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Fortunately, you do not have to head the entire world to find the information you need to boost your company’s performance. Here are 5 key conclusions that will help you do so right away!
What Is The Maturity Score Index?
The Maturity Score Index is a brand-new indicator aiming to measure the operational excellence of IT services companies in the European Market by placing them on a 5-grade scale, with the companies on the fifth level being the most advanced and companies on the first and second level having the simplest processes.
Operational Excellence Is The Key To Sustainable Growth
The data from the European Profitability and Utilization report make it clear: raising rates indefinitely is not the key to success in the IT services industry.
The data acquired in the study proves that success in the field is conditioned by operational excellence and the overall quality and advancement of the key processes, including planning utilization, creating long-term plans, and measuring different degrees of profitability. Without those mechanisms in place, growing prices will just mask the real problems affecting the company’s performance in a longer perspective.
The Results? 33% Increase In Profit Margin
Although using additional indicators may seem like a minor change, the data obtained in creating the Maturity Score Index proves the opposite: there is as much as a 33% difference in profit margin between low-developed companies. As seen in the chart below, this difference is visible for other KPIs, including EBIT margin and 1st-degree profitability.
The correlation between the Maturity Score Index level and financial performance becomes even more vital for companies with over 100 employees. In their case, the profit margin between levels 1 & 2 and 5 differs by an average of 9% percentage points, as shown in the chart below. By the way, that’s a 280% difference!
Balancing People and Projects is Not Enough For Success
The less developed IT services companies in the bottom half of the Maturity Score Index often believe that managing a service company is all about balancing the number of projects and the number of people on board. However, their more advanced counterparts are certain there is more to it than meets the eye.
According to the MSI data, the region's most advanced IT services businesses are more inclined to focus on measuring profitability and, consequently, utilization. By doing so, they ensure that:
- Their profit margins can sustain the further growth of the company.
- Their employees' time is spent on billable projects generating further profits.
- They have enough projects in the pipeline to cover all the costs in the company.
Having achieved these goals, the most advanced IT services companies can ensure the stability of their business in the long term and plan their future using actual data with no errors.
What’s The Most Important Space For Improvements?
Naturally, the majority of IT services companies in the European market have yet to achieve the status of operational excellence. The study proved that most respondents were at level 3 on the Maturity Score Index, placing precisely in the midfield thanks to mastering the essential category: Measuring.
Still, most failed in the advanced categories, such as Forecasting Reporting & Scalability, which are more than three times less developed. The respondents indicated that they generally struggle with issues such as:
- Long-term financial and utilization planning - 47% of companies do not forecast utilization long-term. Most of them do it ad-hoc or in short-term periods.
- Different-scenarios forecasting - 49% of companies believe that this should only happen for confirmed projects,
- Reporting by different profitability dimensions - only 9% of companies have access to resource profitability report.
- Reporting by different utilization dimensions - 26% of companies are using project utilization report.
Improving And Upgrading Processes Is Essential For Your Success
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?
Thanks to the comparative conclusions included in the study, IT managers gain access to the personalized insights they can use to improve their processes right away, aiding management boards in implementing best practices and improving the performance of people, projects, and the company as a whole in a quantitative way.
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!
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