Building Professional Services

Building Professional Services
The Sirens Song
Thomas E, Lah
Steve oConnor
Mitchel Peterson
The Siren, by John William Waterhouse (circa 1900)

Content
0.Why Product Companies Jump In
1.Mapping the voyage
2.Setting the parameter
3.Levers for Profitability
4.Organizational Overview
5.Selling
6.Delivering
7.Productizing
8.Promoting
9.Operational Infrastructure
10.
Putting it all together
11.
Customer Engagement Workflow
12.
Four phases of Building PS
13.
Unique Issues
14.
Appendixes
Why companies jump in?
PS are not dramatically different from

support or education services
(PS are dramatically different in size, scope
and risks, not directly linked into own
products)
PS should be a high margin component
in a product company
(Many product companies has PS at break-
even or slightly unprofitable)
The Product-Services Wheel
Product
Services
Products Product-centric
b
Service-centric Services
Productized
Services
Types of Services offered by product
Service Description
companies Tag lines Pricing attributes Length Proposed benefits
name Attributes
Support Basic Break-fix services 24/7; Fixed % of product Annual Insurance policy for the
Services for product company Remote cost. Price also driven contracts customer
Admin; Help by response time. during the
Desk life of the
product
Education Product training E-learning Fixed % of product cost Services Increased employee
Services Web- OR per class. Also, measures in productivity and
Learning training units days of employee certification
available as part of the training
product sale.
Implementatio Standard services Quick Start; Fixed price per service 1 day 4 Decreased time to
n services designed to help System requested weeks implement product and
customer implement Tuning; improve effectiveness of
product faster or make Performance products already
product more efficient analysis implemented
Consulting or Custom services Business Variable price; driven 2 weeks 6 ROI; reduced risks and
Professional designed to truly solution; by complexity or months time to implement
services integrate the product into Best deliverable business solution
customers business practice,
Turn-key
integration
Outsourcing Staff provided by product Staff Fixed price per head Months- Reduced costs and
services company to actually augmentatio Years increased customers
administer the product n focus on core
on an on-going basis competency
SAR Services Alignment Risk
Professional Services
SAR Factor
Managed Services
Education Services
Support Services
Core Products
Good reasons to offer new services
Client interest in business solution as opposed to point products
Services are services, managing a PS
within a product company is not
different from managing a stand-alone
PS
(There is fundamental differences. If
they are not understood, it will be
difficult for a product company to build
profitable PS organization)
1. MAPPING THE VOYAGE

1.1 Parameters for Success
1. The mission of your business unit
Recipe approach
1.2 Product Company PS
vs stand-alone PS
Parameter Stand-alone PS PS within a Product
Company
Mission Deliver outstanding Customer satisfaction and
customer services, hire and product pull-through
retain the best talent,
achieve financial success
Strategic objectives Grow installed based Educate sales force on
Improve /maintain billable selling and positioning
utilization rate services. Develop software
and tools to complete
product offering
Business Model 40%-50% gross margin 20%-30 gross margin
10%-16% operating profit 0-10% operating profit
1.3 Frameworks for Building PS
Product-service wheel; 10 key parameters
Offering high-margin PS is a sound business
move for product companies
(Decision to build PS must be reviewed before agreed
to. Not all product companies are well positioned to
offer PS)
2. SETTING THE PARAMETER

2.1 Four qualifying questions starting PS
Can we articulate what differentiates us from the rest?

2.2 Mission
2.3 Business Model
Product company with PS Stand-alone PS
Product Industry Industry Management System
Company Average Target Consulting Integration
Revenue 100% 100% 100% 100% 100%
Gross Margin 42.5% 25.0% 30.0% 40.0% 45.0%
Operating Expense
R&D 10.0% 1.8% 2.0% 10.0% 10.0%
Sales 11.0% 8.9% 5.0% 5.0% 8.0%
Marketing 7.0% 1.4% 2.0% 5.0% 6.0%
General&Admin 7.0% 15.7% 8.0% 5.0% 13.5%
Total Expenses 35.0% 27.8% 17.0% 25.0% 37.5%
Operating Profit 7.5% -2.8% 13.0% 15.0% 7.5%
2.4 Objectives
Finalize mission and business model
2.5 Guiding principles
Topic Description Potential issues Senior Mgmt Comments
involved
1. Account Mgmt How will PS and Poor a/c planning VP of PS and
traditional sales work Uncoordinated sales VP of Product
together to mgmt efforts. sales
customer a/c?
2. Business Who will fund biz dev PS asked to perform at VP of PS, VP of
Development investments with low or negative Product Sales,
funding strategic customers margin for strategic VP of
customers Marketing
3. Compensation How will PS Compensation plan VP of PS, VP of 1. Establish a program that is
compensate its staff? does not drive needed HR consistent with the mission and
results goal
2. If mission and goals change, change
the comp plan
3. Pay for performance, not seniority
4. Link program to job types (sales
compensated with revenue target,
delivery with project performance,
operations based on mile stones
4. Internal Policy for transferring W/o policy PS will VP of PS, VP of
transfer employees from cherry pick staff from HR, VP of
other depts into PS? sales/delivery/others Product sales
2.5 Guiding principles (cont.)
Topic Description Potential Senior Comments
issues Mgmt
involved
5. Intellectual How will new Failure to VP of PS, VP 1. Senior mgmt must demand that IP captured and
Property IP be gathered gather/develop of reviewed
Transition and developed IP hinder new Marketing, 2. Staff should have incentive to capture IP
solution VP of 3. Guidelines to be applied consistently through-out
development Engineering the company
4. Simple process to optimize collection time
5. IP must be captured asap to avoid losses through
personnel movements
6. Existing IP to be review periodically
6. Partner Process for Signing up new VP of PS, VP 1. Select a group of partners to further expand current
management identifying, partners that of offerings and opportunities
qualifying, create direct Marketing, 2. Do biz with the partner as a consulting customer
negotiating, conflict with VP of 3. Jointly develop and deliver new high-value services
signing new other business Product that generate incremental revenue
partners. What units. Sales, VP of 4. help customers focus on core business, not
to optimize Engineering technology
when signing 5. Leverage on scare HR, co-marketing funds,
new partners? equipment pool, training capabilities
6. Supplement with skill sets not yet available
Topic
2.5 Guiding principles (cont.)
Description Potential issues Senior Comments
Mgmt
involved
7. Revenue How will revenue be With unclear VP of PS,
recognition recognized between PS and guidelines it is difficult VP of
other business units (eg, for PS to predict Product
would PS receive revenue revenue. sales, VP of
recognition for products Marketing
included in PS contracts?)
8. Solution How will the overall company Failure to develop and VP of PS, 1. Use incentives at all level for new
Developme fund new solutions? invest in new solutions VP of ideas
nt Funding will inhibit progress Engineerin 2. Create simple way for new ideas to
thru the 4 phases g, VP of be included in new biz cases
Marketing 3. For ideas that create potential
solutions, develop comprehensive biz
cases.
4. Have senior execs team review,
approve and fund solution
5. Establish accountability for solution
back to the company
6. Review instituted solutions to ensure
it is in line with objectives
7. Fund only those solution with
greatest return to the org
9. Support How will PS and existing VP implement 3rd VP of PS
contracts support service interact? party product existing and VP of
Support service PSS
cannot support
$$$
B I LI T Y
FI TA
FOR PRO
LE VE RS
3.
3.1 PS Triangle of profitability
3.2 Revenue Types, Mix and Growth
Firm A GP Firm B GP
Annual $100 18% $100 30.5%

