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    ASPonline.com  >  Reports  >  How to Grow Professional Services
 

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How to Grow Professional Services
Publication date: 7/06


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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