billable utilizationCustomer expectations have drastically changed. Outstanding customer support has become the rule, not the exception.  There are far too many alternatives and very few services or solutions so specialized, that a few quick Google searches by our customers won’t turn up some legitimate alternatives if they become unhappy with our ability to resolve their Support issues quickly.

Keeping the Help Desk stocked with knowledgeable employees means you have to be profitable enough to pay for them, and many professional services organizations overlook the impact that Support hours can have on Billable Utilization and overall Services profitability.

The first challenge many organizations face, is that Support resources responding to issues that are covered by Support Agreements, don’t really think about those hours as “billable”.  Technically they’re not,  but if you take an example where you expect the Support Agreement to consume 100 Support hours during the course of the contract term, but it takes 120 Support hours instead, then you had 100 hours for that Support agreement that were “billable” and 20 hours that were not.   So those 20 hours were in fact hours delivered without supporting revenue, which negatively impacts billable utilization.

For most Support contracts, it’s okay to say a little of the service contract profitability is impacted by “luck” – how many incidents the customer happens to have over the term of the Support agreement.

But the truth is, there are three areas where Support organizations consistently “leak” billable utilization that can be easily plugged,
with a little effort:

1) In order to determine Support Agreement profitability, you need to know in advance what your target numbers of incidents/hours are for the contract term, that supports your target Support agreement margin.  You’d be surprised by the number of organizations that haven’t calculated that initial metric.  Support Agreements should be based on a detailed calculation of specifically how many hours are going to be required by specialized resource type, over the life of the agreement.

Think of this like car maintenance estimates over the course of a 3 year extended service contract. You expect 12 oil and air filter changes, one set of brake replacements, one set of tires, etc.

2) Ensure all Support hours against that Support agreement are diligently tracked, by specialized resource type.  This will also drive Support Agreement renewal quotes to ensure unprofitable agreements are modified prior to renewal and that future quotes are more accurate for that type of coverage.  But this is only an effective approach if you’ve already done Step 1 to know where your starting target is, so that you know the metric you’re tracking against.

Like the car maintenance estimate, you’ll then compare that to 11 oil changes, two sets of brake replacements and one set of tires.

3) Make it easy for your Support resources to notify the customer during initial incident triage whether their issue will be billable or not.  Help Desk resources don’t always have timely access to the information regarding what is covered by the Support agreement and what is not, so they’re going to provide outstanding customer service no matter what, and figure out the billable aspect of the call later.

This is one of the key areas where Support related billable utilization leaks occur. If you’re only going to notify the customer after the service is provided whether Support is billable or not, then it’s only a matter of time before the customer says, “Why didn’t you tell me that when I called in?  Now I’ll have to get approval after the fact, get a purchase order, exceed my monthly budget, etc.”  And so you arm wrestle.  And many times you want to avoid hurting the customer relationship, so you “throw in” the extra support.  Now your billable utilization gets pounded down some more.  Support resources need easy and timely access to the customer specific information about what is and is not covered by each support agreement.

As per the car example, can you imagine going to the mechanic and only finding out after they’ve done the work, what is and is not covered by the extended warranty?

So if you want to make sure that you’re providing great customer service without hurting your billable utilization in the process, here are three steps for success:

1) Create a detailed breakdown by specialized resource type, of the number of hours expected to support the Service agreement during its term.  This will give you the starting metric to measure actuals to the initially targeted agreement margin.

2) Measure the actual hours required to support the Service Agreement during its term, by specialized resource type.  This will allow you to cycle lessons learned, back into the quoting process.

3) Make sure your support resources have easy access to the information required to tell customers at first point of contact, what is and what is not covered by their service agreement.  This will ensure that the majority of billable hours outside of the Service agreement end up on an invoice.

Today, every customer expects great customer service and good customers definitely deserve it, but you deserve to make money on the level of support and hours you’re providing too. In order for this to be win-win for you and the customer, following these steps will allow you to provide outstanding customer service profitably.

And if you need further ideas on how to improve labor utilization in your services organization, download our Labor Utilization Quick Start Guide.

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