Revenue
Direct $30 25% $70 35%
revenue
Direct Revenue
Pass- $70 15% $20 15%
through
revenue
Reusable $0 60% $10 50%
IP
revenue
120%
100%
80%
60%
40% Growth rate
20% GP
0%
-20%0.5 1 1.5 2 2.5 3 3.5 4 4.5
-40%
3.3 References
References
3.4 Repeatability
Lower cost for direct services
200000
180000
160000
140000
120000
100000
80000 Revenue
60000
40000 Cost
20000
0
e ct e ct ect e ct
j j j j
p ro p ro p ro p ro
t d rd th
1s 2n 3 4
3.5 PS Triangle of profitability
Direct Rev
Reusable IP Rev
References
Repeatability
Growth Rate
=
PROFITABILITY
4. ORGANIZATIONAL OVERVIEW
4.1 PS Functional Map
Services
operations
4.2 Engagement Life Cycle
SALES PROCESS
Funnel Backlog
4.3 PS Organization Map
4.4 PS Organization Map
Technical Staff Sales/Marketing Staff
Product Engineering
The existing product sales forces will
effectively sell PS
(Less than 10% of existing product sales
force can learn to sell PS effectively)
The more services business the company
bid, the more profitable it will be
(Bidding for low-odd project can be the
most expensive mistake a PS organization
can make)
5. SELLING
5.1 Function Overview: Responsibilities of
Services Sales
Services Sales Staff

SALES PROCESS Services Delivery Staff
Funnel Backlog
5.2 Critical Success Factors
5.3 PS Sales Charter
5.4 Identify
Source of Leads
Personal Contact of PS Sales Rep
Trade Shows
Telesales
Product Account Manager
10.00%
5.00%
5.00%
80.00%
5.5 Qualify
5.6 Propose
Resources Inputs to the proposal
Services Sales Rep Overall proposal document
Final Pricing and positioning
Product Sales Rep Product Pricing
Product technical specifications
Services delivery: Solution Effort estimates

Architect Technical viability review of
solution
Services Delivery: Project Proposed Project Plan

Manager
5.7 Negotiate
Services Delivery
5.8 Forecast
Customer Sol Type PS Rev Product PSS Rev Total Rev Probabilit Forecaste Start Date Comment
Rev y d Rev
ABC Custom $100,000 $200,000 $20,000 $320,000 20% $64,000 Q2
Design
and Impl.
XYZ System $60,000 $100,000 $0 $160,000 50% $80,000 Q2
Tuning
Sale stage Probability
Identify 0%
Qualify 20%
Propose 40%
Submitted 50%
Negotiate 80%
Deliver 100%
5.9 Roles and Responsibilities
Role Purpose Responsibilities Requirements
General Manage Financial Experience Edu/trai Technical
rial ning
Services Identify and Manage Manage Meet booking 4+ years 4-year Understand
Sales qualify oppty accounts virtual targets general sales degree company
Rep Generate Manage team Meet expense experience product lines
proposal proposals assigned objectives 2+ years Understand
Close biz Provide to selling services customer use of
Forecast weekly sales proposal technology in
forecast their business
Sales Assist in closing Provide Manage Meet booking 8+ years 4-year Understand
Director business weekly sales sales reps and rev target general sales degree company
Forecast forecasts for territory experience product lines
demand for Manage Meet expense 4+years selling Understand
their territory customers objectives services customer use of
Up-sell existing escalation Ensure 2+years technology in
programs Prospect new collection of managerial their business
business A/R experience
Business Build Generate Educate Meet booking 4+ years 4-year Understand
Develop relationship leads Sales and revenue general sales degree customer use of
ment with prospects Qualify force targets for experience technology in
Manager Educate prospects Advise target solution 2+ years their business
customers on staff area selling services
companys
offering
5.10 Key Interfaces for PS Sales
Services Sales Force Customer Direct Sales Force Service Delivery Services Marketing
Output to Pricing Pricing Customer Customer
Proposal Proposal requirements requirements
Input from Customer Customer Project schedules Solution

