I've seen with service rankings when you do this kind of crowdsourcing is man, there are some vendors that can get like a 4.8 or 4.9 on a five-point Likert scale. Then there are those that are down at the three-level and if you're way down there, you've got a problem. And if you're a service firm and you haven't done a legitimate and I'm going to underline that word a ‘legitimate’ net promoter score assessment to find out will your clients actually recommend you, you may be in for some pretty scary surprises when these crowdsource evaluations come in.
Matt: Yeah, definitely an interesting point. So you put a lot of value on the net promoter score as an indicator.
Brian: I only do when it's done legitimately. I think we've all bought a car and had a salesperson come over, nod, nod, wink, wink and “Hey, if you give us all tens on our net promoter deal here, we'll give you a free oil change.” That's not a legitimate response, that is a gamed response and there's been a lot of that. By the way, a lot of service companies install software and one of the things you'd be amazed to find out is a lot of the software vendors out there have net promoter scores down around the negative 50 range. And you talk about a space in the tech world that needs some improvement in how they interact with customers, that's it.
Matt: Great way to start us off. I feel like we need some kind of jingle or drum roll as we go into the next ones here, but let's jump into trend number four, we're counting down to number one here. The number one hot hit we'll find out in a few minutes, but trend number four Brian, take us away.
Brian: Number four I think we're moving into what I called the age of the global service firm. It's not surprising to me that so many service companies and service firms, every client, they touch and even their own firm is requiring them to do some part of their work in a non-US, non-North American kind of location. Even small firms like my own company, we've been doing stuff all over the world for a couple of decades now and we're not big by any stretch. I mean, yeah, I'd love to be mega gigantic or intergalactic in scope and size, I can't imagine what the audit and tax bill for that work would be, but it's real. And the customers are putting in things like plants, equipment, systems, whatever, they're putting this stuff in all over the world. And they go where there's abundant raw materials, low-cost labor, whatever, they don't necessarily go where you want them to go. And I think every service firm is gotta be able to build up a capability to handle these kinds of requests because they’re there, they are coming and you're going to get more and more of them.
There’s also a whole new ecosystem of technologies that will help support companies as they want to open offices and hire people in different local markets to provide services. And one of them that jumps to the front of mind and none of these are plugs but would be Papaya Global that's really good at helping you set up operations in a completely new country in a matter of a couple of days. So I think there's work to be done there. And I think service firms have got to realize that you can't go deal with a global or multinational client if all your capabilities are limited to one country, you basically just put yourself out of that market. And that's not what companies want. It also means that there are some skills these service companies have to acquire so that they are much more sensitive to different cultural norms, business practices, rules, regulations, tax requirements and everything else in all these different markets. And this is something you don't want to learn on the fly, you want to be proactive and pick this capability up, have this capability in advance.
Matt: Yeah, definitely. And I suppose as well with the advance of COVID in that situation, globalization becomes more important because people can't travel. If you only got people in one geography and they can't physically travel right now to another geography, you need people on the ground and you need that global presence.
Brian: There is some of that and it's amazing. Clients have now gotten so good at being able to run projects without actually requiring other people to come to them in some cases. It now opens up a market opportunity for service firms to do work all over the world and do it virtually. I had a small project team and we did a big factory of the future project big multinational. Their executives are mostly in Australia, their operations were heavily focused in the Western US and Canada and their factory of the future was in all places; Scotland. And none of us on the project had ever gone on a plane and went anywhere. It was the weirdest project I ever did and it was probably one of the cooler global ones I've done lately also.
Matt: Fantastic and shout out to all of our Scottish listeners, beautiful part of the country. Slightly biased being a Brit, but that would be a great place to go for any kind of project I would think. Certainly, if you could visit some of the sights and distilleries up there, wonderful.
Brian: That's the only sad side effect of the project, is we didn't get to go to any of those cool places. And yes, like you, I do love going to Scotland and I've even sent my parents there on vacation. I also love to go to Australia, which was another big deal. I've been there many times and thoroughly enjoyed it. So that one was hitting all of my favorite client kinds of hot buttons, but unfortunately, there was that little pandemic thing that kind of screwed everything over for travel.
Matt: Yeah, you visited Scotland and Australia, but sadly it was via Zoom call.
Brian: Yeah by zoom call. In fact, it was kind of weird running this project because I had to call up people in those locations at all hours of the day and to go get your iPhone or iPad, I need you to now walk around this plant and show me these things. And so I'm getting all these FaceTime calls from all over the world with all this manufacturing stuff. Let's say I had toyed with that idea in the past, but had never used it anywhere near to the extent that I did earlier this year. Anyhow, this was an interesting sidebar, but the bottom line is how you deliver services is going to change because you're now going to be delivering services all over the world. Technology changes and there's still residual pandemic stuff going on, but clients are going to drag you into these other markets. That's the deal and your firm has to be adaptive.
