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The Sirens’ Song: Building Professional Services at a Product Company. By Thomas E. Lah Steve O’Connor Mitch Peterson. Current Issues for Product Companies. Under immense pressure from customers to provide business solutions , not technology components.

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The Sirens’ Song: Building Professional Services at a Product Company

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14 jan 13

©Thomas E. Lah, 2001


The sirens song building professional services at a product company

The Sirens’ Song:Building Professional Servicesat a Product Company

By

Thomas E. Lah

Steve O’Connor

Mitch Peterson

©Thomas E. Lah, 2001


Current issues for product companies

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.

©Thomas E. Lah, 2001


Common response

Common Response

Professional

Services

  • Offer more services!

    • Critical Support Services

    • Education Services

    • Managed Services

    • Professional Services

Managed Services

Education Services

Core Product(s)

Support Services

©Thomas E. Lah, 2001


Common consequences

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.

©Thomas E. Lah, 2001


Improving the situation

Improving the Situation

©Thomas E. Lah, 2001


Improving any business

Improving Any Business

Two ways to improve profitability

©Thomas E. Lah, 2001


Raise the bridge lower the water

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.

©Thomas E. Lah, 2001


Key concepts of the book

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.

©Thomas E. Lah, 2001


The product services wheel

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.

©Thomas E. Lah, 2001


Key concepts of the book1

Managed Services

Education Services

Core Product(s)

Support Services

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.

Professional

Services

SAR

Factor

©Thomas E. Lah, 2001


Key concepts of the book2

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.

©Thomas E. Lah, 2001


Key concepts of the book3

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.

©Thomas E. Lah, 2001


Key concepts of the book4

REVENUE

REFERENCES

REPEATABILITY

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.

©Thomas E. Lah, 2001


Key concepts of the book5

Sell

Services

Sales

Services

Marketing

Services

Delivery

Promote

Deliver

Services

Engineering

Productize

Key Concepts of the Book

Services

Operations

PS

Organizational

Overview

©Thomas E. Lah, 2001


Key concepts of the book6

Key Concepts of the Book

  • Function by Function Review

Services

Operations

Services

Sales

KEY

Metrics

KEY

Processes

Services

Marketing

Services

Delivery

Organizational

Design

Services

Engineering

Key

Interfaces

©Thomas E. Lah, 2001


Key concepts of the book7

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.

©Thomas E. Lah, 2001


Key concepts of the book8

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.

©Thomas E. Lah, 2001


Key concepts of the book9

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.

©Thomas E. Lah, 2001


Ps solution portfolio management

Maturity

Review

CONTINUE

IMPROVE

REMOVE

Revenue

Review

PS Solution Portfolio Management

©Thomas E. Lah, 2001


About the authors

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.

©Thomas E. Lah, 2001


About the authors1

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.

©Thomas E. Lah, 2001


About the authors2

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.

©Thomas E. Lah, 2001


Additional information

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

©Thomas E. Lah, 2001


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