requirements requirements Cost estimations positioning
Account landscape Reference
Service customers
opportunity
Comments Potential conflict
over a/c ownership
and oppty mgmt
Customer
Services Delivery
5.11 Compensation for Sales- Variables
Area Variable Description Calculation
Money Total services revenue Measure of revenue by PS, Total services revenue=
composed of the different DirectRevenue
types of revenue by +3rdPartyRevenue
consulting, solutions, and +ReusableSolutionComponen
pass-thru tRevenue
Bookings Dollar value of engagements Total Services Revenue
that customers have agreed expected from signed
to, or projects that have been proposal
booked and PO generated by
customer but no revenue has
started to flow.
Margin Gross margin% GP per dollar of services Gross margin Dollars per Total
delivered. Services Revenue
GM=TotalServicesRev-
CostOfServicesDelivered (COS
or COGS)
Target project margin Estimated gross profit TargetProjectMargin=
generated per dollar of EstimatedServicesRev
services delivered in specific -EstimatedCOS
project
Acutal project Margin Actual gross profit generated ActualProjectMargin=
per dollar of services ActualServicesRev
delivered in specific project ActualCOS
5.12 Compensation for Sales- Variables
(cont.)
Area Variable Description Calculation
Mix Revenue mix Breakdown of revenue
sources for PS: Direct Rev;
Pass-thru; Reusable. Eg., 30%
Direct Revenue
Milestones Project Completion Ratio Measure the degree of Number of milestones
completion against project completed on schedule vs
milestones total milestones targeted
Minutes Billable utilization Measures the organization to Total number of hours billed/
maximize its billable (number of working hours in
resources a year * number of billable
employees)
5.13 Compensation for Sales- Sample
Position Plan Money Margin Mix Mile- Minutes Total
Type stones variable
Bookings Revenue Gross Target Actual Revenue Project Billable compenti
Margin Project Project Mix Comple Utilization on
Margin Margin tion %
Sales 70/30 10% 10% 10% 30%

Director
Biz Dev 70/30 10% 10% 10% 30%
Director
Services 60/40 20% 10% 10% 40%
Sales Rep
5.14 Key Metrics for Sales
Metric Sample target Person Responsible
Bookings 1.5 x revenue target Sales Director
Services Sales Rep
Gross Margin for Sales Area > 30% Sales Director
Target Project Margin > 35% Services Sales Rep
Revenue Mix Meet mix objective of the business Sales Director

Services Sales Rep
Bid and Proposal Cost Within parameter set by management, Services Sales Rep
for example, < 2% of projected revenue
from engagement
Hit ratio > 50% Sales Director
Services Sale Rep
Revenue Growth > 20% Sales Director
Sales Costs < 8% Sales Director

5.15 Organization Structure and Sizing
VP PS
Director
Consulting Sales
Business
Rep
Development
Delivery
Manager
Technical Director
Architect Region 1
Consulting Sales
Rep
Delivery
Manager
Technical Director
Architect Region 2
Consulting Sales
Rep
Delivery
Manager
Technical Director
Architect Region 3
Consulting Sales
Rep
5.16 Sample Budget Services Sales
Services Sales
Number of employees: 29
Salaries and Benefit $2,600,000 52%
Commission and Bonuses $1,000,000 20%
Occupancy $145,000 3%
Travel $1,055,000 21%
Outside services $55,000 1%
Depreciation $145,000 3%
TOTAL $5,000,000 100%
5.17 Issues to watch
When bidding for PS, effort estimates are
relatively accurate
(The first time the underestimate is typically by a factor of
two)
Once proposal is selected by customer, the PS
team can begin delivery
(At least 30% of customer requirements change after the
initial proposal is signed)
The more delivery staff you have, the more money
you will make
Poorly aligned hiring leads to low utilization and poor
profitability
6. DELIVERING
Services Delivery
Services Sales Staff

SALES PROCESS Services Delivery Staff
Funnel Backlog
6.3 Services Delivery Charter
6.4 Services Delivery - Execute
6.5 Services Delivery: Educate
Postion Certification Internal Courses External Courses
PM Produc Leaders New Consulti Linu Prod Custom MS Other

t hip hire ng skills x uct er skills Office
Delivery Required Required

Manager
PM Required Required
Sen. Tech Required Required

Consultant
Services Sales Required

Rep
Regional Required Required

Director
Operation Required Required

Staff
6.6 Services Delivery: Roles and
Responsibilities
Role Purpo Responsibilities Requirements
se
General Managerial Financial Experience Edu/tra Technical
ining
Delivery Manage Schedule Manage delivery Meet overall 4+years 4-year Understand
Manager Delivery resources Evaluate expense managerial degree technical skills
Staff Manage employee objectives experience being requested by
staff Train or oversee Meet project 2+yeara client
developmen training expense delivery Understand
t objectives manager project life cycle
Project Manage Create Manage vital Meet project 8+years 2-year Understand
Manager Customer project plan project team expense general work degree project life cycle
Projects Manage Manage sub objectives experience Understand how
project -contractors 2+years customers are
Provide project using technology
weekly management in their business
project experience
update
6.6 Services Delivery: Roles and
Responsibilities (cont)
Role Purpo Responsibilities Requirements
se
General Managerial Financial Experience Edu/tra Technical
ining
Senior Create Create system Manage and Meet project 10+years 4-year Deep
technical system architecture mentor expense general worl degree understanding of
consulta architectu Provide effort technical objectives experience technologies being
nts re estimation consultants 4+yeara deployed
Impleme Implement technical
nt solution consultants
solution Assist in closing
business
Technical Impleme Provide effort none Meet project 4+years 4-year Thorough
consulta nt estimation expense work degree understanding of
nts solution Implement objectives experience technologies being
solution deployed
6.7 Key Interfaces for Services
Services Customer Delivery
Field Engineering Service Services Engineering
Delivery Sales
Output to Project Proposed architectures Project Customer requirements
report schedules
Project Cost
Deliverables estimations
Input from Customer Product specifications and Customer Sample Solution architectures
requirement capabilities requiremen Delivery methodology
s Technical landscape of ts
Sign-offs customer site
Comments Domain expertise friction Tension bw delivery and
engineering teams. Classic
friction: staff (engineering) line
(delivery)
Customer
Field Engineering
6.8 Compensation for Delivery- Sample

Booking Revenue Gross Target Actual Revenue Project Billable compenti
s Margin Project Project Mix Comple Utilization on
Delivery 80/20 10% 10% 20%

