The Information Technology (IT) space is undergoing a dramatic shift. This shift from hardware and software based sales processes will have a dramatic impact for those executives that manage IT vendors, those who sell IT solutions and those who market them. As hardware prices have fallen and hardware has become more commodity in nature, companies are focusing less time on purchasing hardware, and more on ensuring that their business needs are being met by their IT systems. Companies are beginning to realize that IT can be an enabler to ensure that their primary business is run as efficiently as possible. This realization is opening new markets around services, primarily highly complex consulting and integration focused services.
To enable organizations to successfully meet these new services driven customer needs, there is a separation occurring within a lot of services organizations. This separation is usually along operational lines to enable each type of services delivery organization to effectively delivery value to their customer, in a scalable manner. Organizations can be broken into four distinct services delivery teams, Professional Services, Consulting Services, Managed Services and Support Services.
There are a variety of interpretations today about what types of offerings are available from a services organization, and how they are branded publicly. When speaking about Professional Services, I envision an organization that is focused on product delivery and integration. Professional Services are often the organization a vendor uses for deploying their hardware and software in customer environments. Professional Services personnel are often experts in a companies portfolio, as well as the products integration with other offerings on the market.
Consulting services are a higher caliber of Professional Services in my experience. Consulting Services are offerings around custom integration or custom development, either system or software. Consulting Services tend to be more complex deals that run longer, and do not necessarily have a hardware or commercial software component as Professional Services would.
Managed services are often used as a way to ensure a vendor has a long term presence at a customer site. Managed Services offerings are often provided to the customer to manage the on-site hardware and software that a customer has purchased, but does not have the staff to operate day-to-day. Managed Services are often long term agreements for a company to ensure a customers' IT operations are stable and managed per industry best practices.
Finally, Support Services. Support Services are typically the contracts that are purchased with hardware and software to entitle the owner to a clear path for product assistance. This is most often phone support and access to patches for the product for bugs and security vulnerabilities.
Each of these four offerings is distinct, they each have their own lifecycle, associated costs and required skill levels for delivery. It is important to distinguish the various service offerings when developing sales strategies, as well as delivery methodologies. Each one is a different type of purchase for the customer, and has different implications to the cost/benefit trade off analysis work that customers do when purchasing services.
Hardware is cheap
One large influence on the drive towards services and specifically Consulting Services is the drive towards cheaper hardware. Hardware today is based on standards and commodity parts that enable a larger number of vendors to sell the same capabilities and components. Because of this commonality around features, customers look mostly to price when comparing two similar pieces of hardware. The companies that strive are the ones that realize hardware is only a platform for running a business; the real value to companies in todays fast paced market is putting highly capable solutions on this common hardware to enable a customer to be more successful.
Many companies today rely on a predictable, regular refresh cycle for all hardware. This enables companies to position themselves to deliver solutions around managing services on top of this regular refresh. This refresh requires companies to ensure that data and applications are implemented in a way that when the next hardware refresh comes, the data and applications can be easily migrated. Often times customers do not posses the necessary staff in house to implement these types of software provisioning, they will turn to consulting organizations to implement integrated solutions around these refresh cycles.
Fixing Business Problems
Todays customers are looking more and more to IT as a way to enable their core business in a more efficient way. Customers are using data warehouses as a way to process vast amounts of data to ensure the business is being managed correctly, they are using customer resource management systems to ensure customer requests are handled efficiently and correctly the first time, and they are using mobile devices to connect remote workers to the office and get them information as soon as possible.
Often times companies do not have the necessary staff in house to both implement and manage todays complex solutions. Customers often must balance having too many versus too few staff, and often will lean towards fewer staff, and contracting the complex implementations and projects that require more time then staff immediately have.
Customers today will also look to outside services for guidance in business inefficiencies. Often customers see a value to outside input when reviewing legacy processes, this outside input can ensure that new processes are developed with an understanding of currently available technology and tools that can assist with driving productivity. These business efficiencies have a multitude of possible solutions including business intelligence tools with an associated data warehouse, a formal enterprise architecture program, automated provisioning of new services or automated software development assistance.
