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Bo Di Muccio
Does it make sense for your organization to have a dedicated team for Professional Services sales? Every organization is different, but there is growing evidence to support a dedicated resource for selling Professional Services. Check out the following research to help you decide what’s right for you.
The most common question we get from TSIA’s Professional Services membership community is if there’s any data that shows the business benefits and/or the impact a dedicated services sales team has on key Professional Services metrics. A common follow-up request is for data points and content that justifies the investment in a dedicated resource for selling Professional Services. Why has this become such a hot topic?
Based on the sheer volume of similar inquiries we receive on this topic, justifying a dedicated sales team is clearly a pain point for the vast majority of our Professional Services members. I think there are several reasons why.
The first reason is the industry transformation that is keeping all of us up at night. We’ve talked about this a lot over the past couple of years, and it hasn’t gone away. If anything, it’s only progressed, and we as an industry need to accept this change and make necessary adjustments. The harsh reality is, Professional Services (PS) has always had to wrestle with an identity crisis. It has always struggled to define its proper role within the broader technology organization.
The customer consumption model, operating model, and financial model transformations have only added to the struggle for PS to find its place. This struggle has always impacted and been impacted by the discussion around the proper sales model for Professional Services.
This pressure is taking various forms. PS organizations could be required to reduce or eliminate barriers to Product Sales by drastically slashing prices on Professional Services and fully integrating it into the solution selling motion. They could be asked to plug revenue or margin gaps with services-led offers and selling motions that are created by commoditizing products and price pressures on maintenance. However, few in the industry seem to have decided what the right operating and go-to-market model should be for Professional Services when it's connected to technology-as-a-service offers.
Against this backdrop, only a minority of Professional Services organizations (about 37%), say they have a dedicated or overlay PS Sales team in place. So, whether to run that play or not is a question that’s bound to come up for a great many PS leaders today. This is also because the needs and interests of Professional Services are so rarely served by the Product Sales function, at least from the perspective of the services organization itself. The overall sales motion is commonly owned by Product Sales, and their ability and willingness to properly or adequately position the value of services are equally commonly spotty.
This unfortunately creates a disconnect between sales and services that can have many extremely negative side effects, regardless of the target financial model for Professional Services. Whether PS is intended to be highly profitable, a revenue engine, or a cost-center customer success driver, it's hugely important for the right services to be positioned with the right message and the right scope. But is investing in a dedicated PS Sales capability the elixir that will bridge this disconnect? Let’s look at the data to find out.
The hypothesis is that if you invest in a dedicated motion for selling Professional Services, you’ll be able to provide prospects with an improved context on why they need services. This leads to improved value prop selling for services, a better understanding of services for your Product Sales team, better integration of PS into the sales motion, and a better interlock between sales and delivery. The benefits of this include increased product attach rates, higher utilization rates of delivery staff, faster PS revenue growth, and higher revenue per consultant.
To get into the real numbers behind this, we should look at the data collected from TSIA’s latest core Professional Services benchmark data set. For the purposes of this analysis, we’ve filtered this list to include only software companies of $1 billion or more in total revenue, which we refer to as “large” companies. We believe this will remove a risk that differences in key metrics, such as revenue growth rate, would be driven by size rather than sales model. It’s likely that many other metrics are affected by size as well, so our approach in this case takes some steps to remove or at least smooth out that driver. The result is a menu of data points testing this core hypothesis mentioned above.
The chart provides a selection of metrics with interesting differences driven by the presence of a dedicated PS Sales function. It should be noted that we can’t guarantee that these correlations or associations are causal, but based on the hypothesis above, we obviously have some deductive reasoning to assume that implementing a dedicated PS Sales function can independently drive some of these impacts.
Having PS Sales in place ought to drive higher revenue growth, attach rates, utilization, average rates, revenue per metrics, faster sales cycle times, etc. Also, tech companies with larger exposure relative to Professional Services-specific financial performance may require dedicated sales motions in order to maintain those performance levels, thereby minimizing risk to the company based on the outsized performance of PS.
The short answer is: yes. There is a good reason to expect causality to go both ways here: companies drive better Professional Services performance because of dedicated PS Sales, and tech companies have dedicated PS Sales because of higher Professional Services performance. Either direction of causality makes sense and justifies the investment.
TSIA has done a lot of research on this subject, which is only available to members of our Professional Services research area. Contact us to learn more about how we can help you stand up a PS Sales function within your organization and pave the way for better overall Professional Services sales.
Post Date: August 16, 2017
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.