Solution Centers: Sourcing Survival Strategy #4

Right now, Bo DiMuccio and I are working on a Services Insight for the TSIA community titled “Seven Sourcing Survival Strategies.” The paper overviews tactics embedded PS organizations should be pursuing to stay competitive in the technology services marketplace. One of the tactics we discuss is leveraging centralized solution centers. In this blog entry, I will share some of the content from the pending paper. However, before I delve into the topic, I want to make TSIA members aware that we are currently conducting a member survey that captures both practice and results data related to optimizing solution center resources. To participate in this study and receive the readout, please visit:

http://www.tpsaonline.com/member_surveys.asp#pssolcenpractices

PRESSURE ON REGIONAL DELIVERY MODELS

In essence, embedded PS organizations often build out their services capabilities in a traditional “partner model.” When the product company needs services in a country or region, they hire a services leader. That leader is then responsible for determining how to source services engagements and meet financial targets in that region. This is very similar to how consulting firms traditionally would expand. They would assign a new region or practice to a partner and make that partner responsible for building a profitable business. As long as each partner hit their targets, the overall business was successful.

The simplicity of the traditional partner model is attractive. It creates clear lines of responsibility for success and failure. However, it also results in a very geo-centric culture that sub-optimizes the use of scarce human capital. In other words, every partner (or regional services leader) becomes fixated on optimizing his particular patch. There is little incentive to share resources or tactics across regions. This is not fertile ground for incubating competency centers or off-site resource pools that could be leveraged by multiple geographies. These limitations caught up with the Accenture’s of the world and forced them to begin migrating from a geo-centric sourcing culture to a competency-centric sourcing model. It is this shift that has allowed them to remain competitive with the Indian services firms.

Embedded PS organizations are still in the process of learning that the geo-centric model is indeed out of gas. Establishing resource management offices is a tactic to break down these geo-centric models.  Another tactic that is becoming table stakes in the world of PS resourcing is the creation of centralized solution centers that provide technical and business expertise to engagements across multiple geographies.  In a 2006 focus group study with member companies on this topic, TSIA captured five reasons embedded PS organizations were creating centralized solution centers:

1. Increase the ability to support “low volume” geographies
2. Increase the ability to support  low volume offerings
3. Increase the ability to respond to lumpy demand per geography
4. Reduce the cost of labor
5. Accelerate knowledge transfer

FINANCIAL IMPACT OF SOLUTION CENTERS

The TSIA 2009 Project performance study confirmed that the use of centralized solution centers increases average project margins. This correlation also existed in the 2008 Project Performance Study. The image below shows data from the 2009 study.

Impact of Solution Centers on Project Margins

An additional data point supporting the use of solution centers can be found in the 2009 Partner Practice Survey. In this survey, TSIA captured the average resourcing mix of PS organizations. The analysis of the data showed that high performing PS organizations were leveraging solution centers at twice the rate of average performing PS organization as shown below.

Pacesetters and Solution Centers

 

IT’S A JOURNEY

Implementing solution centers and leveraging solution centers are two different endeavors. TSIA members have found the following challenges in having solution center resources actually being leveraged within engagements:

• Simply establishing a solution center and mandating the field leverage the centralized resource does not guarantee adoption.
• Field employees will have a preference to using the local partners they have always used.
• Some companies have been forced implemented overlay sales reps dedicated to booking solution center resources.

Once again, practices for optimizing the use of solution centers is the topic of a 2010 TSIA member survey.  Please visit the following location to participate in this study. Participation is free to TSIA members:

http://www.tpsaonline.com/member_surveys.asp#pssolcenpractices

Tags: improving project margins, solution centers