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The LAER Effective Company
Bo Di Muccio
If you’ve been following anything TSIA has been doing or saying for the last 5 years or so, you know how obsessed we are about the LAER model: Land, Adopt, Expand, Renew. This isn’t just an alphabet soup or a bunch of buzzwords. In fact, we believe that LAER is the best set of operating principles for just about any technology company today.
The LAER model is not a set of concepts specific to professional services. It’s really meant to describe the technology firm’s overall customer life cycle, particularly those firms that operate in an environment of technology-as-a-service (XaaS) where the focus is, at least in part, on recurring revenue streams.
The relevance of LAER for professional services (PS) leaders is simply this: You can and should provide value to the company across the board, not only in the context of your traditional strengths. There are, in other words, opportunities for PS in every phase of LAER to do one or more of the following interrelated things:
This is true for every phase of LAER. To illustrate ways of “landing” the LAER model for the PS function, let’s look at the example of the Land phase.
For the vast majority of technology Professional Services organizations, the most typical area of core competency is clearly in the Land phase of the customer life cycle. This is also is the phase that most directly and obviously drives revenue and margin to and through the PS organization. Based on TSIA’s definition of the Land phase, “All of the activities required to sell a solution to the customer and get the customer up and running on the solution,” PS most definitely occupies a central role. Standing up the solution inside of the customer’s environment, or enabling them on the platform, have been embedded in the core of the PS modus operandi for decades. And in playing that role, PS delivers value in a variety of ways.
Current State: The bulk of revenue for the vast majority of technology Professional Services organizations comes from product implementation. According to the TSIA PS Benchmark Study, about 60% on average comes from implementation, and PS revenue in general is driving about 15% net operating income on average.
Opportunities: However, there is a 25th to 75th percentile spread on implementation as a percent of revenue of about 30% to 80%; the same bumpers for professional services net operating income (NOI) are 6% to about 25%. So, for many Professional Services organizations (PSOs) there is substantial opportunity to be found in supercharging or fine-tuning the implementation capability so that it drives more revenue and margin.
Current State: Especially for PSOs that drive little direct revenue or margins, the holy grail has always been “economic impact,” which can manifest itself in things like product pull-through and account growth. But this has always been extremely hard to measure. TSIA believes that given the central role of PS in the Land phase, the best PS argument for customer growth is that without a mature PS capability (working either directly with the customers or indirectly through partners), core product/corporate growth is quite literally impossible.
Opportunities: This being the case, it stands to reason that possibly the best business case is to make investments in maturing the PSO tie back to the Land phase. If the corporation is reliant on PS for affecting landing, and landing is the number one thing that will drive corporate growth, having a mature, effective PS capability is a requirement, even for—perhaps, especially for—very product-centric tech firms.
Current State: “Customer success” is becoming a bit of a loaded term. In some organizations, it’s a distinct and unique capability unto itself. In others, it’s merely a new name for the Services organization. In either case (and in other variations), the role of Professional Services is not normally well defined, let alone from the Land perspective. Our point of view is that before there was any such thing as a Customer Success function, your best chance of driving customer success was in ensuring effective landing, or product implementations.
Opportunities: The business case here is similar to the above; without effective product implementations, the chances of customer success decline dramatically, and the challenges to the Customer Success organization in driving customer value, adoption, renewal, etc., are that much greater. The opportunity here is in determining what the PS organization needs to do to be better at landing the solutions, better at measuring implementation success, and effectively analyzing the relationship between key measures of implementation quality and customer success.
Here is an example of how you can get professional services more involved in the Land phase of the LAER model:
You can view the TSW schedule online here. There’s still time to register, so I hope you will join us in Las Vegas October 15-17.
LAER will help make your Professional Services function a top-notch value driver for the company and a capability that will get your customers to value realization faster. Come to Vegas and see how others are optimizing for LAER.
Read more posts in the LAER Effective Company series:
Post Date: September 11, 2018
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.