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Five Strategies for Profitable Services Growth
In today's era of Professional and IT Services competition and consolidation, some small to medium-sized companies are proudly delivering 20%-50% annual growth. Unfortunately, the vast majority of firms have experienced two consecutive years of fee erosion, commoditization, client defection, and company identity crises. We set out to discover where the growth opportunities exist in today's economy, and to share our findings. The Study Our ten-month study uncovered the major gaps between the top performing and bottom performing companies. Our interviews with 53 CEOs across North America were designed to help leaders in this industry achieve three goals: 1. Identify the most common barriers to company expansion; 2. Learn what investments will positively affect their 2004-2005 growth; 3. Compare their operating model and areas of focus against their peers. We spoke with companies across six major sectors of the IT and Services market, including hardware and software support, business and process consultants, IT outsourcing firms, integrators, and BPO's (business process outsourcing). BPOs had, by far, the most rapid growth rates of any other sector. More than three-fourths of our interviews focused on understanding the dynamics within the small to medium sized organizations (50-500 employees). We compared and integrated our findings with IT research firms and trade groups. These included ITSMA, AFSMI, Gartner Group, Culpepper and Associates, and the New Client Marketing Institute. The Top Frustrations-and Hype When we spoke with CEO's, three common frustrations surfaced: ˇ "Our target market does not understand what we do." (1/3 of respondents) ˇ Today's economic downturn is creating fewer inbound leads and longer sales cycles. Several CEO's in the bottom performing category mentioned that their companies are experiencing 18-24 month selling cycles. ˇ Profitability is eroding due to the commoditization of IT services. Although we asked whether they attributed the erosion to offshore development, only two respondents concurred. In spite of the media focus on outsourcing, only two of the CEOs we interviewed mentioned concern with offshore development. We also learned that only 7% of all outsourcing revenues are generated by offshore firms, according to Joe Blumberg, CEO of Specifics Inc. (www.specifics.com). As of this writing, we can infer that offshore development may be worth watching, is more hype than a present threat to successful services firms. The Impact From a marketing awareness standpoint, we found that the 80/20 rule applies. IBM Global Services has become the "Kleenex brand" in IT Services. ITSMA's most recent branding study claims that IBM GS now has a threefold brand equity lead over other firms. This makes it increasingly more critical for small to medium sized firms to create and communicate unique positioning statements. We also learned that the companies who designed their business around a time and materials model are experiencing the greatest profit erosion. The time and materials- based firms told us that billing rates have declined by 15%-20%. Companies who position themselves as problem-solvers, trusted advisors or BPOs did not report any concern with their profitability. Four of the key areas where bottom performers struggled included market positioning, staff attrition, long sales cycles, and poor self-management. CEOs with flat or declining revenues consistently expressed concern with balancing their own personal and professional lives. The Top Performers' Five Common Strategies How can you best capitalize on the lessons we learned from the successful companies? First, consider how to invest your 2005 budget. The top performers who participated in our study typically invest at least 2%- 3% of gross revenues in five areas: ˇ Attracting, hiring, and retaining great people. These companies ensure that leadership development and self-management are part of the fabric of their company. ˇ Positioning their company clearly within a specific, well-defined niche ˇ Creating a lead generation machine, and experimenting with new lead generation approaches. One company sponsors small-scale CIO breakfasts with great success and has scaled back on printing brochures. ˇ Creating a world-class sales process and scalable sales "machine." Top performing CEO's knew they were on the right path when they found themselves less involved in closing sales, and more time using their CRM automation tools to coach team members from the sidelines. ˇ Invest in client account management models. One of our participants saw their services revenue from Microsoft grow from $2M to $11M within two years and attribute their success to their commitment to formal account planning. Scott Testa, CEO of MindBridge in Norristown, PA, has the commitment to building a winning team. "We have become part of the '200 rule' with CIOs. On the average, CIOs receive 200 email, direct mail and phone messages each day." He continues, "This is the time to grow and invest in sales and hiring-when we come out of this economy, we can turn on the light bulb again." We also learned that the bottom performing companies are over-investing in three areas: ˇ Replacing sales and marketing talent due to high attrition ˇ Software and hardware training for their technical staff ˇ Participation in technology trade groups (e.g. Java and Internet standards) You don't need to be an IT Services firm to learn from these secrets. In light of these findings, ask yourself these questions. Is your company ready to be a "top performer" in 2005? What initiatives will your company be willing to let go? How will you surround yourself, and your key executive team, with a top performer operating model? Lisa is President of Nirell & Associates in Del Mar, CA. She leads the "Profitable Growth Series" workshops and audio series for leaders who want to accelerate top-line growth by retaining their best people. In addition to having 23 years experience in software, consulting, and sales, Lisa has served on 3 Boards of Directors. For a free subscription to NirellNews and a Free Special Report ($57 value), send an email to contact_us@nirell.com or visit http://www.nirell.com. By mentioning ezinearticles.com, you will also qualify for a $100 discount on the "Five Strategies for Creating Profitable Growth" multimedia system. This includes 8 3/4 hours of a step by step systems for creating profitable growth from leading experts such as Amir Hartman, Barry Shamus, and Marshall Goldsmith. For more information, visit http://www.nirell.com/FiveStrategies.htm
