Service Productization The Next Wave in Services Innovation Service... · Market and Service Portfolio expansion 3.66 3.41 3.87 Drive Innovation 3.53 3.37 3.67 Client Demand For More

Service Performance Insight www.spiresearch.com

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Copyright © 2012 SPI Research.

All rights reserved. Not for distribution.

October 25, 2012 Presented by:

Jeanne Urich Steve Bittner Managing Director VP of PS SPI Research Unanet


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Service Performance Insight Accelerate Service Productivity & Profit

Copyright © 2012 Service Performance Insight, LLC All Rights Reserved. Not for Distribution.

Service Productization

The Next Wave in

Services Innovation



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Service Productization

Why?

What is a Productized Service?

Benefits?

How to Productize Services

Service Product Examples

Benchmark results

Lessons Learned

Unanet case study

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WHY PRODUCTIZE SERVICES?

Service Productization: The Next Wave of Innovation

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Changing Industry Dynamics Intensify PS Pressure

4

Sophisticated

Procurement

Practices

Increased Project

Complexity

Rapidly Changing

Technology

Environment

Global

Competition

PSO

Revenue

& Profit



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All rights reserved. Not for distribution. 5

PSOs Experience Pressure from Many Constituents

Finance &

Operations

Directives

Career Path, Work / Life

Balance

PS Resource

Requirements

Sales and

Client

Demands

PSO

Revenue

& Profit



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Clients Demand More!

“Value” is the new favorite word

of client execs

Shorter, faster projects

PS firms response: productize

service portfolios

Done right, productized services

can open up exciting new

revenue and profit streams

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Market Challenges Driving Service Productizing

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Challenge Survey

Average

Embedded

PSO PSO

Service Differentiation and Improve Sales Effectiveness 4.29 4.13 4.43

Pressure to Accelerate Project Time to Value 3.83 3.89 3.77

Market and Service Portfolio expansion 3.66 3.41 3.87

Drive Innovation 3.53 3.37 3.67

Client Demand For More Tangible Service Offers 3.27 3.15 3.38

Commoditization of Your Services 3.00 2.76 3.20

Pressure to Provide Packaged Cloud Services 2.31 2.41 2.22



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WHAT IS A PRODUCTIZED SERVICE?

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By Definition…

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service productization [noun]

the process of delineating, building, deploying, and enhancing a

clearly defined service process to achieve operational

improvements in support of an organization’s strategic

objectives

service lifecycle management [noun]

the process of managing the entire lifecycle of a portfolio of

service products from conception, through definition and

development, to enhancement and retirement



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Productized Services Defined

A pre-defined and clear offering

or deliverable

Consistent knowledge and

skills required to deliver the

service

Uses a consistent standard

methodology

Supporting tools and templates

Quantifiable costs and

demonstrable value

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BENEFITS OF SERVICE PRODUCTIZING

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Why Productize?

Clearly defines client “pain”,

business value and deliverables

Makes services more tangible

Tight scope/assumptions - easier

to create estimates and proposals

Improves consistency,

repeatability and quality

Reduces delivery cost, time and

risk

Ability to use less-experienced

resources

Improves revenue recognition

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Desired Results from Packaged Service Offerings

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Desired Result Survey Embedded

PSO PSO

Easier to sell, position and expand service revenue with a

complete service portfolio 4.49 4.56 4.44

Clients understand business value – shortened sales cycle 4.33 4.41 4.25

Improved revenue and profit from predictable costs, resources,

time and deliverables 4.10 4.09 4.11

Improved ability to propose, estimate and manage fixed/time price

bids 3.92 3.96 3.89

More projects delivered on-time, on-budget with reduced risk and

improved consistency 3.83 4.04 3.65

Enhanced intellectual property value around methods, tools, and

processes 3.58 3.22 3.89

Ability to sell into new markets 3.51 3.43 3.57

Clear policies, roles, blueprints, templates and tools accelerate

new-hire ramping 3.23 3.42 3.07



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HOW TO PRODUCTIZE SERVICES

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SERVICES STRATEGY

PORTFOLIO MANAGEMENT

CHANGE MANAGEMENT

PROJECT MANAGEMENT

CHANGE MANAGEMENT


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po

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Pla

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Sp

ec

ific

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rv

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Re

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Ge

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vic

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SLM3™ METHODOLOGY

SLM3™ - SPI’s Proven Methodology



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SLM3™ Roadmap

INNOVATE DEFINE DEVELOP LAUNCH OPTIMIZE PHASES

ACTIVITIES


CHANGE MANAGEMENT FOUNDATION

Approve Launch

Develop Training

Materials

Close

Development

Project

Conduct Market

Validation & QA Propose Service

Product

Approve Service

Product Definition

Track Feedback &

Results

Plan for Next

Release

Perform Service

Product Strategic

Planning

Create Internal Launch Plan

Develop Marketing

Materials

Launch Service

Offering

Evaluate Market Reaction

Assess Service

Product Alignment

Create Service

Specification

Establish

Go-to-Market Plan Conduct Training

Analyze Marketing

Performance

Request Service

Product

Create Project

Plan

Develop Service

Product Conduct Pilot

Program

Analyze Field

Performance

PROJECT MANAGEMENT



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SERVICE PRODUCT EXAMPLES

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Industries

Automotive

Consumer Goods

Financial Services

Life Sciences

Service Product Portfolio Example

Service Lines

ERP

Human Capital

Management

Product Lifecycle

Management

Business

Intelligence

Service Offerings

Business Strategy

Operational

Excellence

PLM Solutions

Technical Services

Analytics

Service Products

Big ROI

Implementation

90-Day PLM Quick

Start



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Achieve Breakthrough Results in 90 Days!

