IT Services 2.0 (Part I of II)

There were many discussions about IT Services 2.0 before and we have seen many definitions of the phrase. All of those are derivations of individual opinions and I don’t think there is any official definition for the concept yet. Here is my take on the next generation of IT services.

So far, the best articulated opinion I have seen is from Chris Barbin of Apprio (http://www.sandhill.com/opinion/editorial.php?id=129). While I agree with Chris on most aspects, there is an apprehension that he is limiting the scope to only SaaS based services in general, and Salesforce.com based services in particular. Here is an attempt to define IT Services 2.0 in a broader sense. It is clear that many of the thoughts presented by Chris are borrowed in this definition as well.

General Objectives

IT Services 2.0 is not too different from the erstwhile (1.0?) services in its theoretical objectives. If we were to look at both from an idealistic viewpoint, the guiding principles would look the same. The difference will primarily be in how the services are rendered and the motivations behind adhering to the objectives. The objectives recommended to be set for a 2.0 solution are:

1. Tangible business benefits to the customer
The most important objective of a Services 2.0 solution is to ensure tangible and measurable benefits to the customer’s business.  This is easier said than done. IT services companies hardly understand their customers and their business today. I don’t think we can blame these services companies because in many cases the IT departments of the customers may not have ample knowledge about the businesses their organizations are into. It is imperative that IT services companies invest in KYC (Know Your Customer) exercises throughout the engagement periods. The services company should be able to understand, articulate, deliver, and reiterate the business benefits derived out of an engagement to the customer.

2. Smaller and measurable project life cycles
In today’s scenario, customers don’t have the stomach for monolithic projects. In my opinion, the biggest positive to the IT industry from the global economic downturn will be the intolerance to very large IT initiatives. Since every investment will now be dissected and analyzed in all possible directions, it is essential to realize an ROI and that too in as little time as possible. So, individual IT projects will be looked at as 3-6 month exercises that will start yielding benefits within a maximum of 7-8 months from the initial decision point. This will enable the customers to realize the ROIs within the same budgeting year.

3. Expectations on value addition
A major requirement for a 2.0 service provider is to be savvy about the customer’s business parameters. Rather than supplying with lines of code or people who can code, these firms will be expected to provide the customers with ideas and suggestions as to how technology can help improve their business. The services firms will be expected to bring expertise and prior experience in solving the exact problem the customer is facing today.

4. “Show me” as compared to “Tell me” approach
The current approach to IT services puts a lot of thrust to tons of presentations, documents, status reports and innumerable meetings. Both the vendor and customer spend too much time and effort in communicating with each other formally with words, numbers and pictures. The thrust of the 2.0 services will be to show how things work right from the first meeting. “Show Me” as an approach will play a significant role in selling the services as well, thus reducing the sales cycle times drastically. SaaS will be a significant delivery model in 2.0 services and with the hosted approach, “Show Me” will be lot easier for the service provider to handle and the customer to comprehend.

5. Assembling instead of building
Building software from scratch is a thing of the past. Now we are surrounded with umpteen enterprise software platforms, technology frameworks, and rapid application development toolkits. Many of the current service providers make use of “reusable components” they have accumulated over a long period of time. I am talking about going to the next level of software solution preparation. This process will be carried out more by solution consultants with minimal effort from programmers. To achieve reduced turn around time for solution delivery, services companies will have to practice the art of quick solution assembly.

6. Paying for value generated and not for resources
What all these will culminate into is a significant shift in service vendors’ mindsets. Service 2.0 companies will not talk about billability of resources, will not send timesheets for customer approval, and will not look for deploying their workforce on customers’ sites on contract. Instead, the focus will be on how quickly they can get out of a customer’s active project. Billing will be based on the achieved business value generated. Most contracts will be subscription based or fixed bids.

What are the key ingredients of a successful 2.0 IT services offering? I have some thoughts on it as well. More on that topic, next time!

Selling ECM in India

I have been convinced for a while that the ECM market in India is huge. In the previous post, I tried to put my thoughts across on that topic. But as a practitioner and vendor of ECM, the struggle has been selling the expertise and solutions in this market. My experiments with selling ECM have been going on for the past three years. Innumerable mistakes were made, many lessons have been learned, plenty of ideas were generated, and a bit of success was tasted during this period.