Latest News:Site: Yahoo! News Search Results for news UAL shares walloped by new posting of old news (Reuters via Yahoo! News) A nearly 6-year-old news story on the 2002 bankruptcy filing of UAL Corp resurfaced on the Internet on Monday, clobbering the airline's shares as some traders mistook the report as current and plausible news. ABC News hammering out Palin interview plans (Reuters via Yahoo! News) ABC News is spending more time trying to assemble the logistics of its exclusive interview with Republican vice presidential candidate Sarah Palin than it did negotiating with the McCain campaign itself. ABC News campaigning in all 50 states (Reuters via Yahoo! News) ABC News will be hitting the road -- and the rails -- for a whirlwind tour of all 50 states before the November election. Game news: 'GTA IV' hits 10 million, EA meets ESPN (AP via Yahoo! News) Real news from the virtual world: Google News snafu leads to airline stock plunge (CNET) After an investor news wire service mistakenly highlights a 6-year-old news story (allegedly sans time stamp) about United Airlines filing for bankruptcy, shares of the carrier tank. Tacoma's News Tribune offers buyouts to 189 staff (AP via Yahoo! Finance) The News Tribune on Monday offered voluntary buyout deals to 189 of its 350 full-time staffers although the publisher said the newspaper doesn't intend to accept anywhere near that number as it works to bring its expenses in line with reduced advertising income. 2002's News, Yesterday's Sell-Off (Washington Post) A six-year-old article mistakenly seen by Bloomberg financial news users yesterday reported the bankruptcy of United Airlines and triggered a massive sell-off that nearly obliterated the company's stock in a matter of minutes. Kenyans React to American Political News (NPR) The United States and much of the world have been transfixed by the current presidential race. Farai Chideya crosses to Barack Obama's father's homeland, Kenya, to get insight into how political news is being received. She's joined by radio reporter Michael Kaloki. United Airlines shares nosedive on old news (BBC News) United Airlines shares nosedive after an old news story about its 2002 bankruptcy battle resurfaces. Column: 'Daily Show' Is One Of Few Fair And Balanced TV News Shows (CBS News) I have this silly little habit of watching the Fox News Channel when I'm bored or in some weird self-loathing state of mind. So for the Republican National Convention, I thought it appropriate to bathe in their conservative credibility instead of the CNN/Barack Obama PDA I witnessed the week before. Site: news - Google News Palm's new smart phone steals the show - MarketWatch
MORE RESOURCES: Site: Yahoo! News Search Results for management Unisys Wins Email-Management Deal From UK Police Force (Computer Business Online via Yahoo! UK & Ireland News) Unisys' UK subsidiary has been awarded a three-year outsourcing contract from North Wales Police to provide email management services. CA Offers Compliance-Management for Utilities Sector (Computer Business Online via Yahoo! UK & Ireland News) CA has launched a risk and compliance management offering for power and utility providers. Vodafone Restructures and Shuffles Management (Computer Business Online via Yahoo! UK & Ireland News) UK mobile network operator Vodafone has announced a series of changes to its management and organization including the split of its emerging markets business into two divisions. Enterprise Asset Management Market to Grow 6.5% Over Next 5 Years (Industry Week) Sept. 12, 2008 -- The worldwide market for Enterprise Asset Management (EAM/CMMS) is expected to grow at a compounded annual growth rate (CAGR) of 6.5% over the next five years, according to a new ARC Advisory Group study. Selfridges rolls out complaint management software (Computing.co.uk) Angelica Mari, Computing , Thursday 11 September 2008 at 16:11:00 Feedback system aims to help maintain service levels Retail chain Selfridges is using feedback management software to build customer loyalty and maintain service standards. The company hopes that the new system will help it identify the root cause... Industry releases content-management interop spec (ZDNet Asia) Microsoft, IBM, Oracle, SAP, EMC, Alfresco and OpenText have released the first draft of their Content Management Interoperability Services specification. Compare your salary Use the IT salary benchmark wizard and know the average salary differences between different job functions. Join activeTechPros. http://www.activetechpros.com Compli And Environmental And Occupational Risk Management (EORM) Announce Partnership To Provide EH&S Compliance ... (SafetyOnline) As part of Compli's continuing effort to provide compliance protection to auto dealerships, Compli and EORM (Environmental and Occupational Risk Management) of San Jose, California, have formed an alliance to provide top-tier Environmental, Health and Safety (EH&S) information and content to dealers through Compli's Dealership Compliance Management System (DCMS) POWER: Lighting management IC drives up to eight LEDs in series (Embedded Systems Programming Magazine) Phoenix, Ariz. ? ON Semiconductor has introduced the NCP5890, a lighting management device that integrates LCD backlighting, fun light controls and ambient light sensing in a 3 x 3 x 0.55-mm uQFN-16 package. The NCP5890 targets compact smart phone and portable media player applications. Union Bank - Edelweiss JV for wealth management service (Business Standard India) Union Bank of India (UBI) in tie up with Edelweiss Securities has launched wealth management services ti tits high networth clients in Mumbai. RedPrairie Enhances Internationalized Shipment Capabilities In Transportation Management System (TMS) (Logistics) RedPrairie Corporation, a world leading consumer driven optimization company, announced today a host of new features in its updated transportation management (TMS) release - built especially for international users. Site: management - Google News MedaSorb Technologies Corporation Announces Management Changes - CNNMoney.com
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