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Bo Di Muccio
You could say that TSIA put the "O" in PSO (Professional Services Organization), because for 10 years we've been benchmarking, dissecting, building frameworks, and otherwise analyzing how tech companies organize their professional services (PS) capabilities. Most of those 10 years have been about the story of the increasing organizational maturation and sophistication of PS, that is to say, we have watched PS "grow up." We have seen it morph from a loosely conceived, poorly funded collection of smart people inventing, reinventing, and delivering technology services to customers, into something that, in the vast majority of cases, has all of the artifices and trappings of fully formed organizational entity. But, what does this mean, exactly?
A professional services organization (PSO) consists of a management team, overhead (including operations, finance, marketing and R&D, as well as specialized selling teams), unique delivery pools, global governance, performance monitoring, and dedicated delivery resources with fully-formed talent management that specializes in consulting. It entails a well-articulated strategy, charter, business plan and set of financial targets, governed and monitored by a detailed profit and loss framework.
While not every tech company that TSIA has worked with over the past decade has evidenced all of these organizational practices, the majority certainly have, to the point where these capabilities have become clear majority practices.
Post Date: January 25, 2017
(Click image to enlarge.)
Source: TSIA Professional Services Benchmark Study.
Source: TSIA Professional Services Benchmark Study.
This is evident from just a selection of organizational practices and their frequencies, based on the latest data from the TSIA Professional Services Benchmark Study. Clearly, we've reached a point at which the PS capability tends to be, for the most part, also a professional services organization by any definition of the term within the lion's share of technology companies. This also is in keeping with industry norms that have been applicable to most service lines or service disciplines for many years.
It has long been the common practice in the tech industry to establish independent services organizations and P&Ls as a way of essentially forcing each service line to optimize its cost structure and fund its own operations and investments, among other things. For many years, TSIA has expounded on the virtues of having clear services financial business and organizational models. This is an approach that has continued to serve the tech industry — and technology professional services — very well.
But, there are reasons to believe that all of this could soon be dramatically changing as a result of a major industry trend around organizational convergence. In his recent cross-industry white paper, "Primer on Services Convergence," TSIA Executive Director, Thomas Lah defines services convergence as "the merging of previously independent service line into organizational structures that improve the customer experience and reduce the cost to deliver." The drivers of this trend are many, and we've been outlining them for years, beginning at least with Consumption Economics, continuing through B4B and culminating in our latest book, Technology-as-a-Service Playbook.
More specifically, he calls out four particularly important sources of services organizational convergence:
I would further summarize this by highlighting the increasing push and pull for tech companies to drive customer business outcomes versus just pushing technology and offers onto them and the related need to deal with customers based on a simple, single, streamlined customer engagement model.
These drivers are significant and real. They will very likely change the way the PS function is typically organized within tech firms. As Thomas' paper suggests, there are lots of good reasons and benefits to be had from a more integrated organizational concept for services, both for the tech firm and for the tech firm's customers. The "O" in PSO (organization) will ultimately give way to the larger trend in the direction of organizational convergence.
Embracing organizational convergence is good for both tech firms and their customers.
As is almost always the case, these huge trends and drivers will not impact every firm equally or on the same time scales; there will be a law of uneven development. In a great many cases, the rationale to maintain the "O" in PSO will remain strong. I'll offer two pieces of evidence for this:
First, looking at the practices in Figure 1 above, there doesn't seem to be any identifiable trend away from the commonality of key PS organizational properties. Looking at the frequency trends in these practices between 2015 and 2017, it's a decidedly mixed bag:
Only two of these practices saw any downward trend in frequency, most are unchanged, two trended up, and all of them remain strong majority practices. Second, I recently conducted an informal poll of TSIA's Professional Services Advisory Board companies (16 global PS leaders from a wide cross section of leading tech firms) probing on this very topic. I asked each of them to tell me which of the following three categories best described the current organizational state of the PS businesses for which they were responsible:
I obviously can't say for sure that this "survey" is representative of the tech industry overall, but the results are interesting and, I believe, instructive. Only one leader responded with a "3," while the remaining responses showed a nearly perfect balance between "1" and "2." By and large, most of the of the characteristics and features of the "O" in PSO are remaining common. My guess is that when I do this or similar polls in the next year or so, we'll see fewer 1s, a huge convergence around 2, and will still only very rarely see a true 3.
The plain fact of the matter is that there is no once-size-fits-all model, no single organizational concept for PS that everyone needs to march toward. We will keep an eye on this and will continue to monitor any developments. We will also continue to formulate our point of view on best practices and good practices. For now, the "O" in PSO is hanging on, but is this a good thing or a bad thing? We'll explore this in subsequent blog posts in this series on organizational convergence, so stay tuned!
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.
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.