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Bo Di Muccio
Professional services revenue growth rates have increased 10% year over year, according to TSIA’s latest Professional Services Benchmark. However, some professional services leaders are struggling to see a fraction of that growth and are wondering just when they’re going to see the results that the rest of the industry seems to be experiencing.
For a long while, PS leaders seemed to be worried about everything but growing professional services revenues, instead focusing more on renewals or customer success. But those goals have not gone away. On the contrary; the potential role of professional services in driving various measures of product and customer success is arguably more important than ever. But, if you’re going to scale up the ability of professional services to support and fuel customer growth and success, you’re going to have to grow the professional services revenue stream too.
In this blog, I’m going to share how to grow professional services revenue with 3 quick tips.
First, I want to touch on some of the challenges you may be experiencing in your current professional services revenue growth strategy. In many ways, the biggest challenges we see occurring within our member companies have to do with two overarching themes: difficulty with moving professional services offers from free to fee, and achieving organizational alignment on the professional services growth strategy.
Related to these two main issues are the following roadblocks:
The following tips can help you start on the right path toward addressing and overcoming these challenges, putting you on the right track to achieving 10% YoY growth and beyond.
Adding heft and size to the projects you’re already doing is one way to increase professional services revenues. In a recent TSIA Professional Services Benchmark survey, we asked participants, “What is the average deal size for your professional services engagement?” The average size of these engagements was $60,443.50. If you find that your deals are significantly lower than that average, you should begin taking the necessary steps to raise it.
“Easier said than done,” you might be thinking. But did you know that one proven way you can increase project size is to add project management services to your professional services engagements? If you’re not already including fee-based project management in your deals, you’re missing out on a huge opportunity, which addresses the “moving from free to fee” challenge I mentioned earlier.
Professional services needs to play a bigger part of the customer journey in the LAER (Land, Adopt, Expand, and Renew) customer engagement life cycle, especially in the Adopt phase. Right now, only 36% of Professional Services organizations have a formal methodology for developing Professional Services offerings that are intended to increase the adoption of products by existing customers.
Customers that successfully and effectively adopt their technology purchase are more likely to renew their contract and expand their spend with your company. If they are properly set up in the consultation and deployment phase with your Professional Services team, this sets them up for future success and your organization for future revenues.
While growing revenues beyond product-led services (of both the deployment and post-deployment varieties) is often about adding business consulting, other service offers beyond traditional professional services need to be considered. Here’s a breakdown of service types based on feedback from our Professional Services membership community.
In addition to these, you should also build adoption and analytics services into your offers. This will not only help Professional Services become more relevant in the Adopt phase of the customer journey, but it will also provide insight on how you can generate more services revenue post-deployment.
If you’ve ever heard the phrases “services engineering” or “services offer development”, they are both used to describe the action of uncovering new and different ways to make money with existing Professional Services talent. Having a robust offer development capability with a formal service development life cycle practice will make your product-oriented services even better. It’s also the only way you’ll be able to have successful outcome-oriented services right out of the gate.
You can do this by:
The truth is, you can’t execute any professional services charter on the cheap. To fuel customer and company success, you’re going to have to grow professional services revenues. But to grow professional services revenues, you’re going to have to invest in scalability levers. As those levers increasingly help you grow, you’ll be increasingly able to fund those investments with increased revenue and margin. It’s a virtuous cycle that we at TSIA can help you to achieve.
Hopefully these 3 quick tips gave you some food for thought when it comes to growing your professional services revenues, but they’re just the tip of the iceberg when it comes to the data-backed recommendations that comes with membership in our Professional Services research and advisory practice.
By becoming a TSIA member, you’ll have access to a vast library of data-rich research reports, technology industry insights, benchmarking, and action plans tailored to helping you overcome your top challenges in growing and improving your Professional Services business. Reach out to TSIA today to learn more about how we can help you get on the right path towards future success.
Post Date: February 13, 2020
How to align your professional services charter with business objectives.
Bo Di Muccio, Ph.D., is the distinguished vice president of research, Professional Services, for TSIA. 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.
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.