Monday, June 4, 2012

Selling IT Services to Stakeholders


The End

If you want to be sure that you're successful in your pursuit of a goal or outcome, then first you need to be sure what is the goal or outcome. Define what it is you are trying to achieve. Begin with the end in mind. Secondly, define the motivation. Know why you want to achieve the outcome, and what the value return is for you or your client.
Not only will this fundamentally guide your actions, investment and the amount of effort you expend, it will also assist you to verify your progress and continued commitment in reaching your intended objectives. If the above is true, then as I.T. Professionals we have to be clear in what it is we are here to do. 
Over the past weeks I have elaborated on the ways that value is created in I.T. organizations: How to make these organizations more efficient, how to structure these businesses, how you as Professional can be more successful. 
One aspect I have neglected is the definition of what it is we are here to do. The term often used for what we do is “Service”. We provide “I.T. Services”.
What is an IT Service? 
It Started With Costing

This question became important because I've been working on a costing model for the ideal I.T. organization (more about this later). I asked: “What is it clients pay for in I.T. Services, as opposed to products like hardware and software? 
The most prevailing approach to pricing I.T. Services is on a “Time and Materials” basis. We hire out the availability and labour of an I.T. Professional for a fee, over an agreed period. In this approach, we are therefore selling “potential” to a client based on the competence of the Professional. It is the potential outcome based on available ability. 
The outcome or value of the outcome is not directly relevant, although important for possible repeat engagement. The I.T. Professional himself is left with demonstrating value through the “Service” that he or she provides. This 'Service” can be Analysis, Design and Implementation, Operation or Management.
An alternative is to price an outcome for a client. An outcome can be a material change such as a new solution deployment for the elimination of a current business problem. An outcome can also be a lack of eventuality like ensuring the availability of a solution. 
This implies that the provider (I.T. Professional and his organization) negotiates a fee relative to the value of the outcome (or lack of it) with the client. This is a more complex and risky pricing strategy that should also prove to be more profitable, based on the higher level of organization required from the supplier, to facilitate such an outcome. In this instance, the value of the “Service” is provided by the organization.
In the following sections, I aim to demonstrate that the above pricing strategies are not necessarily selling different things. That, although priced differently, in the customer's mind they are still buying the same thing: An I.T. Service which is a person or persons, with a process or processes, and a tool or tools, to provide benefits through solving an important problem or problems.
The above two simple pricing approaches are only different in one simple manner: 'Defining who carries the risk of failure?” 
The risk management strategy of the customer will define if they assume the risk and duty of organizing the potential ability of the I.T. Professional for achieving a desired outcome. Alternatively, they can leave this to an I.T. Business with more experience, repeat knowledge and practices in place to organize more efficiently than the customer, for a desired Service outcome.  
We assume that we are here to provide a service for our clients and employers. Just what is this Service? How is it constructed? How do we know we are doing a good job at I.T. Service delivery?

What is an “IT Service”? 
Let us have a closer look and see if we can find a simple answer.
The I.T. Service

