Over the summer, I read an interesting article where professional services firm Deloitte announced a new online service titled Deloitte Digital. The tagline for the service is “Professional Services Online.” The initial article I read on Business Spectator contained the following quote:
Deloitte Digital chief executive Peter Williams said the on-line tools are easily accessible and complement Deloitte’s traditional face-to-face service delivery. Offering out services on-line will appeal to both our top end clients and the middle market, as well as smaller businesses who will now gain access to Deloitte thinking.”
This concept of packaging and productizing professional service offerings is not new. For a keynote at the 2008 TPSA Spring Summit, I had searched Google on the term “packaged services.” IBM, HP, SAP, and Oracle all had tens of thousands of entries related to offering packaged or productized services.
The desire to productize professional services is driven by the need to take out the variability that makes custom professional service engagements so expensive. If a PS firm can codify the value of working with consultants into a highly repeatable experience, with well defined deliverables, the service experience begins to take on the attributes of a product. This is important because products can be scaled. This concept of increasing leverage by productizing professional services is captured in the image of this entry.
The image captures the reality that products can be created and sold in a one to many fashion, which increases their ability to be scaled. Custom, onsite professional services are a one to one experience which makes scalability very hard. Productized professional services help a PS organization move their portfolio up the slope of scalability. But is this a good thing?
If a PS firm can productize their offerings, they can cost effectively reach markets that were unattractive before. Go back to the article referenced at the opening of this entry. With Digital Deloitte, the firm can now service small and medium sized customers in a way that previously was impossible. And Deloitte feels the value added tools which codify Deloitte expertise will be appealing to large companies as well. Going back to the first post of this blog, Three Forces Driving Labor Margin, I argued that reducing delivery costs and increasing productivity were exactly the pressure points PS firms needed to address in this decade.
But how far can PS firms take this approach? Chris Dowse, the CEO of Neochange, commented on my first blog entry. Chris worries that solely focusing on productivity and cost reduction could create a “race to the bottom” for PS organizations. I agree with Chris—only focusing on cost reduction would be the kiss of death of any service organization. But are packages themselves a bad idea? Is Deloitte simply devaluing its more intimate, custom offerings by launching Deloitte Digital? Can custom and packaged PS offerings co-exist under one brand?
I am a firm believer that packaged and custom PS offerings must co-exist within profitable technology professional service organizations. Nicolas Steib, Global Head of Field Services at SAP, spoke at our Spring 2008 summit. He presented analysis his group has been doing on the long tail of SAP’s service portfolio. At the end of the tail are lots of one-off, custom engagements that are never repeated for multiple SAP customers. SAP is convinced they must reduce the requirements for so many custom experiences by creating service packages or enhancing the product to avoid the need for the customization. I do not believe every custom PS engagement can be avoided, but I do believe a healthy mix of packaged offerings with custom offerings should be the target of every PS organization. Packages represent scalability. They open new markets. They force a discipline of capture and reuse. And, perhaps most importantly, packages help reduce engagement risk for the customer.
Deloitte is a classic consulting firm—built on the premise that you pay a premium price for premium expertise. And if the Deloitte’s of the world are aggressively packaging their expertise into digital offerings, I am not sure how other firms can ignore the approach.