Updated: Oct 18
Welcome back to another bitesize version of the Precursive Perspective Podcast. We selected this episode of the podcast to spotlight as the popularity of resources surrounding Productizing Services continues to grow. Guest Ilan Gendellman, Global Head of Professional Services at InfoBlox, a market leaders in computer and network security had the following insights to share on the subject...
You can listen to the full episode below.
The Effect of Productization on Professional Services
If you’ve followed us for any significant amount of time, you’ll know that we are big advocates of productization. It is the process of packaging your services to sell them like a product, which can help you achieve more consistent forecasting, accelerate growth and scaling, and can make you receive faster payments. For more information on productization, check out our guide here. Ilan testifies to the benefits of packaging services:
Jonathan: So turning attention now to one of the hot topics in the market is around productizing services or packaging services, depending on where you are at. And by the way, listeners, those are two different things. But if we look at this area for a moment, I know you had some different offerings and structured offerings and things like this in the past. So what were some of the triggers for the PS function when it comes to standing up new service offers or refining the current mix of services provided?
Ilan: Yeah, I'm doing that right now in defining good, better, best packages. I found that if you call them small, medium, and large, they're not as exciting as good, better, best. But the goal really is to figure out what is the MVP? I know everybody uses the term MVP. I like to use a different term called SLC. Small, lovable, and complete. What is the small, lovable, and complete use case that we can get customers to have to implement after they sign? Those are those packages. There are also other packages, like a resident architect that's super beneficial to the customer, but also to the company because the margins are great. Again, focusing on what do we need the customer to achieve and what we think the customer want to achieve and build an offering around that. Another thing that I've used in the past quite successfully is to bundle. Bundle support, bundle education, bundle services in one renewable package, and you can call whatever you want. I call it the pro package in past lives, and customers purchase it and they get better support SLAs, they get professional services packages, and they get education. So all in one, a discounted really great option to move forward.
The Key Metrics to Manage Performance in Professional Services
In any part of the business, metrics serve as important benchmarks, offering insight into various aspects of operations. By closely monitoring these metrics, professional service firms can make informed decisions, optimize resource utilization, and enhance client experiences, ultimately driving sustainable growth and excellence in service delivery.
Jonathan: When you think about operating excellence, just help our audience understand what are the metrics that matter when it comes to managing performance for you with a PS function?
Ilan: Operations are key to having a world-class professional service organization. You can't really have good operating organization without clear metrics. Those metrics that I use are bookings, they're billings, margin, utilization, of course. That's the standard. Everybody uses them. But also I'm looking at others, which is time to value. We measure when the project starts, when we can get to completion or to the first value, and of course, ASAP and NPS. There are other metrics that we look, but those are the main ones. Also looking at goodwill spend, which is free services that are provided. I've had a role in the past in which the spend on goodwill was enormous. I can go into that if you'd like and have some lessons learned. But tracking those dollars, those are dollars that in theory, some or most could have been billed and provided for free. That impacts the utilization, that impacts the billable utilization, impacts margin. So keep an eye on the goodwill spend as well.
The Role of Professional Services in the Technology Industry
Professional Services play a vital role in the technology industry, acting as a crucial bridge between cutting-edge innovations and practical implementation. These services encompass a spectrum of expertise, ranging from consulting and system integration to custom software development and technical support. By providing specialized knowledge and hands-on assistance, professional services enable businesses to effectively leverage technology, navigate complex systems, and stay competitive in an ever-evolving digital landscape. Ilan discusses how below the impact of professional services from his perspective.
Jonathan: You've been working in PS for a number of years. So as you take a step back, what should the role of PS be in the technology sector? Because I think for some it's ARR enablement. For some it's a well-run business within a business. It's revenue and margin. For others, it's all of the above. What's your perspective?
Ilan: Having worked in startups and more established, larger companies, I think in startups, when they just begin Series A, Series B, it's all about ARR. And often PS has a negative margin because it's really all about the outcomes and doing everything you can to make sure you get to those outcomes and the margin and utilization. That's a second priority. But what I found, and frankly, what I strongly believe in is that the PS organization has to be a well-run business, which is it has to pay for itself at a minimum. And if it has a 5%, 10 % roughly, and the margin, that's a good thing. So the question is, should PS be an AR driver or customer enabler or a well-run business? All the above. And it's hard. It's hard because sometimes you have conflicts. Sometimes you have to do goodwill or free projects to make customers successful because of a variety of issues. But I found that if you focus on outcomes for the customer, make sure that the SWs are really well defined as to what the scope is, and I can talk about that in more detail if you like, and what the expectations are, assumptions, role, responsibilities.
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