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Reports >
How to Grow Professional Services
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How to Grow Professional Services
Publication date: 7/06
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Executive summary
There’s a tired old myth that says professional services are a lousy
business—tough to sell, impossible to manage, and almost never
profitable. Smart companies like Microsoft, we're told, dump most of
their professional services work onto resellers and consultants, who
are the only people hungry enough to work for the kind of margins
that services provide.
Well, that's end-to-end nonsense.
The reality is that software companies have been generating serious
revenue from professional services for quite some time, and the
trendline is rising. Last year, professional services contributed 17%
(median) of revenues for large public software companies, and the
profit margin on these services was a healthy 20%. Moreover, one
popular rule of thumb is that enterprise software customers end up
spending seven dollars in services for every one dollar they spend on
product licenses. The market opportunity is clearly not trivial.
Fortunately, the technology industry seems to be waking up. Much of
the initiative is customer-driven: The clear message to vendors is
that fee-based services represent a logical extension of the support
process. Customization, integration, data migration, training, system
tuneups, and license management are all basic services that customers
want done well, and are willing to pay for. And there are often
broader customer pain issues—personal career development, project
management, business process analysis, expert domain advice—where
technology companies are often uniquely positioned to become credible
sources of help and even trusted advisors. In fact, it's very
possible that these services represent one of the next big
opportunities for the technology world as a whole.
But first technology companies have to do a better job with the basics
of services design, delivery, and marketing. With this goal in mind,
we invited our members and friends to share lessons they've learned
about how to grow fee-based services. We heard from managers in the
trenches, consultants, and authors, and the advice they gave us is
reflected in this report.
Topics include the following:
- Enhancing the sales process
- Lead generation
- Services innovation
- Designing "packaged" services
- Reducing giveaways
- Pricing strategies
- Selling services on the Web
Copies of the survey are free to ASP members in the
members-only area.
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