The good news, again, is that the PS agenda is set for TSW (click HERE to see it) and it’s full of good stuff, beginning with the pre-conference workshops that take place on Monday, May 7th.  Among these, I’d highlight the half day session by our good friends at Pretium Partners.  This session goes to Pretium’s strength:  helping services organizations get better at selling on value and driving more and more profitably business in so doing.

The core conference sessions are made of of two kinds of experiences.  One is a traditional, stand and deliver presentation (“Breakout”) in which our members present their case studies and best practices to one another.  The other experience is called a “Workout Session.”  These sessions are designed to be more interactive and to create an environment in which members help one another with problems that are tackling.  They are moderated by peers and experts, but there is very little in the way of formal ”stand and deliver.”  

I’m really excited about all of the sessions, as I’ve said.  But I would like to highlight one Breakout and one Workout session that I think should be particularly interesting.  The breakout session I want to highlight is being given by Mary Elston of VMware.  This session takes place on Tuesday May 8th and is entitled:  “Capturing the Cloud with Confidence: Creating Professional Services Programs for the New Cloud Application Era.”  The back story on this session is that it came to us not through the traditional application process but by my own personal request to Mary.  Mary had contacted me through VMware’s membership inquiry service to ask about best practices in creating PS programs and offerings optimized for the cloud.  In discussing the topic with her, I quickly realized that VMware was doing some really cutting edge things.  As a result, I asked her to present to the TSIA community and fortunately for all of us, she agreed!  I’m going to go to this session, that’s for sure.

This year in Santa Clara, there is one set of concurrent Workout sessions taking place also on Tuesday, May 8th.  In highlighting a Workout session, I’m conflicted because I and the PS Champions Co-Chairs are facilitating a session on developing cloud services and all of the workout sessions are concurrent.  For folks interested in this topic, it’ll be a great and lively session.  However, if I had to pick one session to highlight for the broadest PS audience, it would not be our session, but another one being facilitated by Randy Myslievic of RTM Consulting and Ruth Fornell of NCR.  This session is entitled “Driving Strategic Revenue Growth by Extending the Delivery Model Beyond Traditional Services.”  What’s particularly interesting about this topic is that developing non-attached consulting has long been the new Siren’s Song for embedded PS organizations.  But it’s always been easier said than done.  This session will leverage success story on how NCR’s Professional Services Organization worked with a TSIA partner to establish a global consulting services practice as the lynchpin around a interactive discussion about how to get this done in your organization.  I don’t see how you could beat a Workout session being facilitated by this fantastic team of Randy and Ruth.

Ultimately, you’ll have to review the agenda and make your own decisions about what’s going to be valuable for you.  And don’t forget, even if your company is only a PS member, you can attend all of the Support Services, Field Services, Education Services, and Services Revenue Generation sessions you want at our conference.  Throw in all of the keynotes, not to mention all of the services technology sessions by John Ragsdale (who is a discipline unto himself) and you have the makings of … well … just another fantastic TSW conference.  See you there!!!

As for the PS-specific awards, we’ll be sponsoring two competitions for the Spring TSW conference:

1. Professional Services Excellence in Enabling Customer Success (Details here)
2. Innovation in Professional Services (Details here)

The Customer Success category willl recognize the PS organization that has the most extensive, most impressive and most effective customer success/satisfaction program specifically optimized for technology professional services.  A very different award is the one for Innovation in PS.  This could be any kind of innovative approach to managing or delivering professional services:  a cool technology, a new and different incentive program, a new and effective approach to field development of PS offerings … you name it. 

So get your applications in and get recognized!!!!

But the fact is that many of you also have your hands (and feet and heads) in other services disciplines.  And — unless you’ve been in a cave for the last few years — you’re probably also very interested in how to generate new revenues for any services business that you’re involved in.  Well, have we got some new blogs for you! 

Making the Grade is Maria Manning Chapman’s new blog for anyone interested in technology Education Services.  Maria has many years of operational experience running P&L education services businesses for several different companies and has built TSIA’s Education Services discipline from the ground up.  Maria is also a former teacher, so think “apples” (or maybe just Apple) if you plan on giving her any gifts. 

