How Service Teams Can Boost Profitability in 2026

Your services driven company is finalizing plans for 2026 and one of your goals is to increase service team profitability. Here are actionable approaches that can be implemented in the first quarter of the year (and you’ll notice that none of these suggestions include AI.)

Make a Shift to Value-Based Pricing

Move away from traditional hourly billing toward outcome-based and subscription models. These align client value with measurable results, protecting margins even in competitive markets.  Many leaders fear a move from time-based billing because there is fear that risk is shifted to the vendor from the client. But this is not the case. Outcome based billing will result in higher win rates and easier change requests because assumption and scope definition is locked down tight.

Buyers want to work with vendors that know what they are doing and nothing creates that confidence more than providing clients with a prescriptive project scope and project plan.

Standardize and Package Services

Repeatable offerings and packaged services improve scalability and reduce delivery complexity, enabling consistent quality and faster onboarding. Subscription based services can provide clients with assurance and help them budget for unexpected demands.

So frequently we see service teams in mid-sized services companies where each project manager has their own project plan, approach to communication, approach to managing RAID logs, change requests, etc. Give your team one set of tools and processes built on best practices, make it so that your project success will not change from one project manager to another.

Drive Higher Utilization and Reduce Cost per Project

Delegate routine tasks (configuration, testing, training) to junior resources while reserving senior talent for high-value work. So many firms have become overly reliant on high cost, often contracted, resources. Spreading the work around creates succession and reduces dependence on senior resources. The trick to this is breaking down project tasks into finer details and ensuring strong internal communications.

Avoid free work by tightening scope definitions, enforcing accountability for client deliverables, and close projects promptly to prevent budget leakage. Not only will tighter definitions reduce free work, but they will also help you shrink your sales cycle length and improve your sales win rate.

Manage your PMO with weekly reviews. Look at new work orders and projects, scheduling changes to identify pockets of time that have opened up unexpectedly. Even two extra hours per week in billing will have a pronounced impact on team profitability.

Elevate Talent Strategy

It’s time to reskill your team. Invest in upskilling programs to create T-shaped professionals who combine technical depth with collaborative breadth.

Improve retention by providing work flexibility. Hybrid work models, commuter benefits, and wellness programs reduce burnout and improve productivity. Nothing will sink your profitability quicker than a newbie replacement sitting on a bench learning the ropes.

Be careful not to over hire. Don’t make that plus-one hire until the entire team is sweating it. Get the team to 90% utilization and make sure you have 500 hours of backlog (one quarter’s work) for that new hire before you pull the trigger.

Benchmark and Mature Your Organization

Adopt the SPI Maturity Model: Firms at Level 5 maturity report 265% higher profit margins and 36% greater billable utilization compared to lower-maturity peers. Continuous improvement across leadership, client relationships, and operations is key. Check out our friends at www.spiresearch.com for more information on their framework.

Invest in Professional Services Automation (PSA)

A PSA suite unifies project‑to‑cash (resourcing, time, billing, forecasting) to lift utilization and margins while improving cash flow.

Most firms lack a unified approach to technology. Project plans managed in Tool A, Backlog managed in Spreadsheet B, Resource scheduling in Spreadsheet C, Time Collection in Tool D, and Billing in Tool E. This doesn’t scale. An Integrated Resource and Financial Management approach using a PSA system will provide real-time visibility into resource utilization, project progress, and financial performance. Benefits include:

• Higher utilization rates,
• accurate billing, and
• better forecasting lead to improved project margins and cash flow.

But what about AI?

Agentic AI pays off only when your data is clean and workflows are explicit, use 2026 to standardize and package services first.

Yes of course, AI is going to have a significant impact on our industry’s future. From two perspectives. First, it’s going to make us less dependent on human resources for 100% of the value creation. This will allow us to bill the same amount on less cost. Second, AI consulting will become a revenue center for most business or technology consulting firms.

Most companies are having some success with Gen AI today, but the ultimate AI will be Agentic AI adoption, and that can’t happen until your organization can provide a machine with clean data inputs and clear workflow instruction. Use 2026 to get your house in order. Every suggestion in this document should be adopted before you invest in AI.

About TekStack

TekStack provides service-driven companies a unified platform to scale their business. Built on Microsoft’s Power Platform, TekStack is AI Ready. Think of us as a CRM, PSA, Support, and Billing system all on one platform completely plugged into Microsoft 365 tools like Outlook, Teams, Excel, and Word.