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Many Customers Triumph Over a Single Large Projects
According to the Maturity Score Index results, companies with the most advanced operational processes achieved 33% higher profitability than their less developed competitors. Simultaneously, leading businesses tend not to rely on a single large customer; instead, they diversify their offer to attract numerous projects, ensure their business's stability, and improve their operational efficiency in the process.
The conclusion from the collected data is simple: improved profitability in 2024 is rooted in managing multiple projects instead of focusing on a single contract.
For Marcin Wilczura, COO of Transition Technologies PSC, the research results perfectly align with his professional experience. As he has noticed throughout his career, “failing to enhance operational maturity during growth can lead to low profitability, cash flow issues, and vulnerability to market crises. The significance of increasing the company's maturity score is evident in its correlation with improved diversification.”
In the case of his company, Transition Technologies PSC, this statement was also proven to be true. During its transformation over the last decade, moving from a single customer contributing 99% of revenue to a wide range of projects generating max. 15% of income with excellent financial results underscores the imperative of rapid development in operational maturity.
“Our primary focus on extending R&D departments of software technology companies involves long-term Time and Materials (T&M) contracts.[...] In contrast, our business in providing solutions for industrial and manufacturing companies, handling short to mid-term end-to-end projects, demands a higher maturity level in progress measurement, risk management, and forecasting. Achieving a Maturity Score Index of 4-5 is crucial in this context."
Forecasting Utilization Is The Key To a Bright Future
The Maturity Score Index has proven time and time again that companies forecasting long-term utilization achieve 21% higher EBIT, 15% higher profit margin, and 13% higher 1st-degree profitability. At the same time, only 47% of organizations use that process and enjoy such significant benefits.
As a result, it is no surprise that forecasting the future of the projects will only gain importance in 2024.
Having participated in over 200 Primetric by BigTime implementations, Tom Gmur, Head of Customer Success in Primetric by BigTime, could not agree more with this statement.
“I have noticed that companies focusing on long-term forecasting supported by solid processes understood and applied by middle management achieve rapid yet manageable growth. These companies can respond quickly to changing market needs, translating into visible financial successes.”
Standardization of processes, the introduction of measurability, and effective data management also play a pivotal role in the process. According to Tom, in his experience, such actions enable faster identification of areas for improvement - and MSI certainly facilitates the further improvement of these operations.
Better Utilization Means Higher Profits
The benefits of proactively managing utilization do not end there. The MSI results have shown that companies with a high utilization rate have up to 1.5 to 2 times higher financial performance indicators than those with a utilization rate below 80%. Therefore, using the utilization to optimize financial performance should be a basic process in 2024.
Despite obvious benefits, the organizations that are involved in utilization management are still a minority. In the opinion of Daniel Ackermann, CEO of Degordian, they could not be more wrong. However, he is not surprised by a general reluctance to introduce such processes in IT services companies, as they are very challenging and complex.
Still, in Daniel’s opinion, the benefits of such a process outweigh the challenges:
“It is fascinating to see how big of an impact active work with utilization, especially proactively managing the bench, can have on financial performance. We have seen first-hand the positive aspects of setting utilization KPIs and their optimization on the decision-making process in the company. What surprised me most was the level of influence forecasting uncertain allocations has on profitability.”
Still, the utilization management in Degordian, Daniel’s company, was not introduced overnight with just an Excel spreadsheet. Only the integration of their operations in a designated platform enabled the organization to unify all of its data sources and use the massive potential of real-time reports for better financial forecasting, resource allocation, improving utilization, and tracking profitability, resulting in improved scalability and, consequently, the company’s success.
Get Your Company’s MSI Score Right Now!
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The MSI research proved that better processes are the quickest way to scalable growth, even in an uncertain market environment. But how do you perfect the processes in the first place - and how do you determine which ones are lacking?
You still have a chance to participate in the Maturity Score Index. Just visit this site: [LINK] to get actionable insights about which processes you should prioritize and boost your profit margin!