When I consulted the standard dictionary I found that the verb service is used principally in the sense “to repair or maintain” An act or a variety of work done for others. Activity directed toward making or doing something. an act of help or assistance. Make fit for use; "service my truck"; "the washing machine needs to be serviced". Mate with; "male animals serve the females for breeding purposes" Functionality derived from.
A person does something to effect an outcome.
I've found one of the better explanations of an I.T. Service from the I.T. Service Capability Maturity Model®. (http://www.itservicecmm.org)
I quote: 
“A major difference between software and hardware development on the one hand, and software maintenance, system operation, network management, etc., on the other hand, is the fact that the first result in a product, whereas the latter result in a service being delivered to the customer. 
Usually, a service is defined as an essentially intangible set of benefits or activities that are sold by one party to another.” A Service is therefore: Something that is done (activities, through processes and people, with tools) for tangible benefits.  
“The main differences between products and services are:
  • Services are transitory by nature, products are not. Hence, services can not be easily held in stock.
  • Product delivery results in a transfer of ownership, service delivery does not.
  • The use of products can be separated from the production of products. Services are produced and consumed simultaneously.
  • Services are largely intangible, whereas products are largely tangible.
The difference between products and services is not clear-cut. 
Often, services are augmented with physical products to make them more tangible, for example, luggage tags provided with a travel insurance. In the same way, products are augmented with add-on services, for example a guarantee, to improve the quality perception of the buyer. Moreover, customers might even consider the quality of service more important than the characteristics of the product itself.
Often, products and services are intertwined. An example is a newspaper subscription, in which case both the product – the newspaper itself – and the service – the daily delivery – are essential to the customer. This means that the quality of such a product-service mix will be judged on both product
and service aspects: Is the newspaper delivered on time, and does it contain the desired information.
Like the newspaper, I.T. management and maintenance can very well be a mixture of product and service. For example, in a situation where a software maintainer analyses change requests for a fixed price per period and implements change requests for a price per change request, software maintenance is a product-service mixture. Here, the service is the customer having the possibility to have change requests analyzed, and the product is the implemented change.
Looking at I.T. Management and maintenance activities from a service perspective, a number of issues that pertain to the quality of these activities emerge:
  • If the activities are performed in an ongoing relationship with the customer, which they will almost always be, the I.T. Service provider needs to facilitate communication between end users and its organization. Moreover, this communication needs to be managed and controlled. The perceived value of this communication and relationship therefore has a material impact on the service perception of the customer.
  • The customer and the I.T. Service provider have to agree on the quality levels with which the service will be delivered. Examples are: the maximum number of change requests that will be implemented per period, the availability of IT systems and networks, etc.
  • The IT Service provider and customer need to evaluate the Service on a regular basis: Is the Service still what the customer needs?
  • Possibly, the I.T. Service provider has to cooperate with third parties to perform its job. For example, new software may be developed by a software house, and is subsequently maintained by the service provider. Or the software may be operated by a separate computer centre and maintained by the Service Provider.
Although each of the above points plays a role in software and hardware development too, the conjecture is that these activities are more important as Service aspects are more prevalent. Regardless of the exact circumstances in which an I.T. Service provider operates, sufficient emphasis should be on processes like the ones mentioned above, to be able to deliver quality I.T. services.
One practical example of how products and services differ is to consider what happens when a product fails verses what happens when a service fails. It’s obvious when a product fails - it stops working; when it’s plugged in nothing happens; when you try them on you find a tear. The remedy for such occurrences is predictable. You return it or exercise your warranty options. But what happens when a services fails? How do you even know if it has?
In web development this happens all the time. A customer calls and says “your site is broken,” meaning that someone emailed them saying that it doesn't work for them. Did you fail and not code the page properly? Perhaps. Did this customer have an outdated or unusual computer or do they have some strange settings that are causing the error? If you tell your client that such an occurrence is a highly unusual anomaly but that the page is properly coded, what do they do? Whom do they believe? 
The end result is simply that you failed the customer in delivering the desired benefit or outcome. You've failed in delivering your Service.
There are thousands of such scenarios that can make selling and buying a Service extremely challenging.
Orientating Yourself for IT Service Delivery

