Should Enterprise 2.0 Software Vendors Offer Professional Services?

Here is re-post from FastForward as I wanted to see if I could stir up some more conversation on the topic. An interesting question was raised in the post, Should Software Vendors Also Sell Professional Services?, by Stewart Mader. He quotes Oliver Marks, "The reality for all "social community" roll outs is that the software is a relatively minor component compared to the change management required to drive uptake and usage and to weave the software into the business fabric of day to day use." I certainly agree here and was even part of a panel at Enterprise 2.0 Conference in 2007 titled: 90% people, 10% technology.

Stewart goes on to quote Jive's Gia Lyons, "Most of what we do could be done with almost any other social software tool, but naturally, we only make ourselves available to Jive customers." Stewart then writes in reaction, "If most of what they do could be done with other software, then why only make themselves available to Jive customers? After all, isn't professional services an even larger source of revenue than the software? That's how SharePoint works. Microsoft sells a basic infrastructure on which lots of 3rd party consultants build and customize tools that meet each company╒s needs."

I would certainly agree with the last statement about revenue sources. When I was part of a large consulting firm we usually figured the system integration costs were about 3 to 5 times the software costs.

Stewart then implies that software vendors will not have the objectivity of third party implementers who can use a variety of tools. Having been on all sides of this equation, I think that this is a complex issue. I like Jon Mell's comment to the post, "I think it╒s slightly more subtle than vendors only trying to validate the sale. If a customer invests in Jive (or any other product) there is a mutual interest in making sure the solution works. If that also happens to validate the vendor╒s sale it doesn╒t automatically mean it╒s wrong and not in the customer╒s best interests."

I would add that just because the professional services firm is independent of the software vendors, there are many alliances that will provide motivation similar to an internal services provider. I was the alliance sponsor for three portal software firms while working for a large consulting firm. There were several tiers of alliances and many wide-ranging agreements and motivations. In the end you have to be able to trust your service provider, whether they are inside or outside the official software provider and trust that there is full disclosure

I have also seen situations where the software firm's internal people partner with a third party developer. This happen on a knowledge management project I led in the early 2000s. It worked well because the internal experts gave us their unique knowledge to help with the implementation and served as a connection to the software firm. The project was a success and promoted by both the very large software firm and the consulting firm, my employer.

In the 80s I was involved in another situation were it made sense to use the software firm's service providers. My employer was a firm that sold CBT software. This firm originally thought that over half their income would come from selling software. I was the head of customer development and we only used our tools. What actually happen was that selling software accounted for only about 10% of our revenue. The rest came from custom development, as our clients would rather pay us to use our tools than purchase the tool themselves. Now software for learning development is a bit of a specialized case, as you need expertise in creating good learning materials as well as using the software.

In the end the answer to the question is not yes or no but the old "it depends." There are many issues to making enterprise 2.0 work (see McKinsey on Making Enterprise 2.0 Work is Reminder of Process Centric KM in Early 90s) and I think there is a role for software firms to engage in this implementation for everyone╒s success.

What has been your experience on this issue?

Post Script. Thanks to Social Computing Journal for republishing this.

Comments

[Sameer Patel]

Hi Bill
Having had also spent many years on the consulting side, my belief is that with Enterprise 2.0, the need for vendor provided professional services is going to be significantly larger than it’s been for previous technology innovation spikes. First, most of the return on social computing software is nebulous so it’s necessary to identify what processes can gain the most and how to drive adoption and change. Second, I believe that larger SI’s are not going to pay attention to this space for a while and so the onus is on the vendor to provide thought leadership.

I also believe that there’s a fabulous opportunity for new upstart consulting outfits to fill the gap (as we saw from my alma mater marchFIRST, Scient, Razorfish, etc., in the late 1990s). The reality is that most E2.0 vendors have to put what’s remaining of their funding towards product development and awareness. Instead of scaling a PS team, they need a network of reliable partners to pull in.

There’s also an ugly side to this that hasn’t been discussed but that’s worth noting. I’ve heard of at least 2 instances where the vendor has sidelined consulting services as part of the sale for fear of ballooning the initial investment and potentially loosing the bid. That’s led to purchases that are seeing timid adopting since the customer hasn’t fully understood how to use the product. It’s dangerous short term thinking not to mention if it’s a SaaS solution, come renewal time…well there likely won’t be one.

[Bill Ives]

Sameer - Thanks for your comprehensive comments. I certainly agree about defining processes that can benefit as that will be where you cam measure concrete ROI. Many E20 software can generate the cost reduction from the switch to the cloud. Many vendors who are E20 and cloud have told me that they are having record profits because they are seen as cost reduction drivers. Then the increased productivity within processes can be an addition to the IT cost reduction. An experienced consultant from vendor or not can help companies sort all this out. I also agree about the opportunities for start up experts in E20.

[Sameer Patel]

To my last point about vendors sidelining PS, to be fair, I should also add that some vendors are getting creative about this. For instance, instead of front loading the sale with long drawn consulting engagements, they offer short, focused workshops to ensure that pilots are as successful as they can be.

[Bill Ives]

Sameer

Good addition. I think there is a great opportunity here. When I was with a startup software firm in the 80s we made much more money with services than selling the software. Bill