What Would Sally Do? is Sally Foster’s new blog, spanning technology Support and Field Services.  Sally also comes to TSIA having built scar tissue (the good kind) running support businesses for a number of well-known tech enterprises, including, most recently, a large software division of IBM.  Sally also has a law degree, so read her blog regularly or she might sue you!

Up and To the Right is Julia Stegman’s new blog covering her (brand new) practice area of Services Revenue Generation.  With over 20 years of experience in technology sales and sales management, Julia has joined TSIA to help member companies optimize their current revenue streams and transform to new revenue streams.  If that’s not what you need, Julia also knows an awful lot about wine and — as I just discovered — is a heck of a singer.  I’m just sayin’ …

So TSIA has now has a total of 6 very active blogs covering all of the topics that are top of mind for our member companies.  Check them out and tell your friends and colleagues!!!

All of that said … this conference has been without any doubt the biggest, coolest, most energizing TSW that I’ve ever attended.  I’ve never seen this much energy, this much interest, this much engagement … this many people … at one of our conferences. 

That’s an amazing thing when you think about the context within which this is taking place.  Think about it … we’re weighed down by concerns about the future and fear about the economy.  We don’t have anywhere near the line of sight for our businesses that we’re accustomed to having.  We’re drinking from the cloud fire hose and don’t know how to shut it off.  And yet, here you are, in Las Vegas, with TSIA at Technology Services World.  Why is that?

If I had to say, I think it’s partly because of all of these doubts and fears that you are here.  You lack line of sight.  You’re worried about the economy.  You don’t know how “cloud” is going to impact your services businesses.  And … you believe you are going to learn something useful about these things either from us, from your peers or both.  And so you come.  How else to explain that more of you have come than ever before?

Well, that’s a question for you really.  And I would love to hear from you.  So here’s my call to action.  Please chime in and let me know why you came to TSW Las Vegas 2011 and what you got out of it.  Did you get out of it what you were hoping?  Did we and your peers help you gain a better line of sight?  Did we are you peers help you understand the impact of cloud on services better?  Did you come away with new things to think about, new ideas about initiatives? 

I look forward to hearing from you and to seeing you next May at TSW Santa Clara!!

So you can imagine the looks of relief that emerged when Thomas Lah followed up with lots of specific guidance on how services executives can “Defend and Protect” their current businesses even as they transform them to adapt to the new rules of tech.

One of the tactics he highlighted for PS businesses has become a virtual holy grail: the use of repeatable solutions or packages.  And on that topic Mark Kayserman from Alcatel-Lucent and I conducted a “workout session” yesterday at TSW.  These are interactive sessions that begin with content that the facilitators put on the table, but then focus largely on the issues the audience wants to explore, both with the facilitators and with each other. 

In this session, Mark talked about his experience building repeatable solutions or “PS Assets” at Alcatel-Lucent.  It was clear from the session that PS managers understand the value of PS Assets and that many of them are running this ”Defend and Protect” play already.  However, adoption is still low.  So based on this experience and data that we have from our various sources, I’d say that most PS businesses need to step up their move to repeatable, packaged solutions.  Luckily, we have lots of content on this topic and others related to services engineering available right now for TSIA members.  Go here for a compendium.

And see you today for the last day of this great conference!!!

 As I suggested in my previous post, the impact definitely varies depending on a number of factors.  The biggest difference we found was between software and hardware companies.  “Consumption Economics” assumes that companies will approach the margin wall at different rates. and this clearly came out in the data.  For example, while 63% of hardware companies report having a documented cloud PS strategy, less than 30% of software companies have such a formal, documented strategy for their PS businesses. 

But one thing is clear from the session today:  there is definitely interest within the PS membership to continue to build on this first, high level run up the hill on the impact of cloud on PS.  And we will definitely execute on this interest on the part of our members.  In the meantime, you can download the white paper I’ve written on this topic and learn what you can do to defend and protect your existing PS businesses, even as you seek to adapt to the new rules of tech and transform yourselves.

As the Vice President of Professional Services at TSIA, I advise member companies on a wide range of topics related to PS operations, financial performance, delivery and the entire spectrum of issues related to running and optimizing a technology professional services business.  The trends identified in Consumption Economics will undoubtedly have a major impact on PS businesses.  I have tried to lay out these impacts in a new white paper: “Consumption Economics and Technology Professional Services:  Defend and Protect as You Prepare to Adapt and Transform” which will be released at TSW.  Here’s a handful of tidbits to prime the pump and get you thinking.

