In my last post, I overviewed key trends in the technology industry that are disrupting the business models of technology companies. These shifts in market dynamics are requireing tech companies to revisit how they will pursue target markets. How does a tech company go to market with cloud applications? What is the role of partners if customers now purchase subscriptions from product companies directly? And what does the business model for a product company look like when customers are not willing to spend significant amounts of upfront cash on licenses and maintenance contracts? Specifically, TSIA sees member companies wrestling with five key questions regarding their company business models:
Industry consolidation: Cloud and utility computing, specifically, are accelerating industry consolidation. The line of demarcation between hardware and software providers is blurring. The crisp lines between product providers and service providers are fading. Executive teams are constantly reviewing who they should be acquiring or who may be acquiring them.
Where will top line growth come from? Cloud computing and utility computing may drive volume, but these trends may also do little for top line growth if customers are paying less for the same IT capability. This begs the question of what will fuel top line growth for tech companies The new major markets? New mobile offerings? New service offerings?
Where should we be investing? Entering 2011, a quick survey of the tech landscape reveals a massive amount of cash being horded. Companies such as Apple, Cisco, EMC, and Oracle are sitting on billions of dollars of cash. Historically, these companies prefer to invest in new product technologies or acquire emerging startups. But, it appears these companies are not finding a plethora of hot new technology opportunities to pursue. Hence, the growing piles of cash. Investors will not tolerate shrinking returns on equity. Product companies will be pressured to invest or pay the cash out in dividends. So the question will grow louder: where should we be investing?
Go to market model: Historically, product companies have leveraged a go to market model that leads with product functionality and leans on partner capabilities. In a post cloud/utility landscape, “product features” will weigh much less than “service features” in the decision process of customers. This means product providers will have to transform their selling motion to truly be services led. For a majority of product companies, this is not a minor transition.
Engineering the experience: Finally, product companies are facing the reality that they must engineer the entire customer experience—not just the features of the product. Apple is not winning the feature war, they are winning the experience war. To truly engineer the complete customer experience, product companies will need to break down traditional boundaries between product engineering, support services, professional services, education services, and outside partner capabilities. They will need to reassemble these capabilities in a way that delivers a seamless, successful customer experience.
These overall business challenges are translating to specific challenges for the service organizations embedded within technology companies. To read TSIA’s perspective on what these challenges are, download the 2011 TSIA Research Agenda. This papaer provides a killer summary of the industry trends, unfolding in tech, the business challenges listed above, and the resulting service challenges.
To download the complete report, visit:
Tags: TSIA research agenda