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Service Revenue Generation
At TSIA, we provide technology and services businesses with the insights they need to grow, advance, and achieve their desired outcomes in our rapidly evolving industry. At the heart of this in-depth research are TSIA's research executives, who keep their fingers on the pulse of what's new and what's next in technology and services in order to deliver compelling content, best practices, and tools to our members. To highlight the brilliant people behind the research that makes TSIA what it is, we've invited the VP of Service Revenue Generation research, Julia Stegman, to tell us a bit about herself and her thoughts on both the current state and what the future holds in her area of research, service revenue generation.
A: I work with members of our service revenue generation discipline to assess where they have opportunities to grow revenue, whether it's through enhancing their offers or improving their customer and renewal engagement models. My goal is to help them get a clear look at what is contributing to both growth and erosion of recurring revenues in their current model.
A: When we finish a year at TSIA, the other researchers and I like to take a look at our member inquiries from the past year and spot the common themes. We also use this as input for building our research calendar for the upcoming year to keep bringing topical thought leadership to our members. For service revenue generation, I saw three recurring themes this past year:
What company doesn't need more revenue? Between hardware, software, and pure-play cloud companies, everyone's looking to grow their revenue. I've heard our members saying that their CEOs and CFOs have higher expectations of them this year around growing service revenue compared to last year. The pressure is on to identify new levers they can pull for more recurring revenue, and to implement those recommendations as fast as possible. We do a lot of benchmarking in this area, which allows us to help our members identify specific areas they can improve that will benefit them most in both the short term and the long term.
With maintenance and support contracts, there's a lot of pricing pressure happening, but many organizations haven't changed their offers in a long time. We guide our members through the steps they need to take to improve their value proposition, such as creating compelling premium support and adoption services customers are willing to pay for. That way, they can reduce discounting and also upsell more customers to premium support tiers.
In XaaS business models, it’s all about defining compelling premium support and adoption services that are differentiated from the "free" support bundle. In fact, the first TSIA outcome chain I published is focused on this very transition. We’re receiving positive feedback from our members that it is helpful to have the outcome chain as a framework to help guide the transition to fee-based services.
The companies that are positioned for the most growth are the ones that have service offers that help their customers achieve their desired business outcomes. These outcomes could be things like growing their revenue, optimizing their costs, or complying with regulatory requirements within their customer's industry. This is a big pivot from how the industry has designed service offers in the past.
A: Adding adoption services into your offer portfolio is definitely a big one. Let's face it, today's tech buyers are finding the old school offers kind of boring, and they're not as excited about buying them anymore. Providers need to modernize their offers and make them more compelling to customers, and that's what adoption services do. They have a fundamentally different value proposition, which is to help customers accelerate on achieving return on investment from the technology. What customer doesn’t want ROI faster?
Also, you can monetize these adoption services, and there are a number of options to define the line between free and fee. I always tell our members, "you're a 'for profit' company, not a 'non-profit' company," so there's no reason you can't monetize support and adoption services. I did a case study on Salesforce and how they map out their adoption services by offering both free and fee offers (both basic and premium). You can read about it in my blog post, "How Salesforce Monetizes Adoption Services."
A: There are two key roles. One is the owner of the renewal revenue. These folks are responsible for optimizing either the maintenance and support revenues in on-premise models, or the subscription revenues in XaaS business models. There’s a tremendous amount of pressure on these renewal leaders to grow recurring service revenues, so they are active members of the SRG community. Many companies have blind spots in terms of how much down-selling is causing erosion with their revenues. There could be some silent problems happening behind the scenes, and you can't fix a problem until you know you have a problem. This is actually where the concept of our revenue waterfall came from.
Based on the results from our on-premise benchmark study, we can assess where the blind spots are for our members so they can get the right level of reporting they need to correct the erosion.
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This revenue waterfall gives us a clear line of sight into what's really happening with a member's recurring revenues, what's helping them, and what's hurting them. We have a similar revenue waterfall for subscription plans in XaaS business models.
Second is the owner of the recurring services portfolio, on the service offer side of the house–Service Marketers, Service Product Managers, and Portfolio Managers. The path to revenue growth begins with having a compelling service offer portfolio, so these portfolio managers are actively spending time with the SRG community to share best practices and are big consumers of SRG research. At least two to three times per week I spend time one-on-one with portfolio managers who are making changes to their portfolios. They tell me the changes they are proposing and we have interactive dialogue on industry best practices and innovations. The goal is to shorten the time to market for a new offer and hit the nail on the head at launch time in order to grow revenue faster.
A: For my educational background, I have an MBA from Chapman University. In terms of my experience, I've worked for Hewlett Packard and Sage Software helping them maximize their revenue and make their offers more compelling. I've run renewal teams, and I like to think of this role as being a steward of the company's recurring revenue. That's a huge role to play and one I'm honored to have held. In my past experiences, I aimed to always be looking for innovative ways to grow revenue and to deliver more value to customers. I think my past experiences have prepared me to best serve TSIA's members, both in service revenue generation and across the community, because so many things are intertwined with one another as part of a greater whole. I'm always aiming to learn and grow as our industry matures and changes, so it's been really great to have a front row seat to watch how these trends have played out in the technology industry over the years. I especially enjoy being a coach and sounding board for our renewal leaders and portfolio managers.
Contact us today to find out how Julia and the rest the TSIA research team can help your business achieve success with our world-class business frameworks, best practices based on real-world results, detailed performance benchmarking, exceptional peer networking opportunities, and high-profile certification and awards programs. We look forward to hearing from you!
Post Date: May 17, 2016
Nicole Dornsife is the former senior content manager for TSIA. She has over 10 years of experience writing for the software and SaaS industries, and joined TSIA in 2014. She managed the TSIA blog and regularly collaborated with TSIA's research team and partner companies to publish their insights on the latest news in the technology and services industry. She also provided editorial support for TSIA’s conferences.
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The Technology & Services Industry Association (TSIA) is dedicated to helping technology and services organizations large and small grow and advance in the technology industry. Find out how you can achieve success, too. Call us at (858) 674-5491 or we can call you.