BigTime and Projector PSA merger - a new force in the mid-market PSA space?
There are a number of solutions for the Professional Services Automation space (PSA). Two of these vendors announced merger plans this week. Here’s a peek into this market and what the mid-market customers want and need.
Professional Services Automation (PSA) software is quite unlike ERP, HR or Financial Accounting software. PSA products exist to help service organizations quote/propose new project work, identify the best staffing mix to do the work, track time & costs expended by person by project, invoice the client as appropriate, produce management reports, etc. These products are often integrated with accounting software, HR applications, training/learning software as well as a raft of personal productivity (e.g., Microsoft Office), collaboration and project planning/project accounting tools.
The PSA space has been evolving since the late 1990s. Many of the earliest solutions were designed to be Internet applications while a few were more akin to on-premises software packages. The former were designed for the numerous law, accounting, engineering and consulting/integrators firms out there while the latter were mostly designed for the very largest service firms.
In the years that followed, many of these applications shifted to multi-tenant cloud application architectures. They also made architectural changes that permitted easier integrations to a variety of third-party applications (e.g., Time & Expense reimbursements, accounting software, Microsoft Office and Microsoft Project to name a few) and tools/platforms (e.g., BOOMI integration technology, Microsoft .Net and others). Today, these products have modern technical architectures that support all kinds of micro-services, open-source tools, hyperscalers and more.
Mergers & Acquisitions are not uncommon in the PSA space. Years ago, OpenAir and QuickArrow merged. Later, that firm was acquired by NetSuite (and then NetSuite was acquired by Oracle). Kimble and MavenLink recently joined together to form Kantata. Now, Projector PSA and BigTime Software are coming together.
Not just one homogeneous market
The PSA space also assumed some measure of industry specialization and market segmentation. Some products predominately serve firms with numerous outside clients while others exist to manage a company’s internal service group (e.g., the captive implementation arm of a software or hardware vendor). Some products do well with defense and governmental services providers. Some products serve the AEC (i.e., architectural, engineering and contracting) space and some cater to business services organizations like consultancies, law firms and accounting firms.
While these vertical slices are important, there are also product segments for small, medium and large enterprise sized services organizations.
Let’s look at one of these market segments: the medium or mid-sized services firm and its unique PSA needs.
The PSA mid-market
Ask any software executive, market watcher or pundit for their definition of “mid-market” and you’ll get one of dozens of answers. Unfortunately, you’ll get a wide variety of responses and only some rough agreement as the boundaries of the space. We’ll not weigh in with any statements as to whose definition reigns supreme.
For this piece, let’s stipulate that the mid-market PSA customer is one where:
- The company can no longer operate effectively with its old ‘starter’ software. Small service firms use spreadsheets and accounting software you can buy at an electronics superstore. Mid-market services firms need something more robust, efficient and integrated.
- The company finds more and more of its business coming from locations away from where it was founded. Some of this growth may well be across country boundaries. It needs solutions that can handle multiple currencies, languages, tax/regulatory requirements, etc.
- The professional services team has grown so large that no one resource manager can remember which team members need to go on what jobs and which jobs will be best for a specific staffer’s career. As staff size grows, then staffing, training and more will become more demanding. Spreadsheets or a person’s memory won’t cut it anymore. This can happen when the staff complement gets to 50 or more persons.
- More and more deal flow may come from or is tied to specific ‘partner’ firms like a software vendor. In this environment, the service firm needs more timely data to share with its partner firms re: deal flow, prospects, pipeline, project status, customer satisfaction, etc.
- Too much time is spent by operational or project managers on administrivia and error corrections. This is an inefficient waste of time, a morale killer and a drain on employees.
- Operational leaders can’t propose, price or adjust work quickly as too many islands of information are present. Management by disjointed spreadsheets, standalone databases and/or custom but poorly integrated software is maddening, unproductive and damaging to one’s business and employment brand.
When a service firm encounters one or more of these indicators, it’s likely time that it needs to upgrade its professional service software.
A recent mid-market PSA M&A deal
This week, Chicago-based BigTime Software announced that it was buying Boston-based competitor Projector PSA. Both firms vie for the mid-market PSA space.
BigTime Software (nee Edison’s Attic) has been around since 2002. The firm had approximately 90 employees in 2021 (the combined firm now has over 150 employees). The company serves a large number of PSA verticals. It has modules to support time tracking, project management, resource management, billing/invoicing, payment processing, mobile access and more. BigTime has integrations with QuickBooks, Sage Intacct, Salesforce, Jira, Slack and Google Apps among others. BigTime targets services organizations of 5-500+ professionals.
Projector PSA has a fairly complete solutions set. It has functionality for T&E processing, project budgeting, invoicing, multi-currency accounting, sub-contractors, revenue management, revenue recognition, financial reporting, project collaboration, BI/Analytics, resource management (e.g., skills tracking, labor/demand management) and more.
