The technology industry has been creating service offers for decades. These service offers have helped customers stand up technology and make it available for use. At TSIA, we call this the "technology availability" value proposition.

However, customers want more. They don’t just want the technology to be available, they want technology providers to accelerate their ability to unlock value. In particular, customers want us to help them achieve their desired business outcomes around:

  • revenue growth
  • cost optimization
  • regulatory compliance/risk management

This shift towards catalyzing customer outcomes is represented below in a framework from the book B4B, written by J.B. Wood and Thomas Lah.

b4b operating model construct  

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The B4B operating model concept. Source: B4B (2013)

The Catalyst for Change

There are different catalysts for companies to jump on the outcome train. A significant pattern we observe through our benchmark studies is that traditional, individual service line offers are under pricing pressure. This is true for traditional support services, education services, professional services, and field services.

This pricing pressure is an indication of a stalled value journey with customers. When we put the same offer in front of customers year in and year out, they will expect to pay less for that offer over time. The law of diminishing returns is at play here.

So, many companies are bolstering their service offers with new, compelling value that serves the dual purposes of: 

  • Helping customers unlock value to achieve their desired outcomes
  • Transitioning the technology company from price negotiations to value conversations

The value proposition of traditional services is expanding and creeping into the historical domain of other service lines.

Bumps and Bruises 

The good news is that many companies are on the journey with this pivot to outcome-based service offers. But as with every industry transformation, we are experiencing bumps and bruises along the way. 

In many companies, we are observing service lines within a given company making this pivot within their individual service silo. The value proposition of traditional services is expanding and creeping into the historical domain of other service lines.

Observations:

  • Premium support offers are getting so sophisticated they are bleeding over into the value proposition typically reserved for managed service offers.
  • Professional service offers are evolving from project-based to recurring revenues. These value propositions are bleeding over into the value proposition of other recurring service offers, like managed services and premium support offers.
  • All service lines are creating adoption services, which creates duplication. 

This results in:

  • Portfolio proliferation and overlap
  • Confusion for customers and the sales team
  • Internal tug-of-war for service dollars

The most serious implication is that it’s not clear what service offer the customer should buy next.

One Service Portfolio Team

A pragmatic first step is to combine all the resources that work on service offers into one service portfolio team. In fact, based on the recent TSIA Emerging Offerings Survey, 33% of survey respondents have already made this move to form a single service portfolio team.

converging service offers and portfolios  

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Other service lines are converging.

Here’s the typical charter of a single service portfolio management team:

  • Define offers to be delivered by all service lines
  • Rationalize existing service portfolio to create a continuum
  • Eliminate overlap in offers to reduce internal competition
  • Design offers that deliver value in new ways for customers

These service portfolio teams possess a level of objectivity. The team has the freedom to:

  • Design service offers from outside-in
  • Define new service offers that can positively affect these important customer outcomes
  • Then, decide who will deliver the services against these new service offers

To build service offers that really move the dial on specific business KPIs for customers, skill sets from all the service lines will be called upon. Separate service line offers are being combined into single outcome-based service offers.

For example, premium customer success plans are a combination of three value propositions:

  • Traditional support services with the "technology availability" value prop
  • Operational services that reduce the complexity of the technology for the customer
  • Adoption services that accelerate the customer’s ability to unlock value and achieve an ROI faster
premium customer success plans  

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Premium customer success plans.

Watch the recording from our recent TSW keynote panel where I interviewed Splunk, SAP, and Zenoss on the impact of service offer convergence in their companies. The bottom line is, service offer convergence is inevitable.

Five years from now, I predict we will look back and see that we were living, right now, in the age of the pivot to customer outcomes. At TSIA, we believe the relationship between customers and technology providers is fundamentally changing forever. The companies that prove to themselves and to their customers that they can positively impact customer business performance, will have a distinct advantage.

Trust me, you want to be leaders with this transformation to customer outcomes, not laggards. Leading the service portfolio transformation is a strategic initiative for every company. Who will lead the way for your company?

 
 
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Julia Stegman

About Author Julia Stegman

Julia Stegman, is the former vice president of research, Service Revenue Generation, for TSIA and was with the company for 7 years. She has over 25 years of experience in the high-technology industry, and was responsible for driving the TSIA research agenda related to the growth of maintenance, SaaS, and managed service revenues as well as the expansion of product revenues with existing customers. 

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