While the technology services industry is moving toward outcome-based services, most professional services organizations have to be able to adapt and transform even as they defend, protect, and improve their Level 2 capabilities. In other words, they have to walk and chew gum at the same time! In this three-part series, I’ll be detailing the three main capabilities successful PS executives are developing in order to avoid common pitfalls and capitalize on the new opportunities presented by the current state of the technology industry.
Industry Changes as they Affect Professional Services
The demands of today’s technology customers are causing a huge shake-up for professional services organizations. Technology hardware companies are no longer achieving the same margins they once did, and this trend is rapidly expanding to software, as low-priced SaaS offers reset customer expectations. Now that customers are pursuing new consumption models that no longer require a large up-front purchase, it’s forcing tech firms to develop offers where the customer pays as they consume. So, what are PSOs doing to keep up with these trends?
While these changes in the industry will inevitably have a significant impact on the operating and financial models for professional services, in the short term, PS executives should focus on establishing or improving the following capabilities to stay ahead (Tweet this!):
Tip #1: Focus on New Offer Development
Let’s face it, PS organizations were born and raised inside of product-focused entities, with, more or less, their entire purpose being to get the product up and running in the customer environment.
The services engineering functions within a PS organization have been no exception, as they focus primarily on product-attached and product deployment-oriented services. The PSOs who are doing it right are the ones who have a formal link into product engineering, which enables them to stay out in front of new products that require implementation services and bug fixes. (Tweet this!)
When done well, the service development life cycle uses tools and templates to offer estimations, pricing, risk assessment, and potential sales materials. However, as PS organizations are being driven to offer more non-attached services, these organizations that were previously 100% born-and-bred product-oriented face difficulties. They will need to develop a more formal approach to conceive, price, pilot, package, and market those newly developed non-attached services.
In short, deciding to offer more non-attached services doesn’t decrease the need for services engineering excellence, but instead, increases the need for it. To retool their services engineering functions to give their processes the support they need to move to the right in their offers include:
- Dedicated Staff: Many PSOs have dedicated services engineering functions that are aligned almost exclusively in developing product-attached service offerings.
- Upgraded Skills: There is an increasing need for service engineering organizations to not only learn how to build non-product-attached offers, but to also develop vertical expertise, consulting skills, analytical skills, and success science.
- Better Offer Qualification: Make sure your staff understands the services opportunity around the product and the business market for any newly developed offer.
- Offer Piloting: Formal, documented piloting programs are currently a very rare thing to see in a current typical service engineering function, but they are a must for the development of non-attached offers.
These steps might seem simple, but far too many PSOs lag behind on services engineering/offer development, which is a gap that will prove more costly as they move toward being more outcome-focused.
More on the Organizational Capabilities Successful PSOs are Developing
In my next two posts in this series, I will go over the other two capabilities PS executives need to develop to succeed in this changing industry: adoption playbook, and business domain expertise. To get a head start on learning about how adoption relates to professional services, be sure to check out my on-demand webinar, “The PSO Journey to Customer Adoption”. Until then, feel free to reach out in the comments or by email if you have any thoughts, questions, or personal experiences you want to share.
Read other posts in the "3 Tips for a Successful Professional Services Organization" series:
About the Author
Bo Di Muccio is vice president of professional services research for TSIA. He is also the chairperson of the TSIA Professional Services Advisory Board. Keep the conversation going with Bo by emailing him at email@example.com.