In 2005 at a small security vendor, I was helping solution providers (SP) understand the value of managed services. For some it was easy, they understood the value of a monthly revenue stream to help even out the vagaries of break/fix maintenance and project revenue droughts and monsoons. Other solution providers took a little longer, in fact so many were taking their time, there seemed to be a thought...“managed services or die”.
It was a tough thought and it was also somewhat inaccurate. As we’ve realized, a successful managed services business isn’t intuitively easy. It requires a different mindset, one that is focused on process and standardization.
While managed services weren't for everyone, the service did make sense for smaller solution providers that depended on the higher services component in their business. They also found there is great value in having their business aligning tightly with their customer’s end goal. Both the customer and the SP desired a robust, reliable infrastructure — for the customer, a strong path to productivity and for the SP, a simpler path to profitability.
Ten years later, I’m concerned that once again we might create a new maelstrom as to what solution providers “must do or die”. That is outcome-based selling or outcome-based services. I have seen some channel-focused columns and heard vendor channel executives speak to the value of outcome-based selling but let us not oversell.
A new opportunity
In the book; “B4B: How Technology and Big Data Are Reinventing the Customer-Supplier Relationship“ (Wood, Hewlin, Lah) the authors layout that it isn’t delivery (the cloud) or pricing model (XaaS) that will drive the next iteration of the IT business. They claim: “Because what matters isn’t whether the customer hosts the product or how the pricing works; what matters is the total return they get from those investments— the outcomes they deliver.” The authors propose a “new” level of supplier to help drive this change. This supplier would go “inside” the walls of the customers building. The vendor would provide support in such a way; “At this level, the supplier’s operating model begins to pursue a new objective: helping customers extract the maximum ROI from the product.” The vendor would offer managed services AND adoption services so the customer would finally realize the productivity gains promised by the offered solution in the first place.
Outcomes as a service
As I read the book, I was struck by the thought that this was just a further evolution of the “trusted advisor” aspect of many solution providers. They were working side by side with their customers to ensure what they had installed and were managing was being used to the maximum affect by the customer. In other words, its not new but it’s a continuation of a business model that many solution providers had relied on for years.
So feel comfortable, that if you took the “managed services or die” mantra to heart and built a successful business around helping customers achieve a robust and reliable infrastructure. This next round will be similar but with more analytics helping you understand how the customer is not only adopting the solutions you provide.
How we can help
For a channel-centric vendor, this might be a substantial change in the way they view thier partner community. For many years, the accepted channel program incentives were those based on "sell a product and get a discount/rebate" or "achieve a level of knowledge and get a discount/rebate."
Just as managed services had an impact, outcomes-as-a-service will change the business model for the solution provider. Transaction-based incentives will have less value and adoption analytics will take on greater value. We can help you understand the changes you need to make in your channel programs in order to attract the early movers to outcomes-as-a-service.