Matt: Yeah, agility's key. Fantastic. Let's jump straight into number three Brian, what have you got there at number three?
Brian: I think that service firms are realizing when they look inwardly at all of their internal stuff, that they're dealing with way too many unique integrations and technologies and not a lot of this is serving them very well. I'll give you an example. I just shared with a company yesterday, a big services firm here in the Midwest, US, kind of a systems map of all the different technologies that they would need to run their firm. Their biggest problem right now is how do they scale? And they can't scale right now unless they fix some critical problems, ones in resource management, but the main thing is they have standalone systems for travel, entertainment expenses, charging systems for projects, PSA automation, personal [inaudible 14:30] automation. Project planning, project portfolio management, configure price quoting, knowledge management and I could go on. And it turns out some of their most important systems are custom bespoke kinds of applications that were developed over the last 10, 20 years.
And trying to keep all that stuff together is a real fragile mess. And as they continue to expand to more global markets, they're going to find the numbers of integrations are going to grow exponentially because every country you go into, you're probably going to have to get another different payroll provider with a completely different payroll interface and a whole bunch of different tax filing issues and it just goes and goes. And if I could, I'd put a klaxon horn ringing, telling these folks that you need to considerably straighten out your existing systems because they're going to impede your ability to scale and grow. And you just can't take on all of that overhead because it means all your data is now stored in all these independent systems. It's got latency and it's gotten redundancy, it's out of date. Most of the time you get to it, you've got to clean that up, so that's just not going to work.
Matt: Yeah and I think the expectation, certainly in the modern age, where every single piece of information is at your fingertips in your personal life. Whether it's social media or personal systems banking, whatever it is to then not have that same experience in your work environment. And oh gosh, that rapport isn't up to date because the data doesn't run until overnight and all that kind of thing. That's just not the modern expectations, certainly with a younger millennial workforce that all they've ever known is having that data at their fingertips. And then to go and work for a company that doesn't have that type of technology and data instantly available, that's definitely off-putting. So I think coming along with that trend is definitely key.
Brian: So to that point, my kids know that this is my world. I work with large software products and they've heard me over the years complain and grouse about a few of them along the way and talk up a few others. I said my kids, they are both grown up and doing well. One's in corporate accounting and one's in the aerospace industry and they'll call me up. They've changed jobs even a couple of times saying, oh my God dad, you just won't believe that this/their employer, they use blank, fill in the blank and go this is some awful software. It's got an ugly green screen interface, there's no mobile connectivity and there's nothing available on the cloud. I can't even work remotely one day because there's just no way to get it done from a dial-in perspective. And they would never recommend somebody else go to work for those companies, mostly because of what you just described. Because the employee experience dealing with all of these geriatric applications that were more appropriate for their grandparents, not them, is a real turnoff. And if you're trying to win the war for talent and that's what you have for systems, their day one experience on the job is going to be a wretched one and they're not going to stick with you at all, that's assuming you even get them in the door.
Matt: That's right, yeah, a hundred percent. Absolutely. All right, that was fantastic. Number two Brian, counting us down, we're almost at number one. Number one is a big one, I can see it on my screen in front of me, so I'm looking forward to that one. But number two, what did you put at number two for us?
Brian: I called it the end of the bespoke era and that word bespoke, that's something I heard in Droves in the United Kingdom in the eighties and nineties and I've never dropped it out of my vocabulary. But all this custom code, which is quite prevalent, a lot of service companies have kind of hit the end of life frankly. Much of it was written to run on on-premise technology and that's not really where the world of technology is anymore. And in some cases, there are much better products that can now be found almost all of which run in the cloud today. That cloud has the advantage like we were talking about in the previous point where people, all they need is an internet connection or a smart device and they can get into this stuff anywhere on the planet. The one caveat I would tell listeners is to be careful about one thing, when your firm defined to be the boundaries of say a customer PSA solution may not be the way the marketplace decides what goes in or out of a PSA solution.
So there are some rough issues you've got to cover because the way you do things doesn't line up with the standard practices out there in the marketplace. But the writing's on the wall, it's an expensive process to build custom code and code has a long tail. Imagine like a little tiny Chihuahua with an empire state building tail dragging behind it. And if you're going to have this custom code, you got to ask yourself, is this application so massively strategic that we have to have it custom, or is it something we could probably buy 95% of the same functionality and subscribed to whatever and that's where you ought to go. Save your custom development stuff for things that are gonna make a huge difference in market share, in competitive advantage and into the bottom line. It's been a long time since I've run into a client, for example, that had a custom, say, fixed assets system. In fact, if any of your listeners ever run into one of those run, run, run away from that firm. Because that's somebody who thinks they’re doing something really creative in fixed asset accounting. And creative and accounting are two words that never belong together because you will get a jail term when that happens. So I'm not sure custom is really where we need to go for a lot of the PSA market ever again. I think we've crossed that threshold.