Manager
Project 80/20 5% 5% 10% 20%
Manager
Senior 80/20 20% 20%
Consultant
Technical 20% 20%
Consultant
6.9 Key Metrics for Delivery
Metric Description Calculation Sample target Person
Respo
nsible
Project Measure the degree of # Milestone completed vs # > 80% PM
Completion Ratio completion against project milestone targeted
milestones
Project overrun Measure accuracy of Total cost incurred/total cost +/- 10% PM
project cost estimation estimated
Billable utilization Measure ability to Total hours billed/(total > 65% Delivery
rate maximize billing resources working hours/year X # Manager
employees)
Project Actual Actual gross margin Revenue cost (incl. salary, Depends on type of services. Project
Margin achieved by a project travel) >35% for high-end consulting Manager
Revenue per head The average revenue per Total services revenue/#full $300K/year Regional
full-time employee time employee director
Turn-over rate The % of delivery staff left # employee left/total # <15% Delivery
annually employees Manager
Account Expansion The ability of a vendor to Additional revenue/revenue > 20% Project
expand a/c penetration and from initial project Manager
volume of business
Training days Avg # of working days spent # working days spent in 10% Delivery
in training training/total # of working manager
days
6.10 Organization Structure and
Sizing
VP PS
Director
Consulting Sales
Business
Rep
Development
Delivery
Manager
Technical Director
Architect Region 1
Consulting Sales
Rep
Delivery
Manager
Technical Director
Architect Region 2
Consulting Sales
Rep
Delivery
Manager
Technical Director
Architect Region 3
Consulting Sales
Rep
6.10 Organization Structure and Sizing
Services Delivery Services Delivery Parameters
Planning Parameters
Target $100
Revenue M Target Revenue $60,000,000
Revenue Mix 60/40
Yearly Hours 2080
Target Billable 65%
utilization Target Billable 65%
Target billable $200/ utilization
rate h Billable hours 1352
Average billable rate $200/h
Total delivery staff 222

Revenue generated $60,028,800
Number of Geography 3
Delivery staff per geo 74
6.11 Sample Budget Services Sales
Services Delivery
Commission and Bonuses $6,132,000 9%
Occupancy $1,170,000 2%
Travel $2,910,000 4%
Outside services $90,000 0.8%
Depreciation $1,170,000 2%
3rd party COGS $34,000,000 49%
TOTAL $70,000,000 100%
Managing IP from past
engagement is cost prohibitive
and unnecessary
(It will be difficult to maintain margin
>25% without some level of IP
management)
7. PRODUCTIZING
7.0 Engagement types and risk levels
Processes
Risk
New Solution
GP 0%-50%
Local Engagement Never delivered

GP 15%-30% before
No existing
Target Solution Delivered methodology
GP 40%+ previously Required skills
No existing not in geo
Delivered methodology HQ staff required
Previously Requires local
Methodology skills and HQ staff
exists Solution assured
Requires geo skills
and HQ staff
Cost of
Delivery
Services Engineering
POTENTIAL SOLUTION
SOLUTION MATURITY SOLUTION BOOKINGS
Services Engineering Staff Services Marketing Staff

7.3 Services Engineering Charter
7.4 Capture
Criteria for significant Sample range
project
Dollar value >$100K or

Largest to date
Time frame > 4 weeks of works
Solution type Completed work in target solution area

7.4 Capture IP from Solution review
Elements to capture Description
Solution description 2-3 paragraphs describing what was implemented for customer
Planned deliverables The deliverable specified in the initial project plan
Actual deliverables A list of what was actually delivered to the customers
Planned expenses Original budget (staff hours, 3rd party services and products, travel, etc)
Actual expenses The actual expenses to complete the project
Planned effort Original hours estimated to complete the project
Actual effort Actual hours estimated to complete the project
Resources Profiles List of skills required on the project team to deliver the solution
Reusable A list of any components that other customers may ask for
Components
Lessons learned A list of gotchas, or surprises with brief description of what happenned and how each
can be avoided next time
7.5 Improve Solution development
Area
Components Description
Component
of a solution Owner Services Services
Engineering Marketing
Executive overview Executive overview A high-level overview that describes
what the solution is and the business
problem it addresses
Sales and Customer presentations
Marketing Datasheets
Whitepapers
Demos
Sales tips
Customer references
Competitive Analysis Info on competitive solutions
Target customer list/profiles
Delivery Partner profiles A list of partners that are used to
Methodology deliver components of the solution.
Resources Profiles Descriptions of the skills required to

implement the solution.
Engagement Framework Implementation strategy and steps.
Engagement Activity Form Detailed instructions on

implementation activities
SW source codes
Components of a solution (cont.)
Area Component Description Owner
Services Services
Engineering Marketing
Sample Engagement SOW
Documentation Proposal
Project Plan
Sample Architecture
Training Sales training material
Delivery resource training material
Support Sample Customer support
agreement.
Support staff training
7.6 Improve Solution development Sample
Engagement framework
2.0 7.0
Service level Risk Analysis
analysis
9.0
4.0 Cost of
Site survey ownership
analysis
5.0
Functional
requirements
Sample engagement framework -
Integration Project - Phase 1
Engagement Activity Form content
Purpose
7.8 Improve Solution development Resource
Profiles
Role Required technical skills Required business skills Estimated project effort
Solution Architect Skills in networking, Customer ready (able to 45 hours
scalable server work directly with
architecture customers)
Solution XYZ Manage technical staff
architecture of 3
Project manager Skill in MS Project, MS Customer presentation 155 hours

Office and solution XYZ skills
engagement
methodology
Technical Consultant Skills in C++, Unix, 255 hours

Software XYZ
7.9 Leverage
More in
Appendix E
Solution
More in Portfolio
chapter Mgmt
9
7.10 Services Engineering: Roles and
Responsibilities
Role Purp Responsibilities Requirements
ose
General Manag Financial Experience Edu/ Technical
erial training
Services Manage Assure the Manag Manage SE 10+years mgmt 4-year Previous
Engineeri SE successful capture of er SE expense budget experience degree, backgroun
ng function IP staff Help Consulting hit Prior experience Master d in
Director Assure on-time bookings and managing budget; preferred programmi
delivery of new margin target ;staff; large projects ng helpful
solution IP
Project Manag Create project plans Manag Meet project 8+years general work 2-year Understan
Manager e the Manage projects e virtual expense objectives experience degree ding of
solution Provide weekly project 2+year PM project life
develop project updates team experience cycle
ment Manag Understan
life- e ding of
cycle for subcont how
target ractors customers
solution are using
technology
in their
business
7.10 Services Engineering: Roles and
Responsibilities (cont.)
General Manag Financial Experience Edu/ Technical

erial training
Senior Manage the Create system Manage Manage 10+years 4-year Deep
Technical technical architecture and project general work degree understandi
Consultant development Provide effort mentor expense experience ng of
of for the estimations technical objectives 4+years technologies
target Implement solution consulta technical being
solution Assist in closing nts consultants deployed
business
Business Perform Create ROI Track 6+years 4-year