The product line also supports tight integrations with Salesforce, Jira, various Microsoft Dynamics products, NetSuite, QuickBooks, HubSpot, Slack, Xero, Zoho and many other products.
While no financial terms about the deal were released, we do know that:
- The combined firm will have about 2,700 customers in a variety of services verticals
- The combined firm will “track over $10 billion of billable time each year”
- BigTime completed a recent investment round of $100 million in January 2022. That deal was led by private equity firm Vista Equity Partners. No valuation figure was provided.
In a BigTime press release regarding that equity investment, we learned that:
Existing BigTime investor Wavecrest Growth Partners will retain a stake in the Company, alongside the Company’s founder, Brian Saunders, and a small number of additional stakeholders. The investment in BigTime was led by Vista’s Endeavor Fund, which provides growth capital and strategic support to market-leading, high-growth enterprise software, data, and technology-enabled companies that have achieved at least $10 million in recurring revenue.
M&A deals, especially those with private equity involvement, can have several different motivations. Some deals can be rollups. Some can be:
- A way to eliminate a competitor
- A way to milk the recurring revenue base of both firms
- A means to gain scale and eliminate a number of redundant processes, systems and people
In a conversation I had with Brian Saunders, the pre-merger CEO of BigTime and now the CEO of the combined firm, he emphasized that this deal is about growth and scaling. Growth is the operative word and is consistent with the goals of the investment fund backing BigTime.
Customers of both firms should like that. The combined firm will continue to sell, enhance and grow the product lines of both entities. Saunders indicated that there are components, IP and other assets that each entity possesses that can be leveraged to quickly help the other product line.
According to Saunders:
- Projector PSA brings a lot of expertise and capability in helping more complex customers tailor or customize the solution. This is something BigTime would like to introduce in its product line.
- Projector PSA also has substantial multi-currency, multi-entity functionality that may get shared with the BigTime product line.
- Both product lines are built on a Microsoft technology stack and provide multi-tenant functionality.
I asked what Saunders top takeaways from this deal are. He replied:
- These two companies will be better together. The deal should expedite product development of both product lines. Customers should also see continued platform support in both product lines, too.
- Both product lines will add functional depth that aids mid-market professional services firms grow and scale.
- Both firms will get even better at assisting customers during implementations.
The mid-market PSA opportunity
The PSA space is a very competitive one. It’s also challenging.
Software buyers often reside in one of three segments: small business, mid-market businesses and large enterprise solution buyers. However, many software solutions reside in a bifurcated space where small and mid-sized prospects are shunted towards a single SMB solution space. That’s quite frustrating for mid-market buyers as these firms often have all of the challenges of a large services firm (e.g., multi-language, multi-currency, multi-national requirements) but possess too little capital to spend on a large enterprise solution (My phrasing for this phenomenon is: Champagne tastes and beer budgets). The BigTime/Projector PSA deal is targeting a mid-market PSA solution space.
In recent years, the PSA space has seen the strength of mid-market solutions to have definitely improved. In some cases, we’ve seen:
- Product footprints are expanding to include more natively developed apps from the PSA vendor.
- PSA vendors have embraced micro-services and enhanced API connections to more and more third-party applications.
- Tighter integration with upmarket or mid-market accounting software products.
- Enhanced support for multi-national projects and services firms. This functionality is not cheap to create and takes time to do it well. Nonetheless, the global functionality footprint has been growing and mid-market buyers are the beneficiaries of this.
- Mid-market solutions are embracing many newer advanced technologies (e.g., machine learning, big data, chatbots, process automation, etc.). These new capabilities are making functions like resource management more enlightened, more profitable and better at aligning the goals of the client, the services employee and the service firm.
Specific to BigTime, joint customers will likely want to hear a new ‘vision’ from the company soon. I suspect they’ll want to know:
- How the products will support a greater global footprint. This may unfold over many years but customers/prospects will at least want to know the scope and timetable.
- What specific advanced technologies (e.g., machine learning) the products will use and how each will help service organizations realize outsized growth and major new operational insights.
- How BigTime’s solutions will help service groups retain their service personnel years longer than they otherwise would have. Can BigTime enhance how professional staff get placed on projects that enhance their career while also improving firm profitability and client satisfaction?
- Exactly how BigTime can help its customers grow and grow without needing to replace their PSA software again.
- What other financial accounting, CRM and other key apps will possess a fast integration capability with BigTime’s solutions.
Large ERP vendors have also been eyeing service firms in recent years. Several ERP vendors have consciously avoided entering into the manufacturing vertical as they see its functional requirements to be quite daunting and expensive to develop. As a result, these firms continue to flesh out their suite to better support service-based firms. BigTime and other PSA vendors can expect more competition here.
Possibly one of the biggest competitive threats will come from ERP vendors that already possess PSA functionality. NetSuite and FinancialForce are two such firms. More will likely follow.
To better understand how a material change of control (e.g., a software vendor is acquired) can affect a software customer, see this diginomica piece.
For more information on the BigTime/Projector PSA deal, see this announcement.