The most popular post to date in this emerging blog is the one I did on Packaging PS. This is clearly a hot topic within PS organizations so I will spend more time on it. Once again, I do not believe that any technology service organization can translate every service offering into a nice, neat, packaged offering. Nor would most PS organizations want all their offerings to be packaged. Clearly, there are clients that require custom solutions and are willing to pay a premium price for them. But how do you move the conversation forward regarding service packages?
The first step in the journey to productize service offerings has to be what we would call long tail analysis. This is the process of analyzing all of the service engagements you have delivered over the past, let’s say, three years. As you look at these past service engagements, you should categorize them into common practices. Within those common practices you should identify the service engagements where you delivered roughly the same thing to the customer. Now, you have an inventory of your services.
For the inventory of services you offer customers, there are two attributes you want to understand for each identified service offering:
Volume: How many times have you delivered the service?
Profitability: How many dollars of profit did the service generate?
In essence, you want to understand what profitable services you are delivering again and again. The results of this type of analysis is the image of this entry:
So, if you want to start packaging services, you should start on the left hand side of today’s image. These are services you deliver lots of times. They should have the most potential to be productized. The more repeatable and profitable you can make these high volume services, the better.
Long tail analysis accelerates a second set of decisions: what services should you discontinue? In some ways, this analysis may generate even higher economic benefits for your service business. What low volume service offerings are draining profits? Why are we pursuing these types of engagements? By removing these bad apples you may save more money than any of the upside from packaging.
Finally, long tail analysis helps a PS organization begin to clearly delineate packaged offerings from custom offerings. Packaged offerings have known deliverables that are created with a consistent delivery methodology and executed by known skills sets. PS can price these engagements aggressively with confidence. Think fixed price. Custom engagements have unique deliverables, follow a winding path, and may require skills sets not initially identified at the beginning of the project. Time and materials is usually the only pricing approach that makes sense here.