Solution providers are looking for differentiation as commoditization relentlessly reduces the margin on IT hardware and software sales. The differentiator that many have chosen is service delivery.
While hardware and software are following the path of price to cost as capabilities become more standardized, service can still command a high margin.
The problem for many solution providers, though, is how to develop a service presence that resonates well with potential customers.
In other words, how much service should a solution provider deliver? How should the service be delivered? And, most importantly, how should service be marketed to maximize the return to the solution provider while maximizing the value perception to the IT customer?
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The bad news is that one service model definitely doesn't fit all customers. The good news is that by understanding the service delivery continuum, it is possible to build a service delivery capability and then tailor specific parts of it to match most closely your customers' expectations.
In a book that Martha Young and I wrote, "The Case for Virtual Business Processes: Reduce Costs, Improve Efficiencies, and Focus on Your Core Business," (Cisco Press, 2003) we pointed out that the virtualization process is a continuum that extends from the extreme of no virtualization at all to a complete outsourcing model.
While the virtualization continuum is really more than just IT support, from the perspective of service delivery, it actually works pretty well. Outsourcing is really the delivery of a complete service by a third party, where the entire IT function is taken over by a third party, while no virtualization encompasses the idea of no support services at all.
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From the perspective of this continuum, it is clear that for many customers no support at all and complete divestiture of support are extremes that are not terribly appealing. Most customers, it turns out, are likely to fall in the middle of the continuum somewhere. This, in fact, has been recognized by others as the increasing popularity of selective sourcing has shown.
The implication of this is that most service models that customers desire are likely to be of a limited nature that are designed to buttress rather than replace in-house IT support.
This is going to be especially true of large enterprise IT organizations, whose desire is to maintain as much internal control over service quality as possible. But how do you know how far to go in delivering service?
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One good way is to develop a service catalog that ties specific kinds of service activities to particular business processes--bench marks, if you will. In this way, a customer will look at the business process for which IT solutions are being deployed and will be able to select service offerings that match that process.
As an example, if hardware and software are being delivered to support a CRM implementation, natural services could be database and server support or help-desk support for CRM users.
It isn't necessary or desirable, necessarily, to offer to outsource the CRM functionality, but if you are able to provide such a service, you should include it as well.
The bottom line is that selective business specific services are likely to add a great deal of value to the customer's operations while allowing you to tailor the services you deliver. The key is to understand the service delivery continuum and tailor your offerings to match.
Mike Jude is an expert in business process optimization and is a research director at Ptak Noel Associates. He is also a co-founder of Nova Amber, a business process virtualization consulting company. He can be reached at mjude@ptaknoelassociates.com.
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