In Vegas last week, over 1,000 professionals from the technology industry gathered at the Technology Services World conference where our latest book, B4B was officially released.
The overarching premise of TSIA’s latest book B4B is quite simple:
The operating models of technology providers are about to be revolutionized.
Why? The historical operating model of technology providers was designed to optimize a supplier’s “push” of prepackaged products to customers via large, up-‐front deals. The goal was usually to get the maximum amount of product assets transferred from the supplier’s balance sheet to the customer’s balance sheet in one big order. However, two trends are dismantling this historical model. First of all, the value of the core technology asset is commoditizing. Technology companies are not achieving the same margins they once did when they sold a technology asset to the customer. Commoditization is a well-known challenge to many hardware companies, but the trend is expanding to software companies as low prices SaaS models reset customer expectations. Secondly, customers are pursuing new consumption models that do not involve a large up front product purchase. This is forcing technology companies to create new ways to offer their technology where the customer pays as they consume. These two trends of “commodization” and “new consumption models” are dismantling the historical economic engines of most technology companies. So what to do?
TSIA believes that revenues and margins in the technology industry will be directly tied with the ability to help customers achieve actual business results. Instead of focusing on features, successful technology companies will focus on realized value. This means technology providers will have to embrace the following success tactics:
- Align technology and service offerings to specific business value for the customer
- Define and deliver services that accelerate the consumption of technology capabilities
- Define and deliver services that drive specific business outcomes for customers
- Modify pricing models so that customers only pay when they achieve specific business value from the technology
- Leverage data streams from the product to clearly understand how customers are using technology
- Employ analytics to clearly understand how customers can achieve the greatest ROI from technology assets
These are but a few of the tactics technology providers will need to embrace to succeed in the next generation of the B2B relationship.
At TSW last week, we spent three days discussing and debating this fundamental shift facing technology providers. TSIA CEO JB Wood overviewed the B4B framework for the audience. Keynote speaker Graham Weston, the founder and Chairman of Rackspace, provided a compelling case study for what the next generation of technology providers will need to look like. Nick Earle, who manages Global Field Service Operations for Cisco, spoke specifically how Cisco has embraced the B4B framework to help transform its business model. I ended the conference by overviewing how B4B concepts will impact the financial models, service offerings, and organizational structures of all technology providers.
If you missed this conference, you missed a watershed event for the technology industry. In my mind, this event marked a moment in time when hundreds of technology companies acknowledged that their traditional business models would need to change. The question facing all of these companies has become quite simple: What does our new business model look like? B4B provides a compelling framework to craft that new business model. And based on the reaction in Vegas last week, the framework seems right on the mark.
All of the keynotes were videotaped. If you are interested in watching them, please send me an email and I will notify you when they are available online.