Definition

professional services

Contributor(s): John Moore and Peggy Rouse

A professional service is an intangible product that a contractor or product vendor sells to help a customer manage a specific part of their business. Because professional service providers have specialized knowledge about niche areas of interest, such as law, marketing or accounting, they allow the customer to focus on core business concerns. Unlike a consultant, who may only be responsible for providing advice, a professional service provider may also be responsibility for the end result.

Professional services providers can be found in a number of public and private subsectors. For some providers, professional services may be a primary line of business, while for others, professional services may be sold as an add-on value driver to a core offering. Historically, professional services have been invoiced on a billable-hours basis. More recently, however, many professional service providers have moved to a fixed price or subscription-based pricing model. For providers that offer operations and maintenance services, this pattern may also be observed in the transition from break/fix work to managed services.

As a contractor or vendor grows its professional services business, it may need more than spreadsheets to manage the business. In such case, a company may deploy professional services automation (PSA) software to oversee projects, manage resources and track time and billing. When providers offer operations and maintenance services, this software may be integrated into other key service provider automation products such as remote monitoring and management. Today, many PSA products are available as hosted software-as-a-service offerings.

Benefits and drawbacks of professional services firms

Although cost savings is still an important consideration for using professional services, companies are becoming much more strategic and seeking benefits such as value creation, operational flexibility and competitive advantage when considering what services to outsource to a professional service provider. In addition to establishing service-level agreements (SLAs) for professional services, such concerns include:

  • Regulatory compliance liability
  • Losing internal knowledge to subject matter employee churn, which will also make it difficult to bring services back in-house should the need arise.
  • Finding a professional service provider who is willing to take time to understand a customer's corporate culture or vertical market as well as internal staff does.

Evaluating professional services

When customers are evaluating a professional service provider, they often gather and evaluate information about the provider from a variety of sources. Typically, such efforts include checking out the professional service provider's website, the professional service provider's web presence and recommendations on social media websites as well as referrals from other customers that the provider has supplied.

IT professional services

Many professional service firms provide highly skilled services in certified areas of expertise such as medicine, law, engineering and accounting. In the 1980s, the former "Big Eight" accounting firms began broadening their management advisory services practices, which operated alongside their tax and accounting business lines, and expanded them into other management areas, including information technology (IT). As businesses have become more digitized, IT professional services have evolved into new business models. Such models include:

  • Cloud service provider provides professional services that support the selection, deployment and ongoing management of various cloud-based resources.
  • Managed security service provider (MSSP) – provides an organization with some amount of network security management, which may include virus blocking, spam blocking, intrusion detection, firewalls and virtual private network management. An MSSP can also handle system changes, modifications, and upgrades.
  • Managed service provider – remotely manages a customer's IT infrastructure and/or end-user systems, typically on a proactive basis and under a subscription model.
  • Mentoring service provides professional counseling and advice for individuals and businesses. A mentoring service may provide recruitment marketing advice, soft skills training or project and portfolio management guidance.
  • Storage service provider (SSP) – provides computer storage space and related management to other companies. In addition to the storage itself, SSPs typically offer periodic backup and archiving. Some offer the ability to consolidate data from multiple company locations so that all locations can share the data effectively.
  • Systems integrator – builds computing systems for clients by combining hardware and software products from multiple vendors. By hiring a systems integrator, a company can align cheaper, preconfigured components and commercial off-the-shelf software to meet key business goals, as opposed to more expensive, customized implementations that may require original programming or manufacture of unique components.
  • VAR – resells software, hardware and/or networking products and provides value beyond order fulfillment. A value-added reseller may provide consulting, design, implementation and training services around the hardware, software and/or networking components it resells. VARs offering such professional services in addition to products are often referred to as solution providers.
This was last updated in April 2017

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