As with all futurology, there is much uncertainty involved in understanding precisely what impacts will obtain from the changes underway.  But one thing is clear:  the rules of tech are indeed changing.  Conventionally, the way tech companies make their money (on both products and services) is by “mastering complexity” or in other words, by profiting hugely from the complexity of their products and from the demand and need for complex services to be wrapped around them. 

Well, what happens to this model when the tectonic changes outlined in Consumption Economics come to the fore?  Simply put, more and more tech companies are going to be forced to “master consumption.”  Enabled and brought about by the tanking economic, the explosion of cloud and the consumerization of IT, Consumption Economics shifts the risk from IT consumers to IT vendors.  As technologies become more consumable through the cloud and over microtransactions, the demand for such consumption increases.

This brings us directly to the issue of what it all means specifically for Technology Professional Services businesses.  The reality is that PS is changing before our very eyes, largely as a result of the trends and factors outlined in Consumption Economics.  However, the change is occurring unevenly.  Some companies have very little reason overall to make any radical changes now … and they are not.  Some companies are seeing huge changes in some of their portfolio while there is a virtual steady state in others.  Still others have passed to the other side of the “margin wall” with the vast majority of their products and related services. 

Since the vast majority of tech companies are somewhere between 100% steady state (complexity economics) and 100% radical change (consumption economics), we believe that most PS businesses will have to defend and protect their core, traditional PS businesses even as they adapt to the new realities and fundamentally transform what they do and how they do it.  To find out specifically what steps we recommend you take to defend and protect while you transform, be sure to download the paper on the TSIA Homepage when it becomes available.  Or better yet, grab a copy at TSW in Las Vegas!!!

Today, TSIA is announcing the availability of its 2011 Cloud Impact on PS Member Survey.  If you are a TSIA PS Member, you can complete this free survey, and get answers to the following questions:

• How is the cloud impacting PS businesses today?
• What has been the impact on offering development, offer pricing, and customer demand?
• What are the drivers of change?  Competitors?  The market?  Customers?
• What is the future impact likely to be?
• How is the PS business model changing?  How are companies most commonly calculating margins and allocating costs?  How have these processes changed?

Would you like to understand current industry experiences and practices on these topics?  Would having access to this kind of data help you figure out whether your PS organization is leading, lagging or something in between when it comes to adapting to the Cloud revolution that is happening in technology?  Well, as far as I know, there’s only one way to find out.

COMPLETE THE SURVEY!!

I will collect data throught September and distribute a report on the survey findings to the study participants in October.  Don’t miss out.

Below is a summary of some of the key findings from these interviews.  Note that our purpose here is not to in any way evaluate these issues.  Rather our goal is to simply report on the issues as they were presented to us.

Pricing Objectives

The primary objective for a focus on pricing is to improve business margins.  That is not necessarily maximizing PS margins, but rather improving PS margins in the context of optimizing overall margins, and balancing the need for profit and growth.  Business leaders, in some cases, indicated they have worked diligently to improve business processes and utilization, i.e. the cost side of the equation.  The focus on pricing is about improving revenues and particularly margins.  Another issue that came up related to pricing objectives is the alternative pricing orientations – cost based, market based, value based – and the business implications of each

Users of Pricing Information

Companies reported several users of pricing information.  In most PS organizations, pricing is a function of finance.  Finance, is therefore, a primary day-to-day consumer of pricing information.  PS business leaders and regional sales leaders are more likely to be ad hoc users of information as needs arise in specific situations.  Rates information may also be used during the annual planning process and by strategy development groups.

Pricing Issues/Challenges:  Price Sensitivity

Several companies expressed interest in learning more about customer price sensitivity at certain times during the buy cycle.  For example, professional services may be purchased at the time of the product sale, at times of service only upgrades, to improve business processes and for other value added services.  When is sensitivity highest?  Lowest?

