Dealing with Resourcing Constraints

As part of my current role I engage with top execs of fortune 500 companies discussing cloud transformation and strategy. While discussions are very engaging, they invariably stall around resourcing. After all, everyone wants an ‘A Player’ and they want to on-board that person very next week. The common approach here (unless you have budget to maintain a good bench strength for your practice) is get into an endless loop of interviewing candidates, first internally and then with customer. And even if you are lucky to find right candidate, you are still on hook till he or she really joins the organization. Such situations can derail projects and even create a dent on your reputation. Below are some of the workarounds I have seen working, and would be good to hear your thoughts.

Contracting – Let’s go over the simple option first. There are dozens of recruiting firms out there, who can provide you resources to staff on your project. While these firms charge a premium, you can leverage them to start an engagement at short notice. Contractors can act like tip of the spear, for you to build the launching platform of bigger projects. What’s more, once you get the right person hired, you can swap him with the contractor. Of course, all of this works only if your customer is willing to onboard contractors.

Travel Ready Offshore Candidates – Most of the IT companies today have global delivery center across globe. Resources working in these offshore locations can be availed legitimate work Visa and you can plan to staff them on client engagements. This is good option for global players as they don’t have to maintain a big bench onsite or hire contractors, which is usually expensive.

Supplementing Skill Sets with Onsite / Offshore mix – At times it might be difficult to find a single resource having all the skill necessary for a client engagement. In such cases, you can try to split the profile, deriving an onsite / offshore mix and creating the right symbiosis. If you have the right mix of people, this can be a real savior. Even better, you can convince customer to transfer work entirely offshore or plan for onsite transition when resource becomes travel ready.

Loan from other teams – I have been a loaned resource myself. One of the SVPs in my previous organizations pulled me out to support a key post-merger project. Idea here is, other teams within your organization might have skillset you are looking for or at least in the near range. Key then is to know who those teams are, and how you can leverage them. In a competing scenario, who will have to play it right, so that you don’t ending up losing opportunity to those teams. But it’s still better, as the overall organization wins not losing to an external competitor.

In addition to above, you can also revamp your referral program. There could be company norms here, but one of my earlier VP made is so lucrative that the referral system was flooded. Interestingly, he didn’t go overboard. All he did was to try and bridge the gap between an internal and external referral bonus. You can also get referrals into the annual goal system, but I would recommend not pushing it down the throat of your employees without enough motivation.

Finally, a word on margins (profitability). When you are starting a new engagement taking one of the above approaches your margins would be impacted – you get a resource from market at premium, at the same time customer doesn’t know your capability, so they will bargain for less. You have very less options here but to absorb that cost – ideally indicating you are discounting, considering the fact it’s a new initiative or plan to slowly transition to a blended rate of onsite / offshore mix, where the margin for overall engagement can be improvised (for instance, you make 20% for onsite resource and 40% for offshore resource, your margin for the engagement would average out to be 30% which could be lot better).

All of above though is in addition to prepping up your recruiters & their resourcing channels, making them feel that they are integral to your team, take risks and have guts to maintain a small bench, even if you are on a wafer thin budget.

Hope this provides you some food for thought on dealing with your resourcing constraints. Let me know if you have additional approaches or improvised versions of above. Comments / Suggestions are welcome 🙂

Client Profitability vs. Practice / Company Profitability

This post is for dummies covering few business terms which I am dabbling with these days. Thoughts below are primarily related to software services, but I think they would be of help to any service industry.

Having ran a startup earlier, I have always cared for margins which is necessary for the healthy growth of the business. Before getting into a customer engagement getting your margins or simply put profits right is very important, for both fixed bid and T&M (Time and Materials) projects. Apart from resource costs, you also need to take into consideration other costs like T&E (Travel and Expenses) and call them out separately.

Keeping above in mind, the profits you derive out of a given customer project is called Customer or Client Profitability (CP) – usually measured in terms of percentage. So, is good CP all what a company should care for? Answer is, of course not. While you might have a high CP it’s still possible that the overall company or practice is making loss. Let’s see how.

The common reason for discrepancy here is overlooking the fixed costs. For instance, you are going to incur salary costs irrespective of whether your resources are allocated (billable) to a project or not (e.g. project you signed up for got over in 5 months) and you will have to still pay rent, infrastructure bills, etc. All of these expenses fall under the larger category called SG&A (Selling, General and Administrative Expenses) which includes advertisement, sales, taxes, training, corporate functions, etc. In short, the Practice Profitability (PP) is not a sum of various CPs; rather it’s Sum of CPs minus SG&A.

It should be clear by now that the only way you can grow your business is increment CP without proportionally increasing SG&A; i.e. do more with less. Most of the budget planning exercises in corporate companies is around this agenda. One way to achieve this is move away from RFR (Resource following Revenue) to non-linear revenue models, shifting the focus from services to products.

Hope this was useful in putting these terms into the right perspective.