Which is more important, improving your processes for delivering services to customers, or deploying technology tools to automate service delivery and customer interaction?

Not an easy question to answer, but one that's likely to generate thoughtful and even passionate discussion among solution provider executives and industry experts. Most believe that process improvement goes hand in hand with automation technology -- and that both are critical to business success.

Whether you engage in time-and-materials (T&M) work, fixed-fee projects, managed services, or all of these, developing repeatable and scalable servicedelivery processes is essential to customer satisfaction, profitability and revenue growth. Professional services automation (PSA) software and other technology tools provide the means to automate manual and inconsistent processes. They also generate data for business intelligence that can be used to assess and improve your company's performance.

"From selling to customer provisioning to service delivery to quality assurance and problem remediation, efficient processes correlate directly with customer satisfaction," says Justin Crotty, vice president, services, Ingram Micro North America. "And because services are mostly dependent on labor, profitability is in large part dependent on efficient processes for managing labor. Solution providers we work with have found PSA tools be to extremely effective in tracking labor and billing time to the right projects -- the basic blocking and tackling of running a clean services business."

Paul Dippell, CEO of Service Leadership, a consultancy for solution providers, agrees. "The goal in a labor-based business is making sure you have no leaking billable time, and having tight business processes is critical, as is having technology to track and analyze the time," says Dippell. "For fixed-price projects and managed-services contracts, profit ability depends on efficiency, which follows from documented, repeatable and automated business processes."

There's also a clear connection between efficient processes and revenue growth: As the number of customers, service contracts and projects grows, solution providers may find that their processes are broken, unable to handle the increase in volume and complexity. If you want to grow, you'll not only need to douse raging process fires, but implement a management methodology for continual process improvement.

The four solution providers profiled here have taken that sometimes difficult but ultimately rewarding path. Located in different parts of the country and ranging in size from 20 to 80 employees, they all have grown by providing fixed-price managed services along with projects and products. Their success has been enabled by an ongoing commitment to process efficiency and creative use of PSA software and related technology tools.

Varsity Technologies: A Culture of Process Improvement
When Patrick Ciccarelli founded Varsity Technologies in 1997, he believed he could create loyal customers by providing quality services while educating clients about technology. That turned out to be true, to a point. But as the 20-employee, San Francisco-based solution provider added more clients, CEO Ciccarelli realized that to grow and continue to deliver high-quality services, he would need to develop scalable business processes.

One of the first processes Varsity took on was the ability to specify the exact work technicians performed. "Without supporting documentation, customers might question our billing," says Ciccarelli, "and we couldn't reinforce what we told them had been done." His solution was to develop an open-source services ticketing system, which technicians used to input their billable hours and work performed. The resulting service records were then attached to each invoice, a level of detail that educated customers while reinforcing the invoices' correctness.

As the company grew, Varsity replaced its home-grown ticketing tool with a commercial PSA package. "All the vendors told us we could capture data and report on it to improve our performance," says Ciccarelli. "It quickly became clear that the PSA tool wouldn't help us better define our processes, and that we wouldn't be able to report anything until we aligned our processes with the tool. That was a key reason we began working on process improvement."

Much of the effort centered on Ciccarelli himself. With 12 direct reports, he was at the heart of the company's operations. "We had to develop new processes to remove the bottleneck," he quips, "which was me." He and a team of talented managers worked to develop repeatable and scalable processes that were implemented in the PSA tool, opening the door to a period of rapid growth.

Project management offers an example of Varsity's process methodology. Used for both fixed-price projects and managed services, the process relies on project managers to bridge the gap between sales, engineering and clients while minimizing risk. "Large projects are great, but as the deal size increases, the attention to detail must increase, and there's a greater risk of cost-overruns and missing billable hours," says Ciccarelli. "Dedicated project managers who work with our engineers must get client approval for all change orders, which educates the client about scope creep and ensures we'll get paid."

Project scope is created in a quoting tool and then dropped into Microsoft Project, where modifications are best handled. The finalized scope is imported into the PSA tool. From there, the project manager controls resource allocation, scheduling and the work process, all the way to reporting on the project's profitability and the contribution of individual engineers.

In the future, Ciccarelli and company plan to continue improving Varsity's operations and potential for growth through better processes -- an effort that requires a strong cultural commitment. "Process improvement isn't a casual, one-time thing, and it can be costly from a resource- and timeallocation standpoint," he says. "But with the right technology and support from the top, it can help you achieve your business goals."

Lloyd Group: Processes Help and Hinder MSP Success
Lloyd Group is an MSP in New York organized around vertical markets such as professional services, media and financial services. Adam Eiseman, CEO, rates process efficiency as a key factor in the growth of the company, which is closing in on the 50-person, $10 million mark. "Not having efficient business processes is one of the biggest impediments to success," says Eiseman. "Once you get above $1 million to $3 million in revenue, you have to continually improve your processes if you want the business to grow."

Eiseman speaks from experience. About a year ago, Lloyd Group's services-delivery processes broke down due to an influx of clients and service requests. "When our help desk went from three people to eight people, when our call volume went from 100 to 180 calls a day," he says, "that's when things started to fall apart." The larger volume caused problems in tracking service tickets, closing tickets and management of the overall process, as well as glitches in customer "onboarding," the process of transitioning a prospect to a managed services customer.

"It was less challenging when we were a smaller organization, because the same people were involved in the sales, onboarding and services delivery," says Eiseman. "As you grow and different people and departments become involved, things will be missed unless you have an efficient process for transfer of knowledge and the relationship." He also notes the chain-reaction effect growth can have on business processes: "Not being able to onboard efficiently limits growth," Eiseman says. "You fix that, and all of a sudden your service delivery starts to fall apart. Then it's something else. It's continual process improvement because succeeding in one brings failure in the next."