Analyst financial and estimations for financial experience degree in
business solution development performance 2+year accounting
analysis of efforts of solution performing or finance
solution Present business portfolio ROI analysis MBA
opportunities analysis to senior preferred
management
Services
Engineering
Partners Engineering
Product
Engineering
Delivery Marketing
Output to Technical Technical Sample architectures Solution roadmap

requirement requirements for Sample project plan Sample architectures
s for target solutions Delivery methodology Solution capabilities
partners Demos
products Resource profiles
Resources Technical expertise
Input from Technical Technical Technical Solution positioning

requirement capabilities of requirements (for Reference customers
s products customers)
Resources Product Engagement IP
requirement roadmaps
s
Comments SE staff
must be
careful in Partners
protecting
partners IP Product Engineering
from other
partners
7.12 Compensation for Engineering Sample

Booking Revenue Gross Target Actual Revenue Project Billable compens
s Margin Project Project Mix Comple Utilization ation
Director of 80/20 10% 10% 20%

SE
Solution 80/20 10% 10% 20%
Manager
Solution 80/20 10% 10% 20%
Architect
7.13 Key Metrics for Engineering
Respo
nsible
Research and Measure the degree of R&D costs divided by total 2% services revenue SE
Development investment made to services revenue. Director
Expenses enhance the firms tools,
products, and
methodologies, Total R&D
costs equals infrastructure
plus sales tools plus
delivery tools.
Project Measure the degree of # Milestone completed vs # > 80% SE PM
Completion Ratio completion against project milestone targeted
milestones
Project overrun Measure accuracy of Total cost incurred/total cost <10% SE PM
project cost estimation estimated
7.14 Services Engineering Organizational Structure and Sizing
VP PS
Business
Analyst
Director Director
Consulting Sales Technical
Business Services
Rep Architect
Development Engineering
Project Manager
Delivery
Manager
Technical Director
Architect Region 1
Consulting Sales Services Engineering
Rep Planning Parameters
Target $100
Delivery
Manager Revenue M
Technical Director Revenue from $40M
Architect Region 2
Consulting Sales
Target
Rep Solutions
Delivery Number of 3
Manager Target
Technical Director Solutions
Architect Region 3
Consulting Sales
Rep
7.15 Services Engineering Sample Budget
Salaries and Benefit $950000 48%
Commission and Bonuses $120,000 6%
Travel $200,000 10%
TOTAL $2,000,000 100%
Your existing product marketing
manager can also market
services
(If you dont invest in services
marketing, no one will be marketing
your services)
8. PROMOTING
Services Marketing
POTENTIAL SOLUTION
SOLUTION MATURITY SOLUTION BOOKINGS
Services Engineering Staff Services Marketing Staff

8.3 Services Marketing Charter
8.4 Differentiate
Professional Services
Competition
Increasing
Managed Services
Education Services
Decreasing
Credibility
Support Services
Core products
8.4 Differentiate: Campaign
Executive Overview Development
5.6.5.1
8.5 Validate: Demos and
Benchmarking
5.6.5.1
8.6 Evangelize : Sales Training, Channel
Management and Lighthouse Accounts
Sales Training
1. What am I selling? solution description 4. Who specifically should I go call on (target
2. Why would the customer want buy from us customer list)?
(sample customer presentation)? 5. Who is my competition (competitive analysis)?
3. What support our positioning (whitepapers, 6. Any final points on how to close business (sales
demos, benchmarks, references) tips)?
5.6.5.1
8.9 Services Marketing: Roles and
Responsibilities
General Manag Financial Experience Edu/tr Technical
erial aining
Servic Manage the Assure the Manage Manager 10+years 4-year
es Services successful role-out Services Services management degree
Marke Marketing of target solutions Marketin marketing budget experience ,
ting function Assure the g Staff Help consulting Prior experience MBA
Direct availability of Sales business unit hit managing budgets preferr
or IP booking and Prior experience ed
margin targets managing staff
Marke Manage the Develop go-to- Manage Track bookings of 6+years marketing 4-years Understand
ting solution roll- market plan for marketin target solutions experience degree how customers
Mana out process target solutions g 2+years , MBA use
ger Manage the specialist experience preferr technologies to
development of s and developing sales ed solve the
marketing materials contract channels business
Train sales staff ors problems
Marke Coordinate Manage the day-to- 2-years
ting the day activities trainin
Specia development required to publish g
list of marketing and distribute
materials marketing materials
Marketing
Partners
8.10 Key Interfaces for Services Marketing
Services Partners Product/Vertical Services Sales Services
Marketing Marketing Engineering
Output to Customers Services portfolio Services portfolio Solution roadmap

requirements for Services Datasheet Services Datasheet Solution
partners products Customers presentations Customers requirements
Marketing and Sales presentations
literature on the services References
offering of the company Sales tips, scripts
Input from Customers Product roadmaps Customers Solution maturity

requirements Product positioning requirements Solution
Marketing and Sales literature Sales pipeline capabilities
literature Target markets
Marketing campaign
strategy
Comments Services Marketing Services Marketing and Services Marketing

should map capabilities product Marketing should must create tools that
of internal PS staff with align efforts to attack enable the sales force
partner capabilities to target market and to successfully position
satisfy complex customers the services portfolio
customers need
8.11 Compensation for Marketing
Sample
Booking Revenue Gross Target Actual Revenue Project Billable compentio
s Margin Project Project Mix Comple Utilization n
Director of 80/20 10% 10% 20%

