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Between big data, the cloud, and changing customer demands, there is an increasing pressure on technology companies to facilitate customer outcomes. As a result, many companies have already begun moving from being more product-oriented in their relationships with customers to being more outcome-oriented, but it is an ongoing process that will only continue to evolve, resulting in big impacts on professional services organizations. Here are some key trends that TSIA has observed in early 2015.

Moving Beyond Level 2

Many of TSIA’s professional services members have had tremendous success as Level 2 suppliers. They have not only developed complex offers that support their technology, but have offered implementation, integration, consulting and value realization services in support of those assets, and more. However, the Level 2 model is clearly under pressure, and many technology suppliers are being compelled by their boards, their customers, and numerous other sources, to go beyond this to develop Level 3 and Level 4 offers. In short, their future success may well hinge upon their ability to facilitate the success of their customers by exploring and developing even more outcome-based offers. 

The Rise of XaaS

Big data and a massive shift to cloud-based delivery of technology solutions are driving change across the industry, especially when it comes to how technology is being consumed. More than ever before, customers are demanding the ability to consume vendor solutions through on-demand platforms, as seen in a software-as-a-service (XaaS/SaaS) model.

In principle, cloud platforms are less complex and easier to implement out of the box. For Level 2 suppliers, this means that big data and the cloud are going to continue pushing them toward becoming a Level 3 and Level 4 supplier, as outlined in TSIA’s most recent book, B4B.

While it’s true that many PS organizations are doing their part to stay ahead of the curve, they must continue to get better at driving customer outcomes while still maintaining good financial hygiene. For some PSOs, small, incremental change will suffice, while others will have to transform more rapidly and more fundamentally. For most, it’s not an either/or proposition, it’s an AND proposition. For example, although many XaaS providers tend to view services merely as part of customer success, recent data has shown us that customer success and PS growth and profitability go hand in hand.

xaas for professional services  

(Click image to enlarge.)

Though this is only a small selection of key metrics, it’s clear that the performance of XaaS PS organizations is comparable to, and even better than that of the average technology company in the TSIA database on many key measures. This shows us that although XaaS consumption models can create real problems for services operational and financial models, today’s PS leaders are managing to adapt and succeed in achieving impressive results.

What This Means for PS

For the past few years, TSIA has repeatedly stated the pressures of consumption economics and how you must define and protect your Level 2 business model while continuing to develop and explore Level 3 and Level 4 offers. So far in 2015, we’re seeing that this prediction is coming true in surprising ways industry-wide. As we continue to research how PS companies are adapting and growing in 2015, we will look to answer the question, “What do PS leaders need to be thinking about as they continue to grapple with the challenges of the technology industry transformation?” 

To find out about this and more, be sure to take a look at my State of Professional Services  report or view my on-demand webinar.

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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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