Let’s face it, we work in a massively commoditised industry. Ninety-nine percent of the hardware and software you sell is identical to what your competitors are selling. The same is true for the majority of online services. How things came to be in this state is an epic tale of natural market forces that has involved, among other things, vendors vying for market share, customers learning to play suppliers off against each other and an ever-increasing number of resellers.
As commoditisation increases, there is a natural and increasing tendency for resellers to strive for differentiation. While there are many ways this can be done (via pricing, bundling and alliances) the harsh reality is that few, if any, of them are sustainable in the long term.
The two semi-exceptions to this rule are service and services – both of which can potentially provide long-term differentiation and opportunities to increase profit margins. The secret is that these need to be plannedand managed carefully and correctly.
So let’s start with service (singular) and, in particular, pre-sales service. Have you ever considered how important your levels of service and expertise are from the standpoint of a large vendor such as Cisco, IBM, Microsoft or Oracle?
Think about it, these companies labour away and spend billions developing new products and services that they rely on you to understand, champion and, ultimately, sell and support.
If you do a good job of it everybody is happy but if you do a poor job the customer will come away with a negative perception of both your company andthe vendor. Vendors need you to deliver a consistently high quality service experience, but today’s channel economics make that difficult to achieve.
In particular, the pre-sale process of determining requirements, meeting with stakeholders, identifying and comparing options, preparing pricing and organising demos soaks up a huge amount of valuable time and financial resources, and guess whose resources they are? That’s right, they’re yours !
I think many vendors need to revise their partner programmes and do more to provide some of the upfront support required for resellers to be able to pitch and position their wares - with minimal impact on resellers’ bottom line.
So what about services (plural)? When you look at the growing breadth of technology products on offer, the increasing depth of functionality of those products, flat or declining vendor marketing budgets and the cost of keeping your staff engaged, informed and certified; services are pretty much all that separates many resellers from eventual failure.
The expertise, insight and experience a good reseller can deliver to a customer via their services team is potentially all that sets them apart from the also-rans.
Those are the things customers and competitors can’t clone easily and, therefore, they’re logically the things that are worthy of sustained investment over time.
In case you haven’t figured it out already, the differentiation you’re looking for isn’t going to be provided by the technology you provide – it will come from the people you hire to deliver that technology to your customers. And that begs a few salient questions: How much are you investing in building this competitive advantage for your organisation? Do you hire the best frontline services people? Do you give them the support they need to support your customers? Do you do whatever it takes to develop and retain them? Are they goaled in ways which maximise the chances of your ‘differentiation via services’ strategy succeeding? If not, why not?
I spoke recently with the owner of a smallish technology company who has a reputation for delighting customers. We got onto the subject of the increasing rate of change within the IT industry, the impact of local and overseas mergers and acquisitions and the emergence of cloud-based services.
I asked him how he determined which technologies his company should focus on and his answer surprised me. It turns out he doesn’t spend a lot of time thinking about such stuff, what he focuses on instead is ensuring customer satisfaction and loyalty. His view is that customers would determine which technologies were best for their respective businesses and his role is to provide the leadership, coaching and people development required to ensure his team can provide the services their customers require.
I thought he ran a technology company, but it turns out he runs a services company. A very successful and profitable services company. I think there is a moral in there somewhere.
Brett Roberts is a partner at business strategy consultancy Business IQ and Microsoft New
Zealand’s former CTO. He can be contacted at brett.roberts@businessIQ.co.nz