Transcript Building Professional Services at a Product Company

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The Sirens’ Song:
Building Professional Services
at a Product Company
By
Thomas E. Lah
Steve O’Connor
Mitch Peterson
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Current Issues for Product
Companies
• Under immense pressure from customers to
provide business solutions, not technology
components.
• Required to identify new revenue
opportunities.
• Working to offset decreased product
margins.
• Fighting system integrators for account
control.
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Common Response
• Offer more
services!
Professional
Services
– Critical Support
Services
– Education Services
– Managed Services
– Professional
Services
Managed Services
Education Services
Core Product(s)
Support Services
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Common Consequences
• Product companies are experiencing 10%15% gross margins on professional services
offerings.
• Product companies are operating their PS
business unit at break even or a loss.
• Internal friction caused by PS offsets
benefits like account control and product pull
through.
• Management is unclear why the PS unit is
not meeting business objectives.
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Improving the Situation
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Improving Any Business
Two ways
to improve
profitability
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Raise the Bridge & Lower the
Water
• Understand how to structure, charter, and metric a
PS business unit when it is part of a product
company.
• Understand how you create a solution portfolio that
is aligned, differentiated, and more profitable.
• Understand the unique issues that handicap a
professional services business unit based in a
product company.
• Learn techniques to improve the operational
efficiency of a professional services business.
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Key Concepts of the Book
The Product-Services Wheel
• The Gartner Group has documented an identity crisis
both product and service companies constantly go
through: Product companies want to become service
companies and service companies want to become
product companies.
• For product companies offering technology, the turning
of the wheel begins with “product services”. These are
services offered to support the core products of the
company. Commonly known as support services.
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The Product-Services Wheel
The Product-Services
Wheel
• After product services, the
product company is
tempted to move up
stream. In particular, the
siren call of potentially high
growth and high margin
“Consulting Services” is
almost too tempting to
resist, especially if the
product company is
experiencing an erosion in
product margins.
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Key Concepts of the Book
The SAR Factor
• When product companies
create a new professional
services organization, they
run a high risk of creating a
new business unit that is
not synergistic to the
overall objectives of the
product company. We call
this the SAR Factor: The
Service Alignment Risk
Factor.
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Professional
Services
SAR
Factor
Managed Services
Education Services
Core Product(s)
Support Services
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Key Concepts of the Book
Qualifying Questions
• Should your company invest in
professional services?
• There are four key questions the
management team needs to ask and
answer before making the commitment
to launch professional service offerings.
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Key Concepts of the Book
PS Business Parameters
• There are ten key parameters an
executive team needs to set when
launching a new professional services
business unit.
• Key parameters include mission
statement, target business model,
and organizational structure.
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Key Concepts of the Book
PS Profitability Triangle
• The growth and success of
a professional services
organization is driven by
three critical variables:
Revenue, References,
and Repeatability.
• Every activity invested in
should be targeted at
improving one of these
three variables.
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REVENUE
REFERENCES
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REPEATABILITY
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Key Concepts of the Book
PS
Organizational
Overview
Sell
Services
Sales
Services
Promote Marketing
Services
Operations
Services
Delivery
Deliver
Services
Engineering
Productize
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Key Concepts of the Book
•Function by Function Review
KEY
Metrics
Services
Sales
KEY
Processes
Organizational
Design
Services
Marketing
Key
Interfaces
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Services
Operations
Services
Delivery
Services
Engineering
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Key Concepts of the Book
Four Phases of Maturity
• When a product company
makes the decision to
move upstream to more
solution oriented consulting
services, there are distinct
phases to the journey.
• Each phase has its unique
challenges and priorities.
The key is to understand
what phase your
professional services
organization is in.
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Key Concepts of the Book
Unique Issues
• There are six unique issues a professional
services organization within a product
company faces that an independent
consulting firm does not face.
• Unique issues include partner conflict,
channel misalignment, and skill overlaps.
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Key Concepts of the Book
Solution Portfolio Management
• Companies must review both solution
revenue and solution maturity to effectively
map and manage a professional services
solution portfolio.
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PS Solution Portfolio
Management
PS Solution Portfolio
Solution Revenue
60000000
50000000
40000000
Maturity
Review
CONTINUE
IMPROVE
REMOVE
Revenue
Review
30000000
20000000
10000000
0
0
0.2
0.4
0.6
0.8
1
Solution Maturity Level
Solution ABC
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Solution XYZ
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Solution 123
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About the Authors
Thomas E. Lah
• Thomas has held many roles in both I/T and Consulting over the
past fifteen years. Previous roles include Business Development
Manager, Regional Sales Director, and Senior I/T Development
Manager. Most recently, Thomas was Director of Solutions
Engineering at Silicon Graphics where his team was responsible
for developing and launching consulting solutions on a global
basis. He received an undergraduate degree in Information
Systems and holds an MBA from the Fischer College of
Business at The Ohio State University.
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About the Authors
Steve O’Connor
• Steve has held both Business and Information Services
Leadership roles during the past twenty years. He most recently
was the Vice President for Professional Services at SGI where
he was responsible for building a profitable Global Professional
Services Business. Before that he was the Chief Information
Officer at SGI. He spent four years at Sun Microsystems where
he held a number of Information Services leadership roles. He
received his undergraduate degree in Management from the
Boston College, School of Management. He also holds a Law
Degree from Suffolk University, School of Law in Boston
Massachusetts.
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About the Authors
Mitchel Peterson
• Mitchel Peterson has held a variety of financial and operational
roles over the last eighteen years. Previous management roles
included supporting the areas of Internal Audit, Engineering,
Finance, Cost Accounting, Facilities, and Human Resources.
Mitch is currently the Senior Manager of Strategic Planning and
Communications for the Professional Services Organization
within Silicon Graphics where he has been responsible for
developing and implementing various strategic and tactical
programs for the Professional Services organization. He
received an undergraduate degree in Accounting from Oregon
State University and an MBA from Santa Clara University.
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Additional Information
Please Contact
• For additional information on this book and any of the concepts
presented, please contact Thomas E. Lah.
• Email: [email protected]
• Cell Phone: 614-284-0375
• Or visit: www.thomaslah.com
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