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Professional Services

Essential Guide to Professional Services Growth Strategy

How to Thrive in the World of SaaS

7 min read
By Bo Di Muccio
Growth is a central component of any business plan, but it doesn’t just happen on its own. This is why creating a growth strategy is so important, especially for professional services. Even before the uncertainty of the pandemic, I saw many professional service teams struggle to make strategic plans towards growth. TSIA took a webinar poll to see what those in professional services saw as their biggest obstacle. 
Obstacles to professional service growth
Obstacles to Professional Service Growth

It is no surprise that growing a business requires entering new markets, keeping current customers happy, or future casting where your company is headed. But all of these obstacles, in one way or another, lead back to one thing: the Software as a Service (SaaS) transformation.

SaaS seems to have transformed the technology and services landscape, and is a reason many professional service firms are struggling to grow. “All roads lead to SaaS” because its impact can be felt in every stage of professional service offers and success resides in your ability to navigate it.

Professional service teams need to be ready to pivot, as SaaS requires organizations to rethink everything from their charter to their delivery. Those that are able to do so will see growth, whereas those who fail to update their best practices will see themselves sidelined.

What is the Professional Services Business Model?

Before we get into how SaaS has changed professional services, we need to understand professional services as a whole.

Professional services organizations are made up of specialized experts that have extensive knowledge in a given field. In the technology sector, many customers require professional services for adoption and troubleshooting. Professional services plays an integral role in ensuring customer success, which is why so many companies have a dedicated professional services team embedded in their business.

Structurally, professional services teams can take on different roles (see our blog “What is Professional Services: A Quick Guide” for more), but most provide the same functions inside an organization.

At TSIA, we think of professional service offers in four stages:
Professional Service Business Model
Professional Service Business Model

Charter Strategy: A charter is a simple statement that acts as a vision for the organization, clarifying why it exists and what its focus is. This statement should provide a clear basis for communicating the organization’s purpose to the rest of the company.

Build Professional Service Offers: This stage lays the foundation for what solution you will offer your customers. Building encompasses all aspects of putting together the solution and services package, including defining the boundaries of the deal and what’s included.

Sell Professional Service Offers: As I’m sure you guessed, sales plays an integral role in the “sell” stage. For the professional services side of the equation, this involves inter-department coordination and also ensuring solutions are well defined with a tight go-to-market strategy.

Deliver Professional Service Offers: Delivering your offer is “where the rubber meets the road.” How is the offer implemented? What is the customer’s success with it? Resource management is key in this stage to ensure the customer actually gets the outcome they were looking for.

It’s important to note how these stages fit together; it is no accident we used puzzle pieces for the graphic above. Each stage plays a big part in the success of the stages that follow, and this cross-stage “synergy” becomes even more important in the context of SaaS.

What SaaS Means for Professional Services Growth

SaaS (also Anything as a Service or XaaS) has shaken up the tech world, but what does that mean for the service industry? In a recent webinar poll, almost 90% of participants said they’ve seen more tech subscription revenue over the last five years. This is in alignment with what TSIA found in our Professional Services benchmark study, where it is clear recurring revenue from subscriptions continues to grow.
Increase in subscription recurring revenue
Recurring revenue from Subscriptions

What this shows is that more and more core solutions are coming from subscriptions. If one of your obstacles to growth is visibility, it’s rather clear that this is where the future of professional services is heading.

While the markets and revenue are moving in that direction, one category we don’t see following as vigorously is organizations and company structure. This is where the struggle comes in and the real opportunity for growth lies.

So, what must professional services do to not only survive this coming wave, but thrive? Using the four stages, we will examine how to create strategies in and around each stage that lead directly to reaching your growth goals.

Developing Your Charter Strategy

Of all of the places professional services firms can plan for growth, this stage is the most crucial. While I’m sure all of you have a professional services charter, it is worth revisiting. The real question is this: does the mission/charter of professional services change in an SaaS context?

Yes...and no. As I explained in my webinar, The Role of Professional Services in SaaS,  professional services’ mission is to be a LAER engine (TSIA’s Land, Adopt, Expand, Renew customer engagement model). While that mission is the same, the pressure on our ability to be that engine is higher in the SaaS business model because it depends heavily on Renew. Professional services is a driver of renewal, and falling short means your chances for growth are slim.

So, what can you do to develop your professional services charter towards growth?

Set (or reset) your Strategic Plan.

Before setting out on a journey you need to know where you’re going. You might already have a charter that you developed, but in light of SaaS, it’s time to revisit it. Polling shows that while 79% have a strategy around existing services, only 59% have a formal professional services strategy around SaaS.
professional services XaaS strategy in existing market
Professional Services XaaS Strategy

Know what your endgame is and be specific on what getting there looks like. Do you have a clear set of KPIs that the team has stacked hands on? What benchmarks are you working towards? From net operating income to repeatable revenues, there are a lot of metrics to choose from. If your company is newer to the SaaS game, this might mean taking some time to re-imagine your charter and goals to create an SaaS market penetration strategy.

