by Bill Ives
April 1, 2009 at 8:38 am
· Filed under FASTforward'09
Here is an interesting question that is raised in the post, Should Software Vendors Also Sell Professional Services?, by Stewart Mader. He quotes Oliver Marks, “The reality for all ’social community’ roll outs is that the software is a relatively minor component compared to the change management required to drive uptake and usage and to weave the software into the business fabric of day to day use.” I certainly agree here and was even part of a panel at Enterprise 2.0 Conference in 2007 titled: 90% people, 10% technology.
Stewart goes on to quote Jive’s Gia Lyons, “Most of what we do could be done with almost any other social software tool, but naturally, we only make ourselves available to Jive customers.” Stewart then writes in reaction, “If most of what they do could be done with other software, then why only make themselves available to Jive customers? After all, isn’t professional services an even larger source of revenue than the software? That’s how SharePoint works. Microsoft sells a basic infrastructure on which lots of 3rd party consultants build and customize tools that meet each company’s needs.”
I would certainly agree with the last statement about revenue sources. When I was part of a large consulting firm we usually figured the system integration costs were about 3 to 5 times the software costs.
Stewart then implies that software vendors will not have the objectivity of third party implementers who can use a variety of tools. Having been on all sides of this equation, I think that this is a complex issue. I like Jon Mell’s comment to the post, “I think it’s slightly more subtle than vendors only trying to validate the sale. If a customer invests in Jive (or any other product) there is a mutual interest in making sure the solution works. If that also happens to validate the vendor’s sale it doesn’t automatically mean it’s wrong and not in the customer’s best interests.”
I would add that just because the professional services firm is independent of the software vendors, there are many alliances that will provide motivation similar to an internal services provider. I was the alliance sponsor for three portal software firms while working for a large consulting firm. There were several tiers of alliances and many wide-ranging agreements and motivations. In the end you have to be able to trust your service provider, whether they are inside or outside the official software provider and trust that there is full disclosure
I have also seen situations where the software firm’s internal people partner with a third party developer. This happen on a knowledge management project I led in the early 2000s. It worked well because the internal experts gave us their unique knowledge to help with the implementation and served as a connection to the software firm. The project was a success and promoted by both the very large software firm and the consulting firm, my employer.
In the 80s I was involved in another situation were it made sense to use the software firm’s service providers. My employer was a firm that sold CBT software. This firm originally thought that over half their income would come from selling software. I was the head of customer development and we only used our tools. What actually happen was that selling software accounted for only about 10% of our revenue. The rest came from custom development, as our clients would rather pay us to use our tools than purchase the tool themselves. Now software for learning development is a bit of a specialized case, as you need expertise in creating good learning materials as well as using the software.
In the end the answer to the question is not yes or no but the old “it depends.” There are many issues to making enterprise 2.0 work (see McKinsey Report on Making Enterprise 2.0 Work Brings Back Memories of Process Centric KM in Early 90s) and I think there is a role for software firms to engage in this implementation for everyone’s success.
What has been your experience on this issue?
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This is an interesting topic right now. I sense that several vendors, despite having very good products, are suffering from over-optimistic projections on how long this market is taking to mature. In some cases, I sense investors may be applying some pressure to diversify revenues. Whilst I hope they can be patient – I think there are some very good vendors in this space – I also think that diversifying into professional services might help in some cases. Atlassian is obviously the exception here with their incredibly successful cheap, direct delivery model.
The bigger issue is that professional services is NOT just about integration/customisation of software. We do not want to recreate the SAP model, which although highly lucrative for the company and its partners, is not always quite so successful for its customers.
The professional services required to push through the change we need to see in businesses today go way beyond integration of tools towards education, employee engagement, task support and business / organisational design. It requires a blend of business analysis, social sciences, experience design and other fields, not just suited technical consultants whose conclusion is "install X". Also, as Shirky said, we need much more "situated" software, not just out of the box installs of generic platforms.
Ultimately, the software cost is trending to zero, and its values lies in the way it is leveraged to achieve results (by combining it with professional services).
Like my colleague Jon, I don't disagree with Gia about Jive, but I can also see Stewart's point. Obviously, whilst the vendors might develop their own Professional Services divisions, the most independent (probably never totally independent, for reasons you mention above) approach will come from vendor-neutral advisers.
I know a little company based in London who have been clear about this vision since they started, but they are a really boring traditional business that makes a profit and works with its clients over the long-term to see through change.
We are lucky to have some committed, innovative vendors in this space (unlike, say the KM field of the 1990s) and I would like to see them thrive, so if professional services helps them in that endeavour, they should certainly consider it.
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LLiuApril 2nd, 2009 at 5:32 pm |
I agree with Thomas's comment over at Stewart Mader's blog entry that there is no one size fits all answer. Nevertheless, I believe that software vendors need to strike a careful balance between using PS to ensure that the software is successfully implemented and adopted vs. trying to make significant profit from PS. For a vendor that is truly focused on advancing its software, PS should have a supplementary role within the org rather than a dominant one. Moreover, the vendor should have key PS partners, who are focused on business solutions and have vertical industry expertise because the vendor's own PS will be much more software centric. In many cases, the best approach is to have a 3 way joint effort between the software vendor's PS, an industry focused PS firm, and the customer.
Lee and LLiu – Thanks for your comments. I agree that the vendors seem more committed to making business perform better and not just making profits. I have interviewed many on the AppGap and I have been impressed on this factor for the most part. I think many of the KM vendors took us away from KM's goals to get large document management implementations. This is one reason I am excited about the new lower cost E20 tools. LLiu – I also agree that th ebest role can be as a swat team that works with both the software firm and the third party implementor. That was when I saw it work best as mentioned above. George Dearing made a similar point on Twitter.
One vendor's perspective: At Traction Software we offer best practice based implementation consulting and development services. While much of the best practice experience readily applies to other platforms, much of what we do on an assignment seeks to help customers leverage the differentiating capabilities that led them to choose TeamPage over other platforms.
As a result, we are best off focusing on supporting our customer needs and, in the process, gathering insight into customer needs that will contribute to strategic decisions about our product roadmap. From this perspective, offering professional services is an essential part of business strategy.
More detail here: http://traction.tractionsoftware.com/traction/per...
Another vendor's perspective: At NewsGator, I am leading this charge and finding a substantial demand for our services, which run the gamut from the traditional implementation consulting to more high-level coaching on building and driving community adoption. We are also partnering wisely with firms who have expertise that we are not interested in developing or trying to scale with internal staff.
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