Following up on a post about IBM packaged services, Prashanth Rai from the CIO Weblog asked me the following question in an email:
Yes, it looks like IBM is trying to do something that could really turn into tangible benefit for services customers. This seems to be a step in the right direction, but we need to see how it successful it turns out and how well they execute on the idea.Quick question: Do you see this working in the ERP/Business application implementation space?
Enterprise customers are weary of open-ended, hourly consulting arrangements. These deals often favor the vendor, taking advantage of the human tendency to slide toward complacency and the status quo. In other words, open-ended contracts frequently lead to bigger and bigger projects, scope creep, and a host of other ills. These projects eventually find their way into this blog.
The ERP market has broken into two categories: large, often complex projects executed for big companies, and simpler engagements for the SME segment. At the high end, large implementation customers demand flexibility and are willing to pay for it. Translation: big budgets and open-ended purchase orders. This means happy days for consulting organizations, whether standalone or inside a software vendor. Except, we all know the good times stop rolling when these big projects fall apart and the lawsuits start flying.
Smaller software customers are far more price sensitive than larger ones: they demand more software bang for the buck or they won’t buy. Therefore, to succeed in the SME market, service vendors must carefully circumscribe their offerings, packaging services into straightforward, fixed-price bundles, with clear input requirements and well-defined deliverables.
Productizing services in this way reduces both cost and risk to the customer. Obviously, reduced cost to the customer likely means reduced income to the service provider. Therefore, increased efficiency becomes a key survival skill for service providers. Packaged services involve leveraging and reusing knowledge, which means being efficient.
Packaged, productized, and standardized services are here to stay in the enterprise software market, including in ERP. Forward-thinking services organizations are already moving in this direction, and dinosaurs who ignore the obvious will be left behind.
Click here to see other postings on packaged and productized services.