Align your goals with the company’s.

Professional Service and your company’s goals don’t always align naturally. In TSIA’s Professional Services Benchmark Study, we found that on a scale of 1 to 5 (1 being completely unaligned and 5 being fully aligned), the most common rating was 2.
professional services charter alignment score
Professional Services Charter Alignment Survey

You have to be intentional about making sure the company’s charter is reflected in your end goal and make adjustments accordingly. This might be especially difficult as you pivot your strategy more towards SaaS, and will be a process you will have to deliberately work at with your own team and outside organizations. However time consuming, this process is necessary to drive towards growth–I’d compare it to aligning tires on a car.
 

Understand your challenges.

It’s not enough to know your goals, but what obstacles you will face as you reach for them. What might make the move to SaaS challenging, and what can you do to counteract it? Think through potential problems before they happen so you can be proactive with solutions.
 
BOTTOM LINE FOR GROWTH STRATEGIES:

No matter what your roadblock to growth is, doing strategic planning around your professional services charter will open up avenues.

  • You can’t enter new markets if you don’t have a plan to get there.
  • Customer satisfaction won’t improve on its own if you don’t make it a baked-in priority.
  • Industry experts want to work for organizations that have a clear vision, and so being able to present prospects with a strategic charter is sure to draw them in.

But a plan without proper execution is just a nice story of what could have been, which is why it needs to be paired with the following stages.

Building Your Professional Service Offers

With every stage, a higher focus on customer value is needed to drive renewal (since SaaS is often built on subscription plans). Nowhere is this more evident than in the “build” phase. Yes, you need value realization to deliver success down the road; but your team will be set up for failure if it's not top-of-mind while you’re building the offer.

Once you’ve set your target, you can start building offers around renewals in the SaaS model. Here are ways you can best accomplish this:

Institutionalize Customer Journey Maps.

A fixure in many of our research practices, customer journey mapping is a necessary tool to build the best professional service offers. A customer journey map is a visual picture of the customer journey, and can be used to better understand their needs and the way in which they interact with a product or service.
customer journey map for market strategy and development
Customer Journey Map Example

As a professional service team, you need to know how and what your customers are consuming. How do we ensure that there’s recurring value in the customer journey? If they aren’t using it or are coming up against constant pain points, there is less chance of renewal. In order to get the most out of your product solution, you need to make customer journey mapping a staple of your department.

“The digital customer experience is the lighthouse, our goal post.”
- Dave Young, TSIA Sr. Director for Professional Services

Introduce a Flexible Consumption Model.

A flexible consumption model is centered around having a component-driven catalogue, where the customer can self-select different components of a technology solution. Smaller “pieces” allow the customers to pull together a solution that will feel customized for them. And, since it will only include the components they actually need, their adoption and usage will be considerably higher. This will make it easier for you to show them your value when it comes time to renew.

In order to have this type of service catalogue in place, your services engineering offering activities have to be robust and mature. Leading to our last point…

Formalize the Professional Services Engineering Role.

Professional services engineering is one of the more rapidly maturing disciplines, gaining momentum in SaaS companies and already an established practice in traditional business models. But in order to reap the benefits of service engineering, it has to be formal, documented, and formally in place.

Research shows demonstrative benefits to have a professional services engineer in place. Even though it's not currently a majority practice, it’s becoming one with a lot of benefits regardless of charter. From higher revenue to higher utilization, we’ve seen the demonstrative benefits a formalized service engineering role has to offer across the board.
professional service engineer role in product development
Professional Services Engineer Role

Part of this includes making sure you have a solid work flow for defining new offers and taking them to enable sales and then to the market and then rolling them out to actual delivery.
 
BOTTOM LINE FOR GROWTH STRATEGY:
Building offers requires you to have a solid work flow for defining the new offers and setting in motion the rest of the offer cycle.  
  • Customer journey maps allow you to better serve and understand your current customer and markets you hope to reach.
  • A flexible consumption model gives customers the chance to choose exactly what they want and sets them up for success down the road.
  • By formalizing the service engineering role, you give yourself the tools to reach your charter goals.


Selling Your Professional Service Offers

In professional services regardless of SaaS or traditional, there’s always debate around the issue of selling. SaaS is rooted in renewals, and so how you package and position your offer in the initial sale is crucial. However, alignment between professional services and sales can be even more difficult than charter alignment, and is often where we see the most thrashing.

Why is that? Well for starters, there is a lot at stake for both teams. Whether or not an offer sells is naturally a priority for the sales team. For professional services, how the offer is presented is important because it influences the way a customer understands what’s in the offer and how they might use it.

