Hiring Services Leadership in a Product Company

There was a recent article in the news I have been meaning to write about. Microsoft announced they have hired a new leader for Microsoft services:

Microsoft names ex- Capgemini parent new vice president of Microsoft Services, North America

Professional services veteran Brad Callahan has been appointed vice president of Microsoft Services, North America. In his new role, Callahan will oversee the Microsoft Services strategy in the United States and Canada.

Callahan will lead a team of more than 3300 professionals who assist customers with the implementation and utilization of Microsoft technologies through IT architecture and planning, adoption and deployment, and enterprise and consumer support.

For product companies that are becoming more focused on professional services, this type of announcement is common. For example, Software AG just brought in a McKinsey alum to head up professional services:

Software AG Names Holger Friedrich to Management Board

Sat. September 06, 2008; Posted: 01:29 AM  

Software AG, a provider of business infrastructure software, has appointed Holger Friedrich to the Management Board with responsibility for global professional services.

Friedrich brings 15 years of leadership experience from within the professional services industry and will join the company as of October 1. Previously, Friedrich served with McKinsey & Company, SAP AG and SPM Technologies GmbH.

“This is a significant appointment in light of the trends within the business process management and service-oriented architecture markets,” said Software AG CEO Karl-Heinz Streibich. “Customers increasingly require high-level consultancy services within strategic SOA and BPM projects. We already have an industry leading product portfolio. By strengthening our complimentary consulting and professional services, we can increase the value of this product offering to our customers.”

In fact, even software as a service providers are not immune to the lure of hiring executives from consulting firms. Three years ago, salesforce.com brought in an Accenture executive:

Former Accenture CRM Head Joins Salesforce.com

September 22, 2005

Salesforce.com, which provides on-demand customer relationship management (CRM) (but you knew that, unless you’ve been living in a closet), today announced that John Freeland, managing director in charge of CRM at Accenture, will join the company’s senior management team as President, Worldwide Operations.

“We are thrilled to have John Freeland join our management team,” said Marc Benioff, chairman and CEO of salesforce.com. “The CRM landscape is going through seismic changes, and John’s unparalleled depth of experience will be a critical asset to our customers, partners, employees, and shareholders.”

However, exactly two years later, Freeland had left salesforce for IRI.  And this brings me to the point of today’s entry.  Service leadership within a product company is not the same as leading an independent service organization.

Two years ago, I published an article titled Profiles in PS Leadership. In the article, I argued that when product companies hire executives from pure service firms, they expect the following benefits:

  • The service executive will aggressively run professional services as a business.
  • The service executive will have a very good understanding the financial business model services should operate under.
  • The service executive will successfully enable the sales force to sell services.
  • The service executive will understand how to scale delivery capabilities.

Yes, the external candidate may have to adjust to selling services as part of a larger portfolio, but clearly the strengths of this type of candidate outweigh the potential weaknesses.

Unfortunately, the case for the external candidate is not really this clear—as the salesforce.com example emphasizes.  In reality, the following challenges face the external candidate when they are asked, for the first time in their career, to run embedded services:

Service Business Model: The financial business model for embedded services is dramatically different than for independent service organizations.  TPSA documents this delta through our benchmarking program.

Sales Channel: A majority of product sales representatives will not successfully sell services.  Furthermore product account representatives may actually be hostile to opening accounts for service opportunities.

Resourcing: The ability to hire service delivery staff may be inhibited by the product company’s desire to keep FTE headcount at a minimum.

Charter: The inability of the executive management team to agree upon the charter for the service organization may set the new service executive up for ultimate failure.

Synergies: Product company executives may care about improving service profitability, but they really care about maximizing the amount of money a customer spends on both products and services. The service executives must have a framework for defining and tracking this product and service synergy.

The process of understanding the true strengths of a pure service executive within a product company is captured in the image for today’s entry. The graph documents the five elements that must be managed by an embedded services executive, how outside service executives are perceived as they take on the embedded role, and the reality of a strength gap.    




I opened this entry with a press release concerning Microsoft’s selection of a new service executive. Perhaps the key piece of information is not that this service executive came from Capgemini, but that they had previous experience within a product company:

Callahan joins Microsoft from Lawson Software, where he served as executive vice president of Professional Services. During his tenure at Lawson, he was responsible for developing a comprehensive services strategy focused on increasing client satisfaction.


Hiring the External Services Executive



One Response to “Hiring Services Leadership in a Product Company”

  1. Chris Moran Says:

    Nice writing style. Looking forward to reading more from you.

    Chris Moran

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