To minimize chaos, Lloyd Group has developed a methodology for continual process improvement:

• Managers in each department are responsible for process delivery and improvement.
• Processess are continually evaluated, from a day-to-day perspective and strategically.
• Regular postmortems after problems lead to process change.
• Proactive thinking prevails, as in "If we experience this much growth, where might our processes fail?"

On the technology side, Lloyd Group relies heavily on PSA software for services-delivery automation -- processes and workflow are defined in the tool, rather than relying on the knowledge of specific staffers. The company also uses Microsoft Share- Point for process documentation and workflow management. In the customer onboarding process, for instance, as forms are filled out and process steps completed, Share- Point triggers the next actions to be taken, and reports on exceptions to the approved process.

Eiseman uses data generated in the PSA tool and other software to assess the effectiveness of the company's operations. Labor-loaded gross margin -- gross profits from services divided by services revenue -- characterizes services-delivery efficiency, while gross profits from services divided by the number of engineers measures associate productivity. Percentage of service requests resolved on the first call, without escalation, tracks help desk efficiency and customer satisfaction; the target is 85 percent, from a base of 72.5 percent in June of 2008.

In all this, Eiseman acknowledges the challenges of process improvement for a fast-growing MSP. "Over the years, our business processes have been one of the top three keys to our growth," he says, "and probably one of the top three limitations."

PMV Technologies: The Art of Process Improvement
At PMV Technologies, a $6 million, 38-employee MSP in Michigan, efficient business processes are a major contributor to success, second only to having employees aligned with the company's values. "If we have that," says CEO Scott Goemmel, "all they need are effective processes, and the rest should work itself out."

An effective process is more than just efficient, according to Goemmel. It also must meet customer expectations and be measurable, so staff can be held accountable for their performance. These dynamics can be seen in PMV's present efforts to fine-tune its help desk processes. "Business development is delivering as many new managed-services clients as we can presently absorb," he says. "If I want to grow, we have to improve the help desk so we can add more clients while keeping the existing ones satisfied."

Goemmel's assessment of help desk performance includes a review of technology tools, process workflow and client expectations, as well as the consistency and quality of the service being delivered. Metrics are essential here, including the time it takes to answer the phone or respond to an e-mail; the time it takes to close a problem; and how often a problem is solved on first contact. "The key is knowing your workflow and being able to measure it," says Goemmel, "and not implementing anything you can't measure."

Measuring process performance depends on mining the PSA database and other data stores for the right information, a valuable skill for any solution provider to have. In fact, help desk metrics moving in the wrong direction led PMV to tackle process improvement.

If this sounds like science, Goemmel believes there's an art to process improvement as well, namely the part that deals with personnel. The help desk, for instance, will live and die by staffing decisions -- "which skills you place in which parts of the transaction most often." And changing any process means retooling the employees around it, getting them to work differently and enforcing new methods. That's why Goemmel advises taking process change slowly, identifying key pain points and addressing them one at a time. "Where there are people, there's resistance to change," he says, "and where there's resistance to change, there's a need for an extended time frame. You can't change everything at once and effectively manage it."

HTS: Leveraging Technology to the Max
Companies with multiple offices dispersed across a wide geography have a special need for documented and repeatable processes. Case in point: Heartland Technology Solutions (HTS), a $20-million, 80-employee MSP and solution provider, has eight offices spread across tertiary markets in Iowa, Kansas, Missouri, Nebraska and Oklahoma.

"The larger we've become, the more important it is to standardize what we do across locations," says Jane Cage, COO at HTS. "Without getting everyone on the same page, we can't leverage our economies of scale or provide services in the most efficient way."

In its quest for process efficiency, HTS has applied a range of technology tools to maximize automation. PSA software works to standardize services planning, workflow and billing. Microsoft SharePoint serves as an online repository for storing operational procedures and standardizing workflow, including returned material authorization (RMA) tracking, market development funding, human resources procedures and employee suggestions. And Microsoft Dynamics accounting software collects financial data for drilling down into process efficiency and business performance.

At present, HTS is applying these tools and its best minds to improve delivery of managed services, with customer onboarding the current focus. The pre-sales process is documented within SharePoint, but after the sale is made, a service request within the PSA tool tracks the onboarding process, with a workflow checkoff after each item is completed. Steps in the complex process include reviewing and approving the contract, creating a purchase order for thirdparty services (such as the Ingram Micro Seismic Help Desk), invoice setup, confirming that initial payment has been received, setting up the customer within the remote monitoring and management tool, performing inventory of the customer's infrastructure and setting up e-mail notification for service alerts.

"If someone had to remember this list, we'd have a problem," says Cage. "That's why we try to do fewer and fewer manual interventions." Cage herself makes good use of the data gathered by the PSA tool and other software to report on company performance, what she calls "the pulse of HTS." She regularly reports on key performance indicators such as the sales pipeline, profit margins and the makeup of the customer base, as well as service metrics from the PSA tool that illuminate process and employee efficiency. At present, engineers are expected to achieve 75 percent utilization of their time, and to generate more than 2.5 times their salary in services revenue -- those generating more than three times their salary receive a bonus. Over time HTS expects to implement dashboards for staff to access such information on demand.

"We've invested heavily in technology for process automation, collaboration and business intelligence," says Cage. "The payoff has been excellent in helping us analyze and improve our company's performance."