What services boundaries will fall first?

As the G-20 summit convenes in London to tackle the economic crisis, services leaders are convening at the Technology Services Europe conference in Barcelona to discuss how to address the mounting challenges they are facing in their services businesses. After the opening two keynotes, one by Stuart Cooper, Executive Vice President, Global Services, Alcatel-Lucent, four key trends became very clear regarding the current state of the global services marketplace:

  1. The bottom has not yet been hit regarding slowing product sales.
  2. With soft product revenues, the pressure has been turned up even higher on services organizations to improve revenues and profits—without hiring additional resources.
  3. Services leaders feel their organizations are already lean—with very little removable discretionary expenses or headcount.
  4. There is a high probability that future cost cutting requirements will impact the customer experience, the ability to capture new services opportunities, or both.

In this environment, energies must be turned to new tactics that allow services organizations to improve profits, increase offerings, and protect critical resources. It was this challenge that conference host J.B. Wood discussed in his opening keynote. His argument was that services organizations must identify new opportunities in both innovation and cost savings. That those opportunities exist whenever services organizations breakdown existing boundaries. Boundaries that can prevent technology companies from delivering services that help customers realize the business value of the solutions they are buying. Specifically, J.B. identified three traditional boundaries that exist in product companies but need to become more permeable if services leaders are to address the challenges they are currently facing:

  • Offering Boundaries: Services organizations need to collapse the disjounted and sometimes overlapping offerings being delivered by the stove piped services organizations that exist within one company. Professional Services, Education Services, Managed Services, and Support Services offerings must be seamlessly blended to optimize both the customer experience and the economics of delivering these services.
  • Organizational Boundaries: The management and infrastructure of these stove piped organizations must become more permeable. That does not mean they collapse into one big services blog. It means they are identifying synergies in their services processes and infrastructure that prevent redundancies AND leverage the strengths of each services line. The strength of support services to scale centralized resource centers. The strength of managed services to develop repeatable business processes. The strength of PS to solve complex, unique business challenges.
  • Financial Boundaries: Finally, companies must be a greater focus on total account profitability and lesser focus on the profitability of individual services and product lines. As long as internal entities are motivated to maximize their own P&L, sub-optimal decisions regarding total account profitability have a higher probability of occurring.

I am curious what boundaries you believe will become more permeable first? Will companies first bundle offerings differently and then change the internal organizational structures? Or, will companies, in this environment, crash services lines together for cost savings and then rethink their offering strategy? Finally, will the current economic environment lead companies to rethink the economics of current customers and begin focusing more on total account revenues and profitability? Log your opinion in the poll below:

This world of “services without boundaries” will not arrive next week. Or even, perhaps, next year. However, the pressure to find new tactics for services success has increased immensely. It is this pressure that will motivate organizations to begin hammering down these ancient walls.

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