Matt: Yeah, definitely. And it's the initial cost, the delays and implementation versus just switching on a product, but also the long-term supportability. You know what happens when the provider that's given you that custom solution, the person that wrote the code leaves the company and now you're stuck with this kind of weird orphan solution that nobody else in their company can support. It's a really tough place to put yourself; from a cost perspective and from a long-term support perspective. Eventually at some point in time, that's going to get retired and you're probably going to go with an off-the-shelf solution anyway. And like you said, the cost of the development versus the 95% that you mentioned. Hey, we might be missing 5% of what we really want, but I'm more than willing to adapt to that 95% for the sake of not going down that bespoke and custom route. I think that's a really important change. I think that's a great one for number two there Brian, I think that's really well-stated.
Brian: And that's also a recognition of the fact that the PSA marketplace has definitely matured and matured a lot. And now we're actually seeing a lot of M and A activities going on in this space. And we're going to see the market starting to coalesce around a few major leaders, so this is a different age of software for the professional services space.
Matt: Yeah, I think you're spot on. We covered that a lot on this podcast. The services industry is underserved by all sorts of things, you know, technology, podcasts, content thought leaders. And that's why we do this podcast to try and bring some of that to the fore. But I think from a technology perspective, it's been fragmented and now it's really coming together as these companies are maturing. So a really exciting time, especially if you’re a client or a services organization that's looking to automate what you're doing on a day-to-day basis to really squeeze that extra remain of profitability, efficiency, revenue, margin. Those tools are out there and I think that's an exciting time to be looking at automation in this space. Very cool. The end of the bespoke age, what a great number two. And I don't know, Josh you could probably put a drum roll in here for our number one, but number one Brian, on the list, what have you got? The biggest trend that you're seeing in 2022 in the services and technology space?
Brian: I think the big eye-opener is going to be how advanced technology is going to radically change service processes and business outcomes. And one of the areas I think that's really worth noting is how resource management is going to happen in service operations and organizations. Resource management has been a real problem area for companies because it's limited to one resource manager lucky to be able to keep track of 50 to 100 professionals and get them staffed. And remember things like what's appropriate for their career advancement. Do they have any special issues about where they can travel or not or their permit issues? What's the right thing from a financial perspective for the company? Is this person too expensive for this client project and whatever. And there are just so many variables that a resource manager has to look at and they had no automation other than the spreadsheet and that's what most of them used. They didn't even use the HR system because most people, if you have a very traditional HR product, that rarely gets data updated in it. And so it doesn't have the latest skills that somebody has, so again, the resource manager is keeping track of that. This area has been overdue for some advanced technology, particularly things like artificial intelligence or machine learning and now you can start seeing it. And these will fundamentally change not only the economics of how service firm works because of a better way to optimize the staffing of jobs. But then also change the careers and the service personnel satisfaction, possibly retention, with the company.
So there are a lot of really great benefits that come by using these smart advanced technologies to change that one area. But that's not the only place that we're going to see these advanced technologies impact service firms in over the next year. You can now get technology that can spot T&E fraud, (travel and entertainment) expense fraud. There is a company in Georgia that has a phenomenal set of tools and Matt they'll pull all your company's corporate credit card transaction data for a couple of years and they can spot little things that you've been doing. Like oh, you got an airline flight approved, you didn't take it, but you got a credit and then use that balance on your credit card to buy your significant other an Ermine scarf for an anniversary, that's fraud. They can spot things like you and I went to some software show, for example and we shared a cab or an Uber car over to the event. You charged it in that immediate pay period, using the receipt that you got. And I got one of those tear-off paper receipts that sometimes cab drivers will give you and I waited two or three time periods before I submitted it. We both submitted the same expense for the same amount instead of splitting the fee. And it's hard to figure that out unless you can look over a large amount of time and data and everything else to spot the fraud. And those are just two little examples, but these guys tell me at this one company that about 7% of all T&E transactions are fraudulent and they spot them.
Matt: Oh wow, fantastic.
Brian: That's one area they're using big data. Another one is to use chatbot technology to help your service people in the field get answers to all kinds of questions or even to process something. There may be out working a client, but maybe they have to make a change to their insurance, whatever, just let a chatbot do it for you and keep HR out of the loop and you can do that 24/7. You can use artificial intelligence to find net new talent. It's amazing. A couple of companies have over a billion resumes in their system. And you just tell Mike, I need these kinds of skills in this zip code and they need to have a couple of other kinds of qualifiers. And they'll tell you immediately, here are the 48 people in that one area that you could reach out to and go contact as possible passive job seekers. We're also seeing smart technologies, planning and forecasting.
