7 Confirmed Profit Blockers in CEE IT Services Companies to Avoid in 2023

The truth is that all of those issues also stripped those companies’ ability to find new sources of profits or avoid losses within their organization.

But here’s the thing. There are fast-growing IT services companies which have already overcome those problems.

Here are the example results they saw:

• +10% profitability across entire project portfolio
• effectively scaling to 2x headcount‍
• 20% increase in billable time

We asked, observed, and worked with them on a daily basis to identify what sets them apart from the rest and what enabled them to grow in terms of headcount, profitability, and stability.

As a result, below you will find the summary of 7 most common issues occurring in IT services companies, along with advice on how to handle and overcome them.

#1 Lack of view on long-term workload and people availability

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Problem origins

Often based on 2-weeks sprints, short-term allocations come naturally with project management tools like Jira or Clickup, which, to a certain extent, force you to organize your work this way around their features.

The problem with using project management tools for resource management starts when you try to look beyond the current sprint, see general availability (not bound to a specific project), and forecast your future workload to see how soon you can take on new projects or predict when you should hire new employees. 

Project management tools just don’t support this kind of long-term visibility, but companies used to working with them just don’t see a clear solution when the problem arises.

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Who suffers in your company 

• Executives don’t know your company's true capacity and when new people should be hired
• Project managers need to waste time on finding out who is available for their projects or fail to forecast demand
• Developers can’t be sure what they’ll be working on in the future
• Sales can’t see when their company’s resources will be available to take on a project

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How to fix it?

Most companies try to fix their issues with workload visibility by moving their data into spreadsheets or standalone resource management tools.

These are also short-lived and isolated solutions that cause maintenance issues and make it hard to get a bird's-eye view on how you use and plan your employees’ available time to run an increasingly profitable company.

Instead, you can try a solution that will clearly present and compare your whole company’s long-term capacity (including time-offs and holidays) with planned and done work in a next-level calendar view.

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Results

Achieving full transparency (between teams and executives) of long-term workload and availability based on always up-to-date data that takes only two clicks to access.

Read how Monterail, one of the fastest growing IT companies in CEE, implemented solutions that let them check availability of 180+ people in 30 seconds.

#2 No integrations between time tracking, resource planning, and financial tools

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Problem origins

As IT companies grow, they naturally add more and more tools to their tech stack to manage different parts of their business.

There appears the need to start time-tracking for client settlements, long-term resource planning for forecasting, and tracking financials for controlling purposes. 

Connecting those areas to see how one affects another and finding the perfect balance between resource workload, market demand and economic ambitions becomes almost impossible.

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Who suffers in your company 

• Executives have to make decisions based on “patchwork” data that may not be accurate and there is no high-level perspective of all operations to make data driven decisions
• Managers and employees spend hours merging the data from multiple tools, verifying it, and re-entering multiple times

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How to fix it?

There are three ways you can get a unified view of your time tracking, resource, and finance data:

1. Develop a heavily personalized BI application that needs custom integrations
2. Use a PSA tool that would require you to stop using separate best-in-breed apps or integrate them, which is counter-intuitive to the idea of PSA 
3. Try a single source of truth solution (like Primetric) that combines and enhances data from multiple best-in-breed tools

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Results

Using either of these methods, you can improve both the transparency and the information flow in your company, making it easier to monitor, evaluate and manage operations within seconds. 

You can learn how TestArmy did this and merged resource planning and budgeting in a single source of truth.

#3 Managing and controlling finances and resources with Excel

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Problem origins

IT services companies often effectively manage their finances and resources with Excel when they are still relatively small.

It’s definitely a good choice for basic calculations and low-scale operations. But as your company grows, it quickly becomes too complex to be managed with spreadsheets.

You start to notice human-made errors in calculations, lack of access control to certain parts of your spreadsheets, and get overwhelmed by maintenance work.

But even at this point it’s unclear for almost ¾ companies what can be done with it, since they don’t know that a dedicated solution for their needs exists.

Who suffers in your company 

Executives and managers who need to maintain spreadsheets, constantly request new data from their employees, and have no automated system to track client invoices status and their correctness

How to fix it?

Just like many other parts of business, Excel spreadsheets can be replaced by automated calculations made by more advanced tools like Primetric. They can gather data from the entire company and convert it to reports, tables, and charts in real time. 

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Results

Consistent, transparent data updated automatically whenever something changes, leading to better monitoring and decision making processes.

A great example of a company who achieved that is Capco, which freed their executives time from managing spreadsheets and can accurately forecast their capability to take on new projects and plan their budgets.

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#4 Not knowing that up to 20% time is wasted on internal and operational work

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Problem origins

Internal projects and operational work are not free - they still generate costs that need to be covered by their commercial counterparts.