Selling ECM or any enterprise system in India is not an easy task. There are certain facts about the software market in India that any vendor should internalize:
• Nobody wants to pay for software (They will, if left with no other choice)
• Hardware is everything
• Priority number one for any purchase decision is save-my-back
• Customer expects every feature under the sun in what you sell
• Vendors should only listen to the customer at least till the purchase order is issued (You should continue to listen till you get paid for your own sake. But, once the money is in the bank, customer will have to listen to you)
I am exaggerating a little here, I admit. But you will experience something close to these observations in 8 out of 10 software sales cycles.

Let us get more ECM specific now. The ECM market in India can be roughly divided into 3 as observed by a vendor. The segmentation is of course based on pricing:
• Segment 1: Up to 5 Lakhs (USD 12,500)
• Segment 2: Between 5 and 25 Lakhs (USD 12,500 to 62,500)
• Segment 3: 25 Lakhs and above (USD 62500 and above)

The vendors should very clearly position themselves in these brackets. No matter which segment you are playing in, the customer expects value for the money paid. Whether they get it or not is debatable.

Segment 1 is a complex market. You can sell initially if you know somebody closely at the target prospect, if you can impress just one of the top decision makers very well, or just by harassing the hell out of somebody at the prospect with your sales calls. Once you are done with some initial sales and have a couple of customers on board, your problem starts. Selling consistently in this segment is the most difficult task. You can’t justify direct sales efforts with the kind of pricing that works here. The product has to be very easy to setup and run. You should have specific vertical scenarios well mapped into the product. Scaling up will need setting up of a good channel network. The problem with channels that work on volumes and smaller margins per sale is that they many not have any expertise in managing the customers, their requirements, or problems. Until and unless you have a great product, good support infrastructure, and good documentation, bringing in revenues in this market is almost impossible. In India, I haven’t come across any vendor who has done a great job at cracking this problem. One of my failed attempts was to get into this market with a Microsoft SharePoint Services based ECM product. I have written about that story sometime last week.

Segment 2 is the crowded space. Almost every ECM vendor in the country had at least one go at this market. NewGen has been here for a while, and they captured a good percentage of the market by being here long enough. IBM DB2 Content Manager had its own share of success in this market. FileNet, Documentum, and Interwoven have tried to get into this segment as well. This market segment is sensitive to everything that you can imagine like price, features, integration capabilities, market presence etc. in that order. This market segment includes mid-sized organizations and departments within larger companies. What you sell in this segment will include the product(s) and implementation services. Once you can minimize the implementation efforts by pre-packaging as much possible in packaged solutions, you as a vendor will be able to survive in this market. Mostly the customers don’t care too much whether the solution is open source, Microsoft, Java, proprietary, or standards based. The main factor still will be the price. The problem with the market segment is that the sales cycles can go anywhere up to 8 months or a year until you either win the deal or just get thoroughly fed up.

Segment 3 is a new evolving market segment. Of late, some organizations have realized the importance of looking ECM as an enterprise wide initiative and not at departmental level. The success stories in this segment for the vendors come from global customers who end up rolling out the globally standardized corporate ECM solution in India as well, or certain forward looking companies adopting ECM for their India operations. The main drivers for the ECM solution selection are return on investment calculations, vendor alignments, corporate global standards, and of course save-my-back considerations. Many times technology or product features have nothing to do with a product or solution selection. This is precisely why the bigger players such as IBM, Oracle, EMC2, or HP are bound to control this market segment. I am not convinced that open source or solutions from smaller vendors can make a big impact on this segment. I predict a straight fight between IBM FileNet and EMC2 Documentum in this segment.

Segment 3 provides huge opportunities for service providers as well. As stated above, the product choice has something to do with reasons other than technology. But once the selection is made, technology and expertise come to the fore. There exists a good eco-system around products such as FileNet or Documentum that makes the customers less dependent on the vendors themselves. Every customer will look out for local implementation and support availability. I sincerely hope that people like me may not starve after all!!