Marketing
Marketing 80/20 10% 10% 20%
Manager
Marketing 80/20 10% 10% 20%
Specialist
8.12 Key Metrics for Marketing
Respo
nsible
Solution revenue Company revenue that can Services
be attributed to Marketing
implementing a specific Manager
solution for a customer
Solution margin Revenue from solution > 30% Services
engagements minus cost to Marketing
deliver solution Manager
Total marketing The investment made by Marketing cost s delivered 2% to total services revenue Services
cost professional services to by total services revenue Marketing
provide services Marketing Director
where marketing costs
equals advertising costs
plus collateral material plus
consultant and media
relations plus alliance and
partnering cost plus market
research
8.13 Services Marketing Organizational Structure and Sizing
VP PS
Business
Analyst
Director Director
Business Services
Rep Architect
Project Manager
Delivery
Manager Marketing
Technical Director Director Managers
Architect Region 1 Marketing Marketing
Consulting Sales Specialist
Rep
Delivery
Manager
Technical Director Services Marketing Planning
Architect Region 2 Parameters
Consulting Sales
Rep Target Revenue $100M
Delivery
Manager Global regions 3
Technical Director
Architect Region 3
Number of Target 3
Consulting Sales Solutions
Rep
8.14 Services Marketing Budget Sample
Salaries and Benefit $950,000 48%
Travel $200,000 10%
TOTAL $2,000,000 100%
Services
Operations
9. OPERATIONAL INFRASTRUCTURE
9.1 Operational Infrastructure The Framework
Staff
processes
Reporting
9.3 Processes and Reports
Overview
Processes Reports
Business Legal Support Funnel -; Bookings-; Billing-; Backlog Reports
PS Automation Websites, e Newsletters
Internal distribution list
Financial report
Executive Dashboard
Metrics reporting: Financial, Operational;
Customer Sat; Employee Sat
Project Partner Management Knowledge Management (the process of

Resource Management capturing, organizing, displaying, accessing
Solution Assurance Review knowledge of the org)
Project Accounting
Staff Commission Payment Time Reporting

Proposal Generation
Professional Development
PM Certification
General/PS Specific Training
9.4 Operation Infrastructure: Roles
and Responsibilities
General Manager Financial Experience Edu/trai Technical
ial ning
Operation Assist in Assure the Manage Manage operation 10+years 4-year Strong
Director closing successful operation expense budget management degree, knowledge
business implementatio staff Help biz units achieve experience Masters of tools
Establish policy n of new margin and Prior preferred and
and processes and profitability targets experience business
procedures reports Assure that revenues managing processes
that benefit Monitor and expenses flow budgets and
the engagements through the sales and staffs
organization to ensure high financial system 5+years
Manage quality results appropriately consulting
system business
requirements
Business Assist in Collect info Summarize key 5+years 4-year Knowledg
Analyst closing Analyze and financial data for general degree e of tools
business summarize management business and
Resolve results experience business
system flow Prepare and 2+years in processes
issue distribute consulting
Implement reports business
new business
process
9.5 Key Interfaces for Operations
Services Services Sales Services Delivery Services Senior Services
Operations Engineering Management Marketing
Output to Funnel and Utilization reports Knowledge Financial reports Customer

backlog reports warehouse and IP Metrics reports reports
capture process
Input from Probability ratio Project completion Intellectual Strategic Pricing

HW pull data property objectives Competitive
Revenue by Time tracking analysis
quarter Project data
Comments
9.6 Compensation for Operations

Booking Revenue Gross Target Actual Revenue Project Billable compensati
s Margin Project Project Mix Comple Utilization on
Director of 80/20 20% 20%

Operations
Business 80/20 20% 20%
Analyst/
PM
9.7 Services Operations Organizational Structure and
Sizing
VP PS
Business
Analyst
Director Director
Business Services
Rep Architect
Project Manager
Delivery
Manager Marketing
Rep
Delivery
Manager Business
Technical Director Director Analyst
Architect Region 2 Operations
Consulting Sales Project Manager
Rep
Delivery
Manager
Technical Director
Architect Region 3
Consulting Sales
Rep
9.8 VP and Operations Budget Sample
Travel $200,000 3%
Outside services $5,520,000 69%
TOTAL $8,000,000 100%
10. PUTTING IT ALL TOGETHER
10.1 Organization Parameters
Critical Planning Parameters Reference
Target Revenue $100M 5. Selling
Revenue Mix 60/40 6. Delivery
Revenue from Solutions $40M 5. Selling
Global regions 3 5. Selling
Focus Geography 5. Selling
Quota per rep $4M 5. Selling
Target Billable utilization 65% 6. Delivery
Target billable rate $220/h 6. Delivery
Number of target solutions 3 7. Productizing

10.2 PS Interfaces
Customers
Product Engineering
Operations
Partners
10.3 Head Count
Function Head Count Total
VP 1 1
Admin 1 1
Sales 29
Management 4
Staff 25
Delivery 234
Management 12
Staff 222
Solution Engineering 6
Management 1
Staff 5
Solution Marketing 6
Management 1
Staff 5
Operations 5
Management 1
Staff 4
TOTAL 282
10.4 Organizational Structure
Sales and Delivery Productize and Promote
VP PS
Business
Analyst
Director Director
Business Services
Rep Architect
Project Manager
Delivery
Manager Marketing
Rep
Delivery
Manager Business
Technical Director Director Analyst
Architect Region 2 Operations
Consulting Sales Project Manager
Rep
Delivery
Manager
Technical Director Finance
Architect Region 3 Legal
Consulting Sales
Rep
10.5 Target Business Model
Description Target Target

Percent Dollars
Revenue 100% $100,000,00
0
COGS 70% $70,000,000
Gross Margin 30% $30,000,000
Expenses $17,000,000
Sales 5% $5,000,000
R&D 2% $2,000,000
Marketing 2% $2,000,000
G&A 8% $8,000,000
Operation Profit 13% $13,000,000

11. CUSTOMER ENGAGEMENT
WORKFLOW
11.0 Customer Engagement Workflow
1.0 Identify 2.0 Qualify 3.0 4.0 Negotiate 5.0 Deliver
Propose
1. Request 2. Qualify 3. Bid 4. Negotiate 5. 6. 7. Sign- 8. Review

