Cisco: The Impact of Services on Product Revenues

Last week a TPSA member made me aware of a webcast delivered to Cisco shareholders and available on the Cisco web site by visiting:

The investor webcast of interest is titled:Revolutionizing Customer Intimacy. In this webcast, Nick Earle, SVP of Services from Cisco overviews Cisco’s updated services strategy. The eye catching statistic provided in the presentation is related to the influence of service activity on product pull. Cisco states the following fact:

Every $1 of solution architecting services purchased by a customer results in $4 of advanced services that drive $7 of Cisco product sales.
Customers that do not purchase architecting services purchase an average of $3 of Cisco product.

The graphical version of this statement is our image for this entry:

Impact of Services on Product Revenues

Cisco: Impact of Services on Product Revenues

This type of data gets professional services folks very excited. It is exactly the type of evidence that service organizations are always searching for to demonstrate the economic impact of services on product success.

Having data that definitively proves the positive impact of services activities makes it much easier for services organizations to make the case for resources. In a way, this data provides the return on investment argument for hiring services staff.

However, referencing the Cisco example within your company will have inherent challenges. First of all, the Cisco analysis is based on only 200 accounts. What was the profile of these accounts? Large strategic accounts? High growth medium sized accounts? Also, does this ratio apply to software as well as hardware? Or is this impact unique when selling networking hardware? These are the questions senior executives will surely ask before believing this Cisco 1-4-7 model applies to your company. And of course, there are no answers to those questions in the Cisco webcast.

To me, this webcast once again raises more questions than it answers regarding the true impact of services on product success. I truly believe the only way the services industry will truly move this dialogue forward is to aggregate data from multiple companies across the hardware and software industries. We need to document, with datasets larger than 200, the impact of service activities on small accounts, large accounts, software sales, hardware sales, etc.

In a previous entry, I discussed the TPSA initiative to aggregate economic impact data for the industry. If you are interested in participating in this effort, review the post.
The Impact of Services on Product Success

Until the day we have a comprehensive industry dataset, the services industry will be doomed to referencing one off examples like this webcast from Cisco. And these one off references rarely hold water in the executive suite.


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2 Responses to “Cisco: The Impact of Services on Product Revenues”

  1. Matt Says:

    Gartner do some great independent studies on the impact of wireless services on profit and product revenue. They are often worth reading.

  2. Impact of Services on Account Stability « Service Visions Says:

    […] pull through product sales? The definitive answer to this question is proving very elusive. Cisco has commented on the pull relationship, but there is no industry validated dataset cutting across multiple companies that definitively […]

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