Service firms struggle to plan and forecast because they keep so much of their information in spreadsheets and other disconnected things. You put it all in a modern PSA and have access to data warehousing kind of capabilities. And now you can do these re-plans, re-forecast multiple times a week if you want to. I'm also hearing some vendors looking at ways they can use these advanced technologies to detect potentially out-of-whack projects. You know, what projects are possibly about to fail or whatever. And it's looking at leading indicators that can be quite subtle to find out where intervention by management may be required. So for the next year or two, I think we're going to just see an explosion of these advanced technologies come in that will make service firms, operations people and leaders want to radically rethink how they run their company and how they use technology to advance their business. That's number one.
Matt: What a number one, that's just such a great point. These types of technologies have been around a little while in other industries, but coming into the services industry… I mean, each of the ones that you mentioned, if each of them can have an incremental impact on overall revenue. An increased margin, lower cost, you're catching all of that, expense fraud is a great example. One thing that we see a huge amount of obviously with what we do is the optimization of those resources. But not just the resources in your self-contained organization across your subcontractor pool, your network of people that you work with, I think that kind of stuff can really drive both efficiency, but also better client outcomes. I think that's what we forget a lot of the time with this type of technology, is it's improving the operation of the services team, increasing the margin and the money that they can make. But the reality is it's a better client experience for the people they're serving as well. You know, getting more skilled people that are more available in the right locations, geographically with the right skill set, that's just going to drive client outcomes and client experience for those services firms as well.
Brian: There's one self-protection, one that I did want to share with you that's kind of out there. Ernst and Young actually came up with this using advanced technology. They'll read a client's or their own emails and text messages and other kinds of electronic communications. And they're looking for communications that originate from countries that are known to have some real problems with, let's say, ethics and bribery, corruption and those kinds of matters. And they look at those messages and they look in the native language for words or phrases like a facilitation fee or some of these other kinds of words. And I love this kind of technology because it's almost like a future crimes application. It's detecting a potential violation of the foreign corrupt practices act, a bribe if you will, before it ever even happens. It's picking off the communications that are coming into the company and so it'll shut it down real quick. And I think service people need to be careful in this space because they may have clients or client executives who want them to do some deals or do some things that are not good for the company, their employer or good for the client itself. So we'll see these technologies, some of which could really be used to drive better behavior, all the way around and that was just a weird example of that. But anyway, the idea that we'll take this into future crime detection is just an amazing direction where this stuff could go.
Matt: Well Brian, I think you've absolutely nailed that list there. I think those top five are a really fantastic and rich group of things that we discuss. Thank you for driving us through that. Number one, completely agreed, that kind of advanced technology is exactly where we're going to see huge advancements moving forward. Prospective clients services firms are going to really see some benefit from that, so I really hope that they learn to embrace them. Back to one of your other points as well, around those unique integrations. Making sure that those products and advanced technologies are integrated into the workforce and the workplace as effectively as possible without these huge enormous custom bespoke solutions. I think that's really key to connecting those things together as well. Brian, I can't thank you enough for coming on the show. Any final nuggets from your top five lists today that you've shared with us?
Brian: The key thing I would tell you in talking with leaders of service operations, is they struggled to figure out how to scale. This has always been a vertical where the only way you scale was by hiring more people and now we have an opportunity to really rethink how do you scale. Some of these new technologies, I think, bring scale opportunities to the fore and companies are going to have to do more work to imagine what is the new art of the possible that's going to allow them to really dramatically grow their company and grow it very profitably and very quick. And those are a different set of challenges than what these leaders have been used to in the past. So it's scaling without hiring, you know, hoards of people is going to be the new thing.
Matt: The key, yeah, absolutely. Okay Brian, thank you so much. Where can our audience find you? Where do you hang out on the internet? How can they get in touch with you? What are your contact details? Website, LinkedIn?
Brian: On LinkedIn, I'm @BrianSommer and you can get me at brianatvitalanalysis.com. I also write a ton of stuff for Diginomica and that's how a lot of people know me because I write all these tough love pieces on that publication.
Matt: Fantastic Brian. So fantastic to have you on a real industry titan. I think you've proven that industry titan title that we gave you at the start of the show, I think we could all agree that's exactly where we can place you in the world. Brian, I can't thank you enough for coming on the show. It was really great to have you running through that top five list. I like this format by the way. Feel free to reach out to us with any other suggestions on formats like this, I think this worked really well. Reach out to us Podcast@kantata.com with any follow-up questions for myself or Brian, suggestions for future episodes, or anything we've discussed today. And we really look forward to hearing from you. Have a wonderful day everybody. Brian, thank you again and we'll look forward to talking to you again soon.