Develop Implement off
Key roles
Product Sales Rep
Product Sales
Engineer
Services Sales Rep

Delivery PM
Delivery Architect
Delivery Techical
Consultant
Key Deliverables Request Qualificatio Customer Updated Weekly Weekly Custome Project
portion of n portion of Proposal Customer project project r training Review
the Request the Request SOW/Pricin Proposal reports reports Custome Report
and and g Updated Milestone System test r sign-off
Qualification Qualification Project Plan SOW/Pricing sign-off sign-off
Form Form Solution UpdatedProject
Callback Bid/No-Bid Architecture Plan
Decision UpdatedSolutio
n Architecture
Signed contract
and PO#
Key Metrics Response Walk ration Hit ratio Target project Project Project Account Actual
time margin overruns completion expansion project
ratio margin
11.1 Customer Engagement Workflow
Propose

Key roles
Product Sales Rep
Product Sales
Engineer
Services Sales Rep

Delivery PM
Delivery Architect
Delivery Techical
Consultant
n Architecture
Signed contract
and PO#
ratio margin
11.2 Customer Engagement Workflow: REQUEST
Propose

Key roles
Product Sales Rep
Product Sales
Engineer
Services Sales Rep

Delivery PM
Delivery Architect
Delivery Techical
Consultant
n Architecture
Signed contract
and PO#
ratio margin
11.3 Customer Engagement Workflow: QUALIFY
Propose

Key roles
Product Sales Rep
Product Sales
Engineer
Services Sales Rep

Delivery PM
Delivery Architect
Delivery Techical
Consultant
n Architecture
Signed contract
and PO#
ratio margin
11.4 Customer Engagement Workflow: PROPOSE
Propose

Key roles
Product Sales Rep
Product Sales
Engineer
Services Sales Rep

Delivery PM
Delivery Architect
Delivery Techical
Consultant
n Architecture
Signed contract
and PO#
ratio margin
11.5 Customer Engagement Workflow: NEGOTIATE
Propose

Key roles
Product Sales Rep
Product Sales
Engineer
Services Sales Rep

Delivery PM
Delivery Architect
Delivery Techical
Consultant
n Architecture
Signed contract
and PO#
ratio margin
11.6 Customer Engagement Workflow: DEVELOP
Propose

Key roles
Product Sales Rep
Product Sales
Engineer
Services Sales Rep

Delivery PM
Delivery Architect
Delivery Techical
Consultant
n Architecture
Signed contract
and PO#
ratio margin
11.7 Customer Engagement Workflow: IMPLEMENT
Propose

Key roles
Product Sales Rep
Product Sales
Engineer
Services Sales Rep

Delivery PM
Delivery Architect
Delivery Techical
Consultant
n Architecture
Signed contract
and PO#
ratio margin
11.8 Customer Engagement Workflow: SIGN-OFF
Propose

Key roles
Product Sales Rep
Product Sales
Engineer
Services Sales Rep

Delivery PM
Delivery Architect
Delivery Techical
Consultant
n Architecture
Signed contract
and PO#
ratio margin
11.9 Customer Engagement Workflow: REVIEW
Propose

Key roles
Product Sales Rep
Product Sales
Engineer
Services Sales Rep

Delivery PM
Delivery Architect
Delivery Techical
Consultant
n Architecture
Signed contract
and PO#
ratio margin
Why start PS with low-margin
implementation services and not with
high-margin consulting services
(Customer may not accept your credibility as an
inexpensive, business-level consulting firm. Your
organization may not posses the required
expertise to deliver these high-margin services)
12. FOUR PHASES OF BUILDING PS

12.1 Four phases of building Professional Services
1. Implementation
Services
Product-centric Service-centric 2. Integration Services
3. Consulting Services
Key Elements
Implementation Integration Consulting Productized
Value Proposition Single point of contact Single point of contact Single point of contact Single point of contact to
to implement products to implement products to implement products implement products
Product-specific skills Product-specific skills Product-specific skills Product-specific skills
Targeted technical Targeted technical Targeted technical skills
skills skills Business problem expertise
Business problem Engagement methodology
expertise
Focus Revenue Revenue Revenue Revenue

Reference Reference Reference
Repeatability Repeatability
Critical Skills Services Sales Rep Project Manager Business Consultants Senior Technical Architects
Project Manager Technical Consultants Marketing Manager
Operational Financial Reporting Project reporting Time reporting IP Capture

Infrastructure Partner Management Staff training
Target Mix 30% own service at 40% own service at 50% own service at 60% own service at 40%GP
25%GP 30%GP 35%GP 40% 3rd-party services at
70% 3rd-party services at 60% 3rd-party services 50% 3rd-party services 15%GP
15%GP at 15%GP at 15%GP
Target Margin Gross Margin 4% Gross Margin 11% Gross Margin 20% Gross Margin 30%
Operating profit -16% Operating profit -10% Operating profit 2% Operating profit 13%
Parameters
Support Service Implementation Integration Consulting Productized
Services as % of Small Growing Growing 30% 30% or more
total revenue <15% 15-20% 20-25%
Annual Growth Locked to product 30% or more 30% or more 20% or more 20% or more
rate of services revenue growth
Gross Margin High 30% or more 10-20% 10-20% 20-30% 30% or more
achieved on
services
Financial performance during the four phases
40%
35% SUPPORT CONSULTING
30%
SERVICES
PHASE 0
SERVICES PH
25%
PHAS
20%
15% IMPLEMENTATIO INTEGRATION
E3 AS
10%
5% N SERVICES E4
0% PH PHA
SERVICES
0% 10% ASE
20% SE 2
30% 40%
% OF
1 TOTAL REVENUE
13. UNIQUE ISSUES
13.1 Alignment
13.2 SAR and aligned solutions and capabilities
Professional
Services
Mission Clarity
SAR Factor Offering Allignment
Managed Services
Education Services
Support Services
Core products
13.3 Horizontal Alignment: Aligning Services
Departments
Product Engineering Customers