This seeming conflict in priorities brings about questions. Who should sell? What should the incentives be? What’s the go-to-market concept?

One question we often get is, if there’s a business case for dedicated professional services sales support function in an SaaS context. The answer to that is yes.
professional service sales services growth
Impact of Dedicated Professional Service Sales

Business case data points show that in every case when there’s dedicated professional services sales support, you’re more efficiently executing sales. Companies can gain up to 52% in efficiency and drastically improve time to value for customers.

This does not refer to an overlay with sales, but dedicated sales support that serves as solution or deal support. This gets professional services more directly involved in working sales opportunities, and allows the team to contribute in two key ways:

Defining “what’s in the box.”

The “box” refers to what’s in the actual offer, and we’ve got to be crystal clear when we define these offers about what’s included. A customer is more likely to renew if they feel they got exactly what was promised to them in the initial sale.

As such, it’s important to make sure everyone is fully educated on what the offer includes and what is outside the offer. This extends to setting boundaries on discounting, deciding together with sales what’s the right price point, and determining how to position it.

Providing insight on the customer journey.

We discussed journey mapping as a practice to help build offers, but it also applies to developing go-to-market methods. The more sales is able to understand where a customer is at in their journey and the specific way an offer might address their needs, the more effective they will be. Professional Services is the one holding that insight, and so it rests on us to provide that to sales.
 
BOTTOM LINE FOR GROWTH STRATEGY:
Doing the work to team up with sales will pay dividends in your ability to increase efficiency and bring value to your customers. It will help your whole organization to:
  • Clearly defined boundaries and set customer expectations.
  • Have a fuller understanding of offers to help position it in markets.

Delivering Your Professional Service Offers

In the context of SaaS, the delivery stage needs a new focus. In order to succeed, we have to pivot from worrying about engagement success to focusing on what long-term success with the customer looks like. Ask yourself: what’s the lifetime value for the customer?

Because of this shift in focus, project managers and customer success managers need to start working even closer together. So the question then becomes, how do you define roles and responsibilities around project managers and customer success managers? It’s admittedly a grey area and why you must be intentional in addressing it.
project manager and customer success manager roles
Project Manager and Customer Success Manager Crossover

Project managers from professional services need to be part of the success planning with customer success and together and determine what long term success looks like for them and the customer. A big component of accomplishing this is to utilize scope and risk management
  • Scope management ensures that project managers are aware of “what's in the box.” This might involve altering the scopes to account for what the customer really wants from the offer. Maybe they bought a service catalogue item, but working with a customer success manager it’s clear that it wasn’t exactly what they wanted.
  • Risk management is centered around making sure the customer maximizes the value of the offer. The risk is that customers won’t renew if they’re not using what’s in the offer. As we oversee these delivery activities, we need to raise awareness of early indicators of the customer not renewing.
With risk management in particular, project managers have a big role to play in understanding when a renewal might be in jeopardy. Part of how project managers can do that is to capture value at different stages or milestones. These are not just milestones based in the traditional terms, but reframed in the context of customer success.

How are they doing? What’s the value they’re getting? And, more importantly, can we document when they are getting that value?

Project managers need to be aware of things like rateable recognition and when there’s a need to introduce new revenue recognition models. This can become a friction point and an obstacle to growth if you haven’t taken the time to think it through. It’s because of this that working closely with customer success is crucial. You need to think about it as a collective, cross-functional initiative.

Because SaaS is viewed as cheaper and faster by customers, we need to streamline processes to meet those expectations. Operationally, this means a focus on career development and planning and a smart use of inventory and personnel. Additionally, this career growth will be a draw for new employees and increase your ability to motivate current team members.
 
BOTTOM LINE FOR GROWTH STRATEGY:
Working with customer success managers can lead to higher customer usage and renewals. You’ll accomplish this by:
  • Ensuring project managers understand the scope of an offer and the implications thereof.
  • Using risk management to ensure customers are maximizing offers and flagging them early on when they’re not.

Driving Professional Services Growth Through SaaS

Professional services can be a massive accelerator for companies running an SaaS companies or trying to transform into one. With the switch to a subscription model that SaaS brings, customer satisfaction becomes more and more important. As such, the role professional services plays in the customer journey is also elevated. Understanding the four stages of professional service offers will allow you to position for growth and operationalize subscription.
Professional Service Growth Strategies by Stage
Professional Service Growth Strategies by Stage

 February 3, 2022

Bo Di Muccio

About Author Bo Di Muccio

Bo Di Muccio, Ph.D., distinguished vice president of Professional Services research and vice president of TSIA advisory delivery. He is also the chairperson of the TSIA Professional Services Advisory Board. Using his nearly 15 years of experience in technology industry research, analysis, and consulting, Di Muccio develops and delivers research and advisory programs that help some of the world’s leading technology companies build and optimize their professional services business.

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