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Dear members and colleagues, It's the last E-ZINE of the year, my friends, and although 2001 was far from the best of years for many of us, it's certainly been interesting! Our industry took some hits this year, to say the least, and we've all struggled to find a new equilibrium. September 11 marked the beginning of an unsettling new era, but the fundamentals of our technology-based economy remain sound and the heroic responses to the terrorist attacks remind us of the power we all have to make a positive difference in our communities. In that spirit, let's all look to a brighter 2002. And to all our readers, please accept the very best wishes from everyone at ITSMA for a happy, healthy, prosperous, and peaceful new year.
[TOP OF PAGE] What's Hot: Microsoft's Push To Solutions "I want it to become illegal to sell our product without services." —Bob McDowell, vice president, worldwide services, Microsoft As head of Microsoft's newly integrated services organization, Bob McDowell is on a mission to help transform the world's largest software company into a services-led solutions provider. With about 14,000 employees providing product support and consulting, McDowell heads the largest single entity within Microsoft. The services organization is also the company's fastest growing operation, with an estimated 30-35% growth in personnel this year. McDowell shared some key elements of the Microsoft strategy with participants at ITSMA's recent annual conference in Chicago. The following is adapted from his presentation and responses to audience questions. Microsoft continues to rely heavily on partners to provide services, McDowell noted. But the firm's growing emphasis on services "is to ensure that the customer has a wide range of options for services and that we have enough scale to put our own skin in the game when it is required." Microsoft is also pushing hard for higher value services work. "A lot of our services work in the past focused on implementing infrastructure, such as messaging systems or desktop rollouts. That is important work that we will continue, but more and more you will see us shift to solutions. Most of them will be built by partners, but with Microsoft wrapping in our technology and adding a services component to help to create solutions to real business problems." The shift means big changes in marketing and sales. According to McDowell: "Getting marketing people focused on a services message in a product company is a big challenge. Rather than talking about speeds and feeds, features and functions, we're talking about customer examples and case studies. The most valuable tool we can give our sales people is a case study that will be relevant to a customer that we are trying to convince to consider us." "We're also going through a dramatic shift to ensure that the sales force is motivated to package services into the product sale," he said. "In the past it would have been just the licensing agreement, independent of service. Then [our sales people] would come in and try to sell separate contracts for product support and consulting. We're now integrating those contracts, making them easier to attach to a licensing agreement, and we're measuring and motivating the sales force on selling both product support and consulting as part of any large contract in the enterprise." "We have decided not to build a separate services sales force. I think that is a mistake many people make. As soon as you do that, you've got competing sales forces, and the customer sees two faces of the supplier. While it may take a little more time for the existing sales force to sell services, I think in the long run—and even in the relatively short run—you're better off." The biggest challenge, McDowell explained, is cultural. "We are shifting from a packaged-product mentality to a solutions service orientation. That is a really big deal. We are probably going through the largest change-management process that the organization has ever gone through." For more information on ITSMA's recent annual conference, visit http://www.itsma.com/Events/event_desc/E10150100.htm. [TOP OF PAGE] Research Desk Getting Pricing Right (Research Excerpt) The following is adapted from ITSMA's new report on professional services pricing, which provides detailed data, best practices, and benchmarks on leading IT professional services organizations. The report covers such issues as pricing processes, fee structures, utilization rates, and margins. ITSMA recently distributed the report to study sponsors; it is now available for sale at member and nonmember rates. Pricing is one of the most important marketing tasks, yet services marketers tend to be ill prepared for the challenge. Most are not trained to deal with the "science" aspects of services pricing. Further, professional services pricing at most IT services organizations is done by committee. Sales, operations, executive management, and finance all have their hands in pricing, and everyone has a different agenda. The results are not pretty. New ITSMA research suggests that many services firms don't have a firm grasp on their complete cost structure, which makes pricing difficult, to say the least. Further, up to one-half of all professional services are being sold at a discount. Salespeople and other managers are lowering the price rather than building value. Finally, at least one quarter of professional services contracts come in over budget. Getting the pricing right is essential. If you price too high, you
may lose business to the competition and eventually erode your market
share. If you price too low, you could end up with too much of the wrong
kind of business, increasing your market share and revenue at the expense