But most companies, even if they track time spent on specific tasks, don’t have a way to verify how much time is used specifically on non-billable activities and how much money is left on the table.

Even Netgen, one of the most respected IT services companies in CEE, used to waste up to 20% of their time on operational tasks related to inefficient tools.

The truth is that they would never see the scale of the problem if they didn’t start to identify time spent on billable and non-billable tasks.

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How to fix it?

To solve the problem, the biggest companies: 

• limit the number of non-billable projects. Of course, some of them, such as sales or administration, are essential. Still, there are some projects that can simply be limited to a bare minimum, or removed from the schedule altogether.
• monitor what the non-billable hours are used for. In some cases, non-billable hours turn out to be some unnecessary meetings or internal initiatives that serve no further purpose. The time spent on them may be used on some more valuable projects! 

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Results

Improved profitability and larger amount of time to be spent on commercial projects.

For example, Netgen managed to increase their top specialists billable time by finding out that ⅕ of their time was spent just on updating outdated tools.

#5 No ability to deep dive into dependencies between profitability and utilization data

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Problem origins

This one is even more important in times of economic slowdown and uncertainty, so IT services companies can have a real overview of their financial condition and resource usage.

Why do IT companies have issues with analyzing how utilization and profitability affect each other on project, team, client, or individual employee level? 

Because it requires complex, automated calculations and always up-to-date data from multiple sources, and the “standard” IT company tech stack (like Jira + time tracking tools + spreadsheets) doesn’t provide any of it.

Profitability and utilization are two metrics that alone can tell you not only how well you’re managing your people and finances on a granular level, but also how well you’re managing a company as a whole.

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Who suffers in your company 

• Executives can’t see the main income and overhead costs sources in detail to increase profits and prevent losses
• Managers don’t see an overview of overworked or benched employees and can’t see the profitability of the project they’re responsible for
• Employees might lose motivation and become burned out if their utilization is too high

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How to fix it?

Implement solutions that merge data that’s already available inside the company (worklogs, hourly rates, capacity), apply automated calculations, and show real time profitability and utilization reports (Primetric is such a solution).

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Results

The ability to see the utilization can be a real game changer, because it allows you to see how many hours go to non-billable and billable work. It is essential for improving the profitability of the whole company.

Read how SovTech approached the problem and achieved full visibility into their utilization and profitability.

#6 Not comparing long-term economic and performance plans to reality

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Problem origins

73% of companies do not have the right tools to compare financial and workload plans to execution, or they simply do not track time spent on assignments. 

Therefore, they cannot see the progress (or lack of it) and evaluate their execution abilities. This way they also can't see the costs of their employees’ work.

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Who suffers in your company 

Managers, who cannot see how the projects are doing and whether they stay in the budget, and employees who often find out about any problems too late and they need to solve them right away. 

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How to fix it?

Time tracking is a base for comparing plans to reality. To translate it into project progress, you need a tool capable of combining the information on tracked time and project schedule. Last but not least, the tool should also have an ability to calculate costs of work based on timesheets, providing managers with a comprehensive overview of project’s finances. 

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Results

Managers can see whether their plans were accurate, they can spot inconsistencies and prevent problems from occurring; they can also use the information to improve future projects.

Even itCraft, a top rated software development company which already had processes to track advanced metrics like project portfolio utilization, reached a new level of operational efficiency thanks to the ability to compare long-term plans to actuals.

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#7 No dynamic profitability and utilization forecasts that automatically update based on project and workload simulations

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Problem origins

This is a result of combined issues mentioned in this article, as well as lack of solutions dedicated to managing IT services companies. 

They don’t have a tool to freely manipulate factors that go into their financial and workload forecasts and see how they automatically change based on different scenarios.

They can't easily run simulations to answer questions like:

• What team compositions will result in best project profitability?
• What will be the planned profit of a future project month by month?
• If a planned project doesn’t go through, will I have other projects I can move my developers to? Or will I need to fire them?
• How soon do I need to acquire new projects to keep my employees busy?

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Who suffers in your company 

• Executives who can’t prepare for several future financial scenarios 
• Managers who can’t assign people to most profitable projects or prepare if they might need to hire or fire people to deliver future projects and make current ones profitable

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How to fix it?

Prepare an incredibly advanced Excel, develop a heavily customized BI (both will circle you back to issues #2 and #3), or implement a system dedicated for IT services companies that will let you create draft projects and assignments to run financial and workload simulations with a few clicks.

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Results

Main benefit of solving this issue is getting a system that can predict financial forecasts and people's workload with surgical precision and then compare them to actual data (just like Makimo did, where the COO needed exactly that - an ability to dynamically see how finances combine with workload).

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