Leveraging PS as a Key Ingredient to Profitable Growth

Professional services (PS) are a key ingredient to customer satisfaction and profitable growth for technology companies. While many leading technology companies recognize this opportunity – as evidenced by IBM’s radical transformation to focus on services, HP’s acquisition of EDS and Dell’s acquisition of Perot Systems – others do not.

We often encounter technology executives who incorrectly label PS as a low return, and thus undesirable, business. They incorrectly compare the margins of PS with those of higher margin software license or maintenance businesses. However, these executives fail to recognize that PS businesses have fundamentally different economic models than technology product businesses. Moreover, they fail to see the 3 key benefits that a healthy PS business provides:

1. PS provides a robust source of profit growth and economic value: IDC, a technology market research firm, sizes the worldwide IT services market in 2009 at $590B. This market size is equal to the size of technology hardware market and is double that of the software market. Tapping into this large market provides a technology firm with a complementary outlet for revenue and profit growth alongside its products.
2. PS enhances the customer experience and helps customers achieve IT project ROI: Due to the increasing complexity of technology, delivering high quality hardware or software products to customers is simply not enough. The added complexity increases the risk that a customer will encounter problems with the implementation of either the technology or the process improvements, which puts their IT project’s ROI at risk. PS is a critical ingredient to ensuring the successful implementation of technology, enabling the associated process improvements and achieving project ROI. The outcome is enhanced customer satisfaction.
3. PS creates additional sales opportunities: On the sales side, PS gives technology companies the ability to build deeper relationships at all levels within customers’ organizations. These deeper relationships provide more opportunities to engage customers in discussions about additional technology and service offerings. On the offerings side, PS is the key enabler for technology companies to develop and sell solutions.

Through building a strong PS business, technology companies can grow their overall profits, enhance customer satisfaction and create additional sales opportunities. All of these benefits, in turn, strengthen the core hardware or software business.