Our 90-Day PLM Quick Start delivers speed to production

Get Ready

Get Set Go!

Rapid implementation methodology

Training sessions and hands-on workshops included

Proven approach with over 150 delighted clients

ADOPTION

Usability – ease of use incorporated in approach

Stakeholder involvement accelerates adoption

Rapid transfer of ownership to business drives ROI

ROI

SPEED

QUALITY

Best practices embedded in solution

Includes easy to use best practice guides

Flexible, user-defined processes support future

changes



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Best Practice Productized Service “Packaging”

Contents

Instructions

Delivery Guides

Tools

Templates

Practices, methods,

processes

Links to supporting systems

FAQs

Best practice examples

Requirements

Content for each service

product reinforces

engagement framework

Easy to navigate

Easy to consume

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What does a productized service look like to a delivery

professional?



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SERVICE LIFECYCLE MANAGEMENT

MATURITY MODEL™ BENCHMARK RESULTS

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Leadership

Client

Relationships

Human Capital

Alignment

Service

Execution

Finance

& Operations

No service

portfolio plan or

investment

No plan, budget,

systems or

metrics

Manual

Inconsistent

Tactical

Reactive

Instinctive

Jack of all trades

Heroic

Ad Hoc

Opportunistic

Service portfolio

strategy & plan

emerges

Campaign-driven

point solutions

Borrowed

rotational

resources

Standard

methodology &

tools

Budget, metrics,

controls

introduced

Piloted

Pockets of

excellence

Strategic service

portfolio plan

Exec sponsorship

Programmatic,

comprehensive

solutions

Dedicated, skilled

service portfolio

team

Global, consistent

methods, tools,

standards

Automated

budget, metrics,

controls

Deployed

Basics in place

for all key

elements

Service portfolio

management

operationalized

Strategic, global

brand,

quantified value

Strategic

Visionary

Automated

service lifecycle

management

Streamlined

Real-time

Self-service

Institutionalized

In organization’s

DNA

Service portfolio

drives market

expansion

Industry-leading,

innovative,

trusted advisors

Thought-leading

portfolio

management

Advanced service

lifecycle systems,

tools

Real-time

analysis & insight

Optimized

Visionary, agile,

innovative with

continuous

improvement

Maturity

Service Lifecycle Management Maturity

Retu

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vestm

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t

Level 1

Level 2

Level 3

Level 4

Level 5

Service Lifecycle Management Maturity Model™



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Level 1

Initiated

Heroic

60%

Ad-hoc,

Opportunistic

Level 2

Piloted

Functional

Excellence

15%

Experimental,

Pilot Stages

Level 3

Deployed

Project

Excellence

10%

Basics in

Place for all

Key Elements

Level 4

Institutionalized

Portfolio

Excellence

10%

In Company’s

DNA /

Fabric

Level 5

Optimized

Collaborative

5%

Visionary,

Agile

Innovative,

Continuous

Renewal &

Improvement

102 PSOs – 46 Embedded, 56 Independent

415 PS employees with $83M in PS revenues

Service Productization Maturity

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Service Lifecycle Management - Maturity Matters!

Service Packaging Focus

Level 1

Initiated

Level 2

Piloted

Level 3

Deployed

Level 4

Institution

Level 5

Optimized

58 15 11 11 7

Initiation of Service Portfolio packaging (years) 2.4 4 3 3.2 4.6

% service revenue from productized services 21% 33% 22% 45% 61%

# of new services launched in the past year 2 4 3 3 5

Months from idea to service launch 10 13 7 6 6

FTEs performing Service Packaging 1.7 4 3 3.5 8

A defined service packaging process and

discipline exists (1 to 5 scale) 2.3 2.7 3 3.6 4.5

% of "reference-able" clients 69% 70% 74% 88% 88%

% of revenue from New Clients 27% 31% 33% 37% 41%

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Service Execution

Level 1

Initiated

Level 2

Piloted

Level 3

Deployed

Level 4

Institution

Level 5

Optimized

58 15 11 11 7

Project Management Methodology 2.7 2.5 2.8 3.6 3.6

Service Productizing Methodology 1.8 1.7 2.4 2.9 4.2

Knowledge Management Processes,

Systems 2.1 1.8 2.2 2.4 3

Service Product Training & Roll-out 1.3 1.3 1.8 2.1 2.8

Quality Management 1.9 1.7 2 2.5 3.4

Average Project Duration (Man-Months) 3.7 7 9.7 11 14

Projects Delivered On-Time 67% 77% 83% 86% 95%

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The Effect of Service Productization Maturity

on Service Delivery Consistency

Initiated

Level 1

Piloted

Level 2

Deployed

Level 3

Institution

Level 4

Optimized

Level 5

Ad hoc / one-off services 36% 16% 28% 25% 18%

Standard methodology / ad

hoc delivery 30% 41% 40% 20% 19%

Standard methodology /

standard delivery 34% 43% 32% 55% 63%

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LESSONS LEARNED AND RECOMMENDATIONS