of profitability. Several other challenges complicate the pricing issue, according to participants in ITSMA’s recent study:
Ideally, of course, pricing must be closely integrated with marketing strategy. Price communicates. Price positions. Pricing is thus, first of all, a marketing activity and should be led by the marketing organization. Services marketing might or might not have the authority to dictate pricing, but if professional services organizations are going to get the prices right, marketing's input is vital. —Julie Schwartz, jschwartz@itsma.com For more information on Professional Services Pricing Study: Pricing Practices, visit http://www.itsma.com/research/abstracts/PSS001.htm. When Not to Fund Market Intelligence Few organizations can maintain success for long without some investment in market intelligence. In many instances, a market or competitive analysis project is the only way to obtain the data necessary to make well-informed business decisions, position services offerings properly, and manage a competitive portfolio. Notwithstanding the overall importance of market intelligence, however, every market and business manager has been tempted to seek additional information or "requested" to obtain new data in situations in which the effort would simply be a waste of company resources. As most professionals can attest, market intelligence doesn't always improve a business decision or solve a marketing problem. There are times when you should just say no. Consider this: If any of the following seven scenarios match your situation, don't spend the money!
So the next time you are considering launching a custom research or analysis project, or you are asked to fund such an activity, review these seven scenarios. If any of them resemble your situation, think again. Will the information you seek significantly improve the business decision you need to make? If not, spend that money where you can get a greater return. —Mary Redford, bvi@ma.ultranet.com Mary Redford is a partner at Business Visions, Inc. (BVI) in Stow, Massachusetts. BVI provides strategic marketing and competitive analysis services to IT services marketing and business development clients. COMDEX: Solutions Take the Stage COMDEX, the massive trade show famed for introducing the latest techno-gizmos to the world, has moved firmly into the solutions market. Top speakers and exhibitors at last month's COMDEX Fall 2001 in Las Vegas focused much more on the combinations of applications, equipment, and services that together provide measurable business impact than on the new gizmos themselves. Most of those companies wrapped their offerings in the word "solution." Technology marketers have long talked the talk about business impact but only more recently have they begun to walk the walk by actually packaging business-oriented solutions instead of simply touting their latest products and features. The recent COMDEX showed that the shift is taking hold even in one of the most product-centered environments. EDS, a pioneer last year in bringing services and solutions to COMDEX, was back in November with a strong presence focused on the firm's abilities to solve complex business problems. The EDS Collaborative Solutions Center on the show floor included shared space with Cisco, EMC, and Sun to demonstrate solutions in communications, storage, and IT management. EDS chairman and CEO Dick Brown used his keynote presentation to discuss international security solutions, and demonstrated specific solutions such as a hand identifying security system in operation at Ben Gurion Airport in Israel. EDS even used a live introduction from the Las Vegas Philharmonic Orchestra to symbolize the firm's ability to manage complexity. John Chambers, president and CEO of Cisco Systems, highlighted personal productivity solutions in his keynote address, mentioning such initiatives as connecting your car to the Internet to get directions, remotely control your car, and even order from your favorite coffee shop. The Cisco booth featured a variety of integrated home office and other business solutions based on combinations of Cisco and partner products, applications, and services. Hewlett-Packard put the services side of solutions front and center through an executive forum presentation by Anne Livermore, President of HP Services. As with John Chambers, Livermore's presentation complemented HP's solutions focus on the show floor. Even eBay's CEO Meg Whitman, an unlikely star of the Las Vegas COMDEX, made a solutions pitch, suggesting that the rest of the participants look to eBay as a new purchasing and sales solution! Customers have been demanding that technology vendors address real business needs and demonstrate real return on investment. Because COMDEX historically has been an arena to showcase the latest products, the solutions focus in Las Vegas last month reflects an important industry response. As COMDEX and its top exhibitors put more solutions on stage, however, the most interesting question may be this: How will marketing at trade shows now have to change? Were you at COMDEX? What do you think of trade shows as a vehicle for marketing solutions? —Rich Staples Consulting Dyslexia (Guest Commentary by Tom Rodenhauser, Inside Consulting) "McKinsey cuts roughly 7% of its workforce—primarily support staff—to achieve annual profitability benchmarks. The news is a headline-grabber amongst consultancies. The story behind the story, though, reflects consulting's often-dyslexic approach to business. 'Our people are our greatest asset...' 'Our assets go down the elevator every night.' Consultants constantly chant such mantras. Yet faced with the practical implications of business, consultancies often resort to by-the-book layoffs that undercut such grandeur."
