Building Professional Services The Sirens’ Song

Product Company Issues 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. 2/24/2019 ©2002, Thomas E. Lah

Common Response Offer more services! Critical Support Services Professional Services Offer more services! Critical Support Services Education Services Managed Services Professional Services Managed Services Education Services Core Product(s) Support Services 2/24/2019 ©2002, Thomas E. Lah

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. 2/24/2019 ©2002, Thomas E. Lah

Improving the Situation

Improving Any Business Two ways to improve profitability Raise the bridge Lower the water 2/24/2019 ©2002, Thomas E. Lah

Raise the Bridge & Lower the Water Understand how to structure, charter, and measure 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. 2/24/2019 ©2002, Thomas E. Lah

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. 2/24/2019 ©2002, Thomas E. Lah

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. 2/24/2019 ©2002, Thomas E. Lah

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 Core Product(s) Support Services Education Services Managed Services 2/24/2019 ©2002, Thomas E. Lah

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. 2/24/2019 ©2002, Thomas E. Lah

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. 2/24/2019 ©2002, Thomas E. Lah

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. REVENUE REFERENCES REPEATABILITY 2/24/2019 ©2002, Thomas E. Lah

Key Concepts of the Book Services Operations PS Organizational Overview Services Sales Sell Services Marketing Promote Services Delivery Deliver Services Engineering Productize 2/24/2019 ©2002, Thomas E. Lah

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 2/24/2019 ©2002, Thomas E. Lah

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. Product Services 1: Implementation Services 2: Integration Services Product-Centric Service-Centric 3: Consulting Services 4: Productized Services 2/24/2019 ©2002, Thomas E. Lah

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. 2/24/2019 ©2002, Thomas E. Lah

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. 2/24/2019 ©2002, Thomas E. Lah

PS Solution Portfolio Management IMPROVE REMOVE CONTINUE Revenue Review Maturity 2/24/2019 ©2002, Thomas E. Lah

About the Authors Thomas E. Lah Thomas has held many roles in both Professional Services and I/T over the past sixteen years. Previous roles include Director of Solutions Engineering, Business Development Director, Regional Sales Director, and Senior I/T Development Manager. Thomas currently consults with companies to establish or improve their professional services organization. Recent clients include Lucent Technologies, Info-One, Brocade Communications, Idea Integration, and ITM Software. Thomas is also actively engaged with The Ohio State University to host an executive education program focused on frameworks and strategies to successfully build professional services at product-centric companies. 2/24/2019 ©2002, Thomas E. Lah

About the Authors Steve O’Connor Steve has held both Business and Information Services Leadership roles during the past twenty years. He 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. 2/24/2019 ©2002, Thomas E. Lah

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. 2/24/2019 ©2002, Thomas E. Lah

Additional Information Please Contact For additional information on this book and any of the concepts presented, please contact Thomas E. Lah. Email: thomas@thomaslah.com Phone: 614-899-9427 Or visit: www.thomaslah.com 2/24/2019 ©2002, Thomas E. Lah