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Service Productization Prerequisites



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Service Productization Failure Points

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Innovate • Misunderstood or not enough client “pain”

• No market sizing or business case

• No competitive differentiation

• No overall plan or portfolio – Service Product “One-offs”

Define • No business plan and/or executive support

• Unrealistic expectations – both revenue and cost

• No committed resources

• No Service Productizing blueprints, methods, tools or competency

Develop • Without committed resources, service productizing takes too long, costs too much

• No repeatable methods, tools, IP or plan for re-use

• Not enough field feedback around “use cases”

Launch • No Sales, Marketing or Launch plan – no internal buy-in

• Not enough time or resources committed to training

• No Beta or reference customers

Optimize • No method for capturing client and field feedback

• No methods or tools for improvement

• Poor field and client reception – missed revenue commitments

• No metrics or measurements tied to compensation



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Show me the money!

Level 1

Initiated

Level 2

Piloted

Level 3

Deployed

Level 4

Institution

Level 5

Optimized

58 15 11 11 7

Total Professional Services Revenue (M) $66 $74 $158 $17 $226

Service Packaging Spend as a % of Service

Revenue 1.7% 1.6% 2.1% 2.0% 1.5%

Gross Margin from Packaged Services 32.8% 38.7% 36.4% 39.5% 49.3%

Annual Revenue per Billable Consultant (k) $151 $253 $236 $277 $275

Annual Revenue per Employee (k) $122 $188 $198 $239 $254

Average Revenue per Project (k) $139 $142 $199 $306 $189

Percent of Annual Revenue Target Achieved 90% 97% 99% 110% 98%

Percent of Annual Margin Target Achieved 84% 94% 91% 102% 103%

EBITDA % 8.8% 14.7% 16.6% 23.3% 26.1%

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SPI’s Point of View …

Industry dynamics are

driving service

productization

Adopting a well-coordinated

service productization

initiative delivers significant

strategic benefits

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Integrated business applications and a consistent

service lifecycle management framework are

fundamental prerequisites



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Thank you for attending!

Special webinar attendee

$100 discount on the

Service Lifecycle

Management Maturity

Model™ Benchmark

SPI offers a 2 day Service

Lifecycle Management

course!

32



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Service Productization – How a PSA Tool Can Help

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Innovate • Misunderstood or not enough client “pain”

• No market sizing or business case

• No competitive differentiation

• No overall plan or portfolio – Service Product “One-offs”

Define • No business plan and/or executive support

• Unrealistic expectations – both revenue and cost

• No committed resources

• No Service Productizing blueprints, methods, tools or competency

Develop • Without committed resources, service productizing takes too long, costs too much

• No repeatable methods, tools, IP or plan for re-use

• Not enough field feedback around “use cases”

Launch • No Sales, Marketing or Launch plan – no internal buy-in

• Not enough time or resources committed to training

• No Beta or reference customers

Optimize • No method for capturing client and field feedback

• No methods or tools for improvement

• Poor field and client reception – missed revenue commitments

• No metrics or measurements tied to compensation



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Service Productization – Analyze Historical Projects

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Evaluate similar projects for

costs and duration

Actual cost of historical project



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35


costs and duration

Actual cost of historical project



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costs and duration



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Service Productization – Define Service Product

37

Templatized Delivery Plan for

Service Product

Service Package estimated costs based on historical projects



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Service Productization – Locate Qualified Resources

38

Locate appropriate resources.



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Service Productization – Track Performance

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Track performance of actual costs… Against Service Package template.

Actual costs versus Service Package estimated costs



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Service Productization - How a PSA Tool Can Help

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Innovate Benefits of a PSA Tool

Define • Analyze historical data for cost variances, resource needs for

both labor and other direct costs.

• Analyze historical data for variability in project durations.

Develop • Create project templates including WBS elements.

Launch/Execute • Locate optimal resources for project staffing.

• Track actuals against template for ongoing refinement.

Optimize • Adjust service package scope, cost, resources to better serve

market.



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Service Performance Insight®

Accelerate Service

Productivity & Profit™


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Service Productization The Next Wave in Services Innovation Service... · Market and Service Portfolio expansion 3.66 3.41 3.87 Drive Innovation 3.53 3.37 3.67 Client Demand For More

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