Presentation of Rates/Prices to Customers

Professional services prices are often presented to clients as a time and materials engagement with either a rate card specifying rates for individual resources or as a blended rate for all resources.  Business leaders expressed interest in learning more about how rates are presented to clients.  The interest stems from two needs.  On the one hand, if rates can be presented in a way that reduces price sensitivity, i.e. as rates for individual contributors that justify investment, that may improve margins.  On the other hand, revenue recognition compliance is simpler with a blended rate.  The downside of blended rate pricing is that it masks true resource allocation and discounting.

Discounting and Sales Performance

A perennially important topic, management of discounting once again emerged as an important issue.  What processes, systems and structures do PS organizations have in place for managing discounting?   What works?  What doesn’t?  Some organizations report discounting at high double digit levels.  Closely related is the issue of sales performance and pricing.  How are PS organizations most effectively controlling price through the sales organization?  In some cases sales negotiates price down based on willingness to pay, not resource required.  Companies in some cases have increased use of offshore resources to improve margins only to have sales discount even more deeply.  There are continuing reports that service prices are sacrificed in order to close product sales.

Price Levels and Structure

Several companies brought up the topic of rate card or price structure.  Do companies use one or multiple rate cards?  When price variances are codified, is it by geography, by volume, or by customer or engagement type? How are companies setting price levels, e.g. for a new job title or new geography?  What about for certain classes of managers, like high priced engagement managers? More broadly, how are prices set for fixed fee engagements?  How do we evaluate pricing for fixed fee engagements?

Residency Programs

Specifically the topic of residency programs came up.  How are companies setting prices for consultants in residency?  Rates may be lower, but yields, cross sales and customer value creation can be higher. Finally the issue of travel and expense billing came up.  How are companies managing consultant travel and expenses?

Global Price Management/Pricing Complexity

One common headache reported by several companies is being effective at global pricing.  Resources may be sourced from a high priced or low priced country, and sold into either as well.  There may also be local resources to consider.  Competition may likewise be local or global.  The problem of pricing complexity also came up during the discussions.  Tools and practices that have worked in the past are becoming obsolete as scale and scope of PS grows.

Shift to the Cloud

Several companies raised the issue of their changing business models and the implications for professional services pricing.  They brought up the shift shift from PS as largely an essential service to a value added service.    How does pricing change as a result?

The 2011 TSIA Market Rates study promises to be the most comprehensive anyone has ever done.  Don’t miss out!!!

PS organizations are increasingly adding flexibility to their delivery mix by shifting more and more customer delivery work to remote resources.  Our data show that 15% or more of total delivery hours on average are performed by resources working exclusively offsite … and this number is slowly increasing.  Yet, 65% to 75% of hours remain traditional, direct FTE, onsite consulting and the majority of companies have built no ability to systematically leverage offsite resources:  that is, they have not “built” Solution Centers.  Most companies are interested in leveraging this form of services delivery, but lack industry proof points to justify the effort. 

Well, I’ve done the analysis on this and the resulting “TSIA Solution” is available to PS members through our inquiry service.  As with the analyses of PMOs and project management, this solution leverages the TSIA 2010 Project Performance data to test projects that included solution center hours in the delivery mix with those that did not.  Specifically, we tested whether there was a correlation between the use of Solution Center resources and the likelihood of a project to meet each of the 6 criteria for “Best in Class” project status.  Those criteria are:

• Did the project start ahead of time or on time at worst?
• Was the project at or below the planned budget?
• Was the actual margin at or above plan?
• Did the project produce an actual margin that was at or above the industry average project margin (35%)
• Was the project completed ahead of time or on time at worst?
• Did the project gain a C-Sat rating of “satisfied” or better?

Projects that meet ALL of these criteria are considered “Best in Class” because they are on time, on budget, profitable for the service provider and satisfying for the customer.  Based on this rather stringent set of criteria, only about 15% of projects achieve “Best in Class” status.  What about projects that do and do not include the use of Solution Center resources in the delivery mix?  The figure below has the answer.

And the result is quite striking.  Projects that include Solution Center resources are nearly FOUR TIMES more likely to be Best in Class projects.  That is because they are more likley to begin and end on time, more likely to be on margin plan, on budget plan, highly profitable, and to end with a satisfied customer.  The full answer and complete correlations with all 6 of the criteria are contained in the TSIA Solution report.  But you can tell generally what’s in the report just by looking at the above chart.  Based on this data, there clearly is a business case for PS Solution Centers.