Firms without PSA platform can lose up to 10% of potential revenue: IDC study

Professional services firms are facing significant losses from fragmented systems as manual processes drain millions of dollars in potential earnings.

Many organizations operating without professional services automation (PSA) software – tools designed to manage resourcing, billing, and time tracking – could be losing 5% to 10% of their annual revenue and productivity. That is according to a recent report from IDC funded by software company Kantata.

This erosion of value often goes unnoticed because firms continue to grow and satisfy clients while their internal operations become increasingly inefficient. As systems continue to advance and automation is increasingly integrated, firms that fail to keep up could quickly lose their competitive edge.

The high cost of manual management

The research, which surveyed 100 organizations across the United States, Canada, and the United Kingdom, found that administrative burdens are a primary driver of financial loss.

“We’re not failing. But we’re working much harder than we should be for the results we’re getting," said one senior communications executive that was surveyed for the report.

Project managers and consultants often spend up to 20% of their time fussing around with manual data instead of focusing on ‘bigger picture’ outcomes. For a typical firm with 25 project managers, this wasted effort can translate to an annual productivity loss of $504,000.

Beyond administrative tasks, the lack of a unified system leads to significant lost billable time. IDC modeled a scenario where 200 consultants each lose two hours per week to non-billable administrative work. At a standard billing rate, this single inefficiency results in $2.3 million in lost annual revenue. These losses are often structural, meaning they remain hidden within daily operations.

Resource gaps and financial inaccuracy

Resource management is another area where the absence of PSA software can create inefficiency issues, according to the survey. Without real-time visibility into employee skills and availability, firms often struggle with misutilization.

IDC found that even a small 5% gap between target and actual employee use can cost a firm with 250 billable staff approximately $2.5 million in lost annual revenue. This lack of foresight frequently leads to over-hiring or staffing projects where senior expertise is required, but is not available.

"We’ve onboarded more cadets and graduates, and lost seniors," said one respondent to the survey.

"We lost senior engineers, and suddenly juniors were being sent out on client projects. Clients want experienced, not graduates. That erodes confidence quickly.”

Financial accuracy also suffers when teams rely on disconnected spreadsheets. Finance departments frequently spend weeks at the end of each month consolidating data, only to provide leadership with information that is already out of date. This reactive approach prevents proactive adjustments to project pricing or scope, leading to unmanaged ‘scope creep’, which can leak another 5% of potential margins.

Restoring control through technology

Despite these clear financial impacts, 65% of organizations that evaluated but declined PSA software cited budget constraints as the main reason. However, the report suggests that the money saved by avoiding the software is quickly lost to the very inefficiencies the tools are meant to solve.

By adopting PSA platforms, firms can create a single source of information that integrates project planning, time capture, and billing. This transition allows leaders to move away from "firefighting" daily crises and toward a predictive model that uses AI to optimize performance.

As the market becomes more competitive, the report concludes that the strategic question is no longer whether such technology is beneficial, but whether a professional services firm can afford to operate without it.

"The decision facing professional services organizations today is no longer whether PSA improves efficiency; the evidence already answers that question. The real question is whether they can afford to continue operating without it," the report notes.