[TOP OF PAGE] Upcoming Events 24 January:
IT Services Marketing: State of the Profession (Online Briefing; free
for ITSMA members) For more information or to register online, visit http://www.itsma.com/events/event_desc/e01240200.htm or contact Lore Griffith at +1-781-862-8500, ext. 19, or lgriffith@itsma.com. 13-14 March: Creating Market-Focused
Growth, with Dr. Lynn Phillips (San Francisco, CA) For more information or to register online, visit http://www.itsma.com/events/event_desc/e03140200.htm or contact Lore Griffith at +1-781-862-8500, ext. 19, or lgriffith@itsma.com. Complete Events Calendar: http://www.itsma.com/aspfiles/Events/calendar.asp [TOP OF PAGE] EuroNotes: Managing the Client Experience We plan one thing; we implement another; and our clients perceive a third. Marketers have primary influence over the first element but must contend with all three. Minimising the differences among them is one of the most important and difficult jobs that marketers face, according to Graham Clark, senior lecturer at the Cranfield School of Management in the United Kingdom. Marketers focused on client satisfaction must do what they can to ensure that the client's actual services experience reflects the company's marketing plan and objectives. Speaking at ITSMA Europe's recent Client-Centric Marketing Programme (12-14 November), Clark stressed the importance of clearly defining your service concept internally and carefully designing the client experience to fit. Interested in learning more about ITSMA Europe? Contact ITSMA Europe at (+44) 01494 616027 or info@itsma.com or visit http://www.itsma.com/europe/eu_home.htm. [TOP OF PAGE] Toolbox: Extraordinary Guarantees Each month ITSMA highlights a new idea, application, or other type of tool that marketers can use immediately to strengthen their programs and organizations. What would it take to inspire clients to become passionately loyal about doing business with you? Do your clients trust that you will always act in their best interests—no matter what? Do they perceive that your commitment to their success goes far beyond the commitment of your competitors? An extraordinary guarantee makes a powerful statement to clients that you are indeed as good as your word. In our industry, where clients demand that services providers demonstrate a clear commitment to client success, an extraordinary guarantee can help separate you from the rest of the pack. Implementing an extraordinary guarantee successfully, however, is no easy task. Making it work requires a rigorous process of program design, organizational assessment, process improvement, and market testing. Visit ITSMA's Extraordinary Guarantees Implementation Guide for a step-by-step description of the design and implementation process. [TOP OF PAGE] Giving Back: Network for Good, HP Digital Village, and Salesforce.com Technology firms have continued to give back to the community in the wake of September 11. This month's E-ZINE pays special tribute to three initiatives:
ITSMA tips its collective hat to you all! For more information on these organizations, visit:
Do you have a services marketing question? (c) Copyright 2001, ITSMA Please forward this newsletter, but only in its entirety. Public citation or publication of any information herein is encouraged but subject to U.S. and international copyright law and conventions. Any citation must include full attribution to ITSMA. Individual graphics or paragraphs can be published without permission as long as attribution to ITSMA is included. Publication of longer selections or complete articles requires ITSMA permission. For permission or more information, contact pr@itsma.com. Subscription Information Subscriptions are available in text and HTML versions. To SUBSCRIBE or to change your subscription to a text or HTML version of the ITSMA E-ZINE, visit http://www.itsma.com/aspfiles/press/ezine.asp. To UNSUBSCRIBE or suggest other potential subscribers, please e-mail us at siozzo@itsma.com. Back issues of ITSMA E-ZINE are available at http://www.itsma.com/press/press_ezine.htm. |
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