Todays businesses rely on information for making decisions, as well as reviewing previous decisions. in a systematic way. This information must be organized and have associated tools for reporting. Often times companies will look to outside firms to assist them with managing their sales information, forecasting, process assessment, manufacturing data and purchasing. Todays business intelligence solutions rely on expertise in these areas in data management, data mining, data cleansing and ultimately reporting using accurate and proven methods.
Enterprise Architecture is growing in popularity as companies look to formalize how business processes and company visions become IT systems. Todays TOGAF and the Zachman Frameworks are used by countless organizations to formally document the architecture that IT will follow for implementing systems, tools, software and support services. Few companies today have the expertise in house to develop a formal Enterprise Architecture program, and because of that will look to outside companies that have expert level knowledge and experience with the above frameworks.
Speed is an important factor when doing business today. Companies that can rapidly adapt to change are more successful in meeting customer demands and needs. A companies IT systems are a critical component to all adjustments to market environments. By being able to more rapidly provision new services, or capacity for existing services, companies can ensure they are ready for this change. Automated provisioning ensures that minimal staff intervention is needed when bringing online new services; this both lowers the time to market as well as the costs associated with bringing new capabilities and capacity to market. Companies will often look for experienced outside assistance when developing automated provisioning systems, this outside experience can ensure that new services are brought online both efficiently and correctly.
Software development can be a complicated orchestra including requirements gathering, architecture, development, internal testing, and finally customer testing. Companies will often look for external assistance with developing unit tests and automated regression testing environments. Outside resources can provide a unique perspective on the development and testing process because of there disconnect from the entire development process, they are able to focus all efforts on testing for defects and usability.
Selling to the decision makers
This shift in IT purchases from hardware to services has a dramatic impact on the sales process for vendors, particularly those that sell both hardware and services. As more and more IT solutions are purchased that are directly tied to company objectives, fewer purchases will be made by the managers and staff implementing the solutions. More and more large IT purchases are being made by a companies executives including the CIO, CFO, CTO and COO. These individuals are no longer focusing on the technology behind the products, they are looking to vendor solutions and offerings as a way to increase productivity, increase output, and to better understand and manage their business.
When selling services and solutions today, sales teams must articulate to potential customers the immediate and long term costs of solutions, and how those costs will directly affect the bottom line of the business. The cost of individual servers, licenses and data centers are no longer looked at with the level of scrutiny they once were. Today purchasers are looking to the total cost of a solution in implementation costs, reoccurring costs, and upgrade costs; then comparing those costs to the measurable benefits once the solution is in place.
Considerations for solution based purchases
Now that we know who is making the decisions around big IT purchases and that hardware is a small piece of the equation, we need to understand what items influence these decisions. These will enable solution developers and sales teams to properly positions services within a customer organization to enable effective business solutions.
Customers look at vendors to provide them solutions that will meet the immediate needs as well as provide paths as the company grows aver time. The paths can be upgrades, accommodation of new legal requirements, growth and manageability. As part of the sales process it is critical to communicate to the customer a vendors capabilities around not only solution implementation, but also upgrades, changes and solution support.
Todays companies look to do business with vendors that will own solutions from end to end. This ownership requires the vendors to have solid methodologies around product development, delivery, support and upgrades. This does not mean a vendor needs to develop all products in house, or have a software package for every customer, but vendors should be able to provide their customers a single point of contact for all phases of complex projects.
Companies today want to ensure they are not locked in to any specific solution, be it hardware, software or a specific consultant. For a consultant to put in the extra effort to ensure a solution is properly documented and communicated to the customer, shows the customer the dedication to their business and helping them succeed.
When purchasing services related IT solutions, companies today are looking at more then the initial cost of the contract, or the options. They are looking at the benefits the company will see because of the solutions, these benefits can be more efficient operations, more customers, or simplified growth paths. It is critical that as part of the sales process the costs and benefits are both understood and communicated to the customer.
To be successful in todays IT market, vendors must focus on correcting customers business problems, and work to become a trusted adviser in their business operations. Customers today are looking for long term solutions to their IT needs that will ensure they are competitive and able to not only grow, but change as the market demands. This has caused a dramatic shift away from purchases focused strictly on servers and storage, but to purchases of solutions. These solutions must have definitive cost returns over time that allow management to clearly understand how their business will be positively impacted.