13.4 Horizontal Alignment: Aligning Skills
FIELD
Product Engineering
CORPORATE
13.5 Overlap

Field Engineering
FIELD
Product Engineering
CORPORATE
13.6 Other Issues
14. SUMMARY THE SIREN SONGS
The Sirens Songs
PS are not dramatically different from support or education services
APPENDIXES
Appendix A: Evaluating your PS vendors
Tier 1: Solutions and Capabilities
Low
Referen
Y risk
ces?
Impleme
nt Y N
solutions Medium
before? risk Tier 2: Ability to Execute
N Right
Y
skills or
partner Low
s? N Staff Y risk
High Develop
risk ment
IP Y N
manage Medium
ment
Tier 3: Strategic Fit Product risk
N Life Y
Low Cycle
Phase Y risk
Method
Fit? ology? N High
N risk
Target Y
Solution? Medium
Previou risk
N s Low Y
Risk
Rating
N High
risk
Appendix B: Key Financial Models
Product company with PS Stand-alone PS

Product Industry Industry Management System
Company Average Target Consulting Integration
Revenue 100% 100% 100% 100% 100%
Gross Margin 42.5% 25.0% 30.0% 40.0% 45.0%
Operating Expense
R&D 10.0% 1.8% 2.0% 10.0% 10.0%
Sales 11.0% 8.9% 5.0% 5.0% 8.0%
Marketing 7.0% 1.4% 2.0% 5.0% 6.0%
General&Admin 7.0% 15.7% 8.0% 5.0% 13.5%
Total Expenses 35.0% 27.8% 17.0% 25.0% 37.5%
Operating Profit 7.5% -2.8% 13.0% 15.0% 7.5%
Appendix C: PS Business Review
Timing
Appendix D: Sample Project Review
Project Overview
Appendix E: Solution Portfolio Management
Solution Portfolio Graph
PS Solution Portfolio PS Solution Portfolio

60
60
Solution Revenue
50 Maturity
Solution Revenue
50 Continue
40 Review
40
Services Marketing
30 Services
20 Engineering 30 Improve
Revenue
10 20 or
Review
0 10 Remove
30% 40% 50% 60% 70% 80% 90%100%
Solution Maturity Level 0 Solution Maturity Level
30% 40% 50% 60% 70% 80% 90% 100%
Appendix F: Customer Request and Qualification Form
Customer <Name, Address, Request Date>
Product Sales Rep: ABC, Date requested
Services Sales Rep: XYZ, Date contacted
Criterion Description Rating

Green Rating 3 Yellow Rating 2 Red Rating 1
Budget Customer has proved they Customer is currently seeking Customer has not initiated
have budget for services budget for services funding process
Response time Deadlines > 3 weeks 1-3 weeks < 1 week
requirement
Project Start Open and negotiable Start date set but can be Current start date cannot
Requirement accommodated be accommodated
Decision Process Process well documented, Not clearly understood or Biased against our services
understood, unbiased potentially biased
Decision Maker Final Decision Maker identified Identified but not yet contacted Not yet identified
and contacted
Solution Fit Customer requirements closely Loosely fit a current solution Does not match any
fits a current solution offering existing solution
Skills Fit Customer require skills Skills in development or Does not fit current or
currently on staff and available scheduled to be available future capabilities
Partner Fit Identified all partners to fulfill Identified required partners but Unclear which partners will
customer requirements. no agreements in place be used
Partner agreements in place
TOTAL xxx

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The Sirens Song

The Siren, by John William Waterhouse (circa 1900)

PS are not dramatically different from

1. MAPPING THE VOYAGE

2. SETTING THE PARAMETER

Can we articulate what differentiates us from the rest?

Annual $100 18% $100 30.5%

Services Sales Staff

Services delivery: Solution Effort estimates

Services Delivery: Project Proposed Project Plan

Sale stage Probability

Input from Customer Customer Project schedules Solution

Sales 70/30 10% 10% 10% 30%

Target Project Margin > 35% Services Sales Rep

Revenue Mix Meet mix objective of the business Sales Director

Sales Costs < 8% Sales Director

Services Sales Staff

PM Produc Leaders New Consulti Linu Prod Custom MS Other

Delivery Required Required

Sen. Tech Required Required

Services Sales Required

Regional Required Required

Operation Required Required

Position Plan Money Margin Mix Mile- Minutes Total

Delivery 80/20 10% 10% 20%

Total delivery staff 222

Local Engagement Never delivered

SOLUTION MATURITY SOLUTION BOOKINGS

Services Engineering Staff Services Marketing Staff

Dollar value >$100K or

Time frame > 4 weeks of works

Solution type Completed work in target solution area

Planned deliverables The deliverable specified in the initial project plan

Actual deliverables A list of what was actually delivered to the customers

Actual expenses The actual expenses to complete the project

Planned effort Original hours estimated to complete the project

Actual effort Actual hours estimated to complete the project

Resources Profiles Descriptions of the skills required to

Engagement Framework Implementation strategy and steps.

Engagement Activity Form Detailed instructions on

Project manager Skill in MS Project, MS Customer presentation 155 hours

Technical Consultant Skills in C++, Unix, 255 hours

General Manag Financial Experience Edu/ Technical

Business Perform Create ROI Track 6+years 4-year

Output to Technical Technical Sample architectures Solution roadmap

Input from Technical Technical Technical Solution positioning

Position Plan Money Margin Mix Mile- Minutes Total

Director of 80/20 10% 10% 20%

SOLUTION MATURITY SOLUTION BOOKINGS

Services Engineering Staff Services Marketing Staff

Output to Customers Services portfolio Services portfolio Solution roadmap

Input from Customers Product roadmaps Customers Solution maturity

Comments Services Marketing Services Marketing and Services Marketing

Director of 80/20 10% 10% 20%

Project Partner Management Knowledge Management (the process of

Staff Commission Payment Time Reporting

Output to Funnel and Utilization reports Knowledge Financial reports Customer

Input from Probability ratio Project completion Intellectual Strategic Pricing

Position Plan Money Margin Mix Mile- Minutes Total

Director of 80/20 20% 20%

Target Revenue $100M 5. Selling

Revenue Mix 60/40 6. Delivery

Revenue from Solutions $40M 5. Selling