One can therefore safely define an I.T. Service as: A benefit(s) derived from an I.T. Professional(s) acting within a mature process(es), utilizing the appropriate tool(s) with the emphasis on delivery or securing of benefit or an outcome for a client.
How do we package what we do as I.T. Professionals into a Service?
As I.T. Professionals, we sell our Services every day. To know how to effectively package what we do, we need some guidance from the Services Marketing experts. They tell us that Services Marketing is marketing based on relationship and value. 
Relationship is a fundamental component of the Service product you provide to your customer. Consider this the value added element to the core objective of the Service. When your customer finds you responsive, cooperative, capable, and focussed on their needs, then you have gone a long way in delivering your Service. 
The core objective however, is the value you deliver to your client. This is the agreed outcome you provide for a fee. If you fail in delivering the agreed benefit or outcome, then no amount of relationship will save you.   It may give you a second chance, but you will have to prove your worth in achieving the outcomes as agreed. 
Marketing a service-base business is different from marketing a product-base business. 
There are several major differences, including:
  • The buyer purchases are intangible. You will have to look for ways and means to demonstrate your value during the engagement. This can be in the form of reports, measurements, packaging, or any artifact that bears testimony to what you have done and achieved in line with the agreed benefits and outcomes.
  • The service may be based on the reputation of a single person. Your reputation for delivery will be your key asset. Be sure to identify and gather support for what you have to offer and how you do it. A good approach to take is to publish on what you've done or achieved. Your Blog or your Professional Profile comes in handy to demonstrate your expertise and reputation in a particular market.
  • It's more difficult to compare the quality of similar services. In many instances the delivery engagement and relationship will be the distinguishing factor. If there are two organizations providing a similar Service, then the customer will go for the most credible business offering the better relationship and customer care. This is also called Customer Service. You have to "Managing the evidence". This refers to the act of informing customers that the service encounter has been performed successfully. It is best done in subtle ways like providing examples or descriptions of good and poor service that can be used as a basis of comparison. The underlying rationale is that a customer might not appreciate the full worth of the service if they do not have a good benchmark for comparisons. 
  • The buyer cannot return the service. Be sure that you know what is expected from you and deliver accordingly. Because the buyer cannot return the service, you may be exposed on a number of other fronts that makes remedy a costly exercise. The worse case is that you are not used again and your reputation is tarnished.
  • Service Marketing mix adds 3 more P's, i.e. people, physical environment, and process. The competence of the people or I.T. Professional, the maturity of the processes or organization and lastly the service interface, be it location or present ability of a person are critical factors in service success. 
I argue that no product or service knows less about how it’s consumers buy than do the I.T. Service business. Historically, this stems from the fact that professional services are mostly bought at those times when urgent needs arise. Nobody wakes up in the morning and says, “What I really need today is a good Problem Management Service.” Or “This is a great day to buy Project Management.” 
Selling I.T. Services

IT Services are bought, not sold. The emphasis is not on the skills an IT Business has to sell, but on the needs of the buyer. Buying and selling of IT Services ought to be predicated on value. If you sell, make the selling itself worth the buyer’s time.”
Here’s your problem. In any Professional Service, just having your name known is pretty useless. In a competitive situation, unless it’s known for something you will not succeed in landing the opportunity. For example: Be a good Web Services Designer, and not just a Java Developer. Be a good Online Solution Project Manager, and not just a Project Manager. Be a good Costing Analyst, and not just a Business Process Analyst. In I.T Services, it’s the reputation for expertise that counts, not just the reputation. 
This is why one of the most effective objectives for any marketing program for an I.T. Service is to project expertise. Demonstrate your special niche or ability relative to the customer's requirement. This applies to both I.T. Professional that is marketing himself for his next job or contract, and to the I.T. Services Organization that is looking for its next engagement opportunity.
There are many ways to do it, but the best and most reliable way is the article. In an article, you don’t have to say you’re an expert. The fact that you wrote the article, expounding on a particular subject, says it for you. It’s your expertise on display.
When a company hires you for a service it is usually because they do not have the expertise to do it themselves. Consequently, they can’t effectively evaluate your expertise. They can see the work you’ve done for others. However, they might fear that they will not get the same quality for their project, or that they could not afford the level of quality they might see in your Profile. 
They might fear that they won’t get the best talent assigned to their project. It may be unfair, but hours of diligent coding will never make up for one occurrence of being inattentive. If a client does not feel like they are being listened to, or that we aren’t working hard enough to communicate clearly, the actual work we do will not offset it. 
They will remember the flavour of our interactions at meetings, in documents, emails, and conference calls, not how well a graphic is compressed or how effective the outcome was achieved. The actual service and work we do are not the main things our clients can see, understand, or measure. The way you and/or your staff present and conduct themselves in every interaction with the client is material to your success as Service Provider.
Unfortunately for Service Companies, we cannot simply rely on a prospect’s ability to recognize our skills and capabilities. Rather, we need to realize that it is the more intangible (invisible) aspects of how a prospect feels about us that will drive their decision, much more than their evaluation of our talent. 
Selling a service is really selling a relationship, and relationships are based on building trust. 
Sell security. There may be a thousand people behind the manufacture of a tube of toothpaste, but the interface between the manufacturer and the consumer is the tube of toothpaste. The interface between a professional firm and the client is the individual professional. And this is one of many reasons why marketing I.T. Services must be done differently, in a great many ways, than marketing products. 
Please feel free to share your insights and experiences in marketing you Services as I.T. Professional or Service Organization. Your opinions are always welcome.
Hendrik van Wyk

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