[Updated 1/21/11] A few weeks back, I was having a great discussion with my friends (and fellow Twitter #ProfServ chat moderators) Alan Berkson (@berkson) and Kelly Craft (@KRCraft) regarding our December 23rd, 2010 #ProfServ chat on Value Pricing.
As we discussed and dissected the Value Pricing chat, and how it had evolved over the course of the hour, two themes kept floating to the top of our discussion: 1) how to deal with Professional Services that had become “productized” (sold on a fixed-price basis in a product-like manner), and 2) at what point does a Professional Service cease to be a Professional Service and become a mere service-related add-on to a product sale.
Why is this important? Because almost every industry, from Hardware to Software to true/pure Service industries, uses the term Professional Services, but in slightly different ways that often result in confusion on the part of many consumers. Clarifying these issues helps both set proper expectations across market sectors and can also be useful for service providers in determine pricing strategies – especially in situations where services are customized verses productized. More importantly, many enterprise customers (especially in large corporations or government organizations) have different pools of budget money for items such as products, support services and pure consulting or business advice services.
PRODUCTS vs SERVICES
As we worked through this discussion process, we found that defining a product was the easy part – any fixed, material good that is sold on an as-is or semi-configurable basis.
But the definition of a Professional Service, or even a hybrid service/product (and the line where a Professional Service becomes a product) was a bit more difficult, including the debate over similar-but-different services such as a barbershop vs. a hair salon or a neighborhood kid with a lawnmower vs. a professional landscaping firm (outstanding service doesn’t necessarily make it Professional Service).
“Un-professional service is not the opposite of Professional Service,
it’s just poor service.”
Let’s use software as an example:
- Having a software developer design a custom software application is clearly a Professional Service.
- Purchasing an off the shelf application is clearly a product sale.
- But what about when you purchase an application and somebody installs it for you? Professional Service? Not in my opinion. It’s product + install.
- Does it become more of a Professional Service if you purchase software and somebody customizes it for you? Perhaps that is a bit closer to a Professional Service, but not, in my opinion, if the software costs $50,000 and the customization is included in the price or if the actual customization fee is nominal.
THE ISSUE OF MARKET SECTORS
This issue becomes more complicated (and important) when you consider the definition of Professional Services across different market sectors – especially with firms that offer a combination of products AND services. For example, many product vendors have Professional Service Groups who provide both pre-sale on-site surveys and design services (usually part of a product sales strategy) as well as post-sale configuration and support (usually part of an ongoing customer support/retention strategy). But their overall goal is to sell products – making money on services is a value-add or bonus (although many firms treat their service organizations a independent profit centers). As such, I would consider this to be a product-oriented firm with supplemental services offerings.
In contrast, let’s take a look at the business services sector (I’ll include strategic planning for business operations, marketing, social media and public relations as good examples here) where a service is being offered, but often results in some type of fixed deliverable (a report, a strategic plan, marketing or advertising materials, etc.). In this situation, I’d clearly lean towards describing any material deliverable as being more of a result of the services being provided, and thus treat this business as a more of a services business than a product business.
TOSSING IT INTO THE CROWD
After some good back and forth on this particular subject, we opened it up to the members of our Professional Services Roundtable group on LinkedIn which generated some additional, valuable discussions. We further discussed the topic on our January 20th #ProfServ chat, which brought out even more opinions -all equally valid but many differing considerably in scope and open to a wide range of interpretation.
“I may not be able to define a Professional Service, but I know one when I see one”
Through all of these discussions, from the original conversation with Alan and Kelly, through the LinkedIn group and into our Twitter chat, there was one constant: while we could all come up with consistent/agreeable answer to the question “What are some examples of Professional Services?” (Attorneys, Civil Engineers, Architects, Consultants, Agencies, Strategic Advisors, etc.), we were unable to agree on a clear-cut definition of just what is a Professional Service and what are the defining criteria.
Even trying to scope the issue through a series of questions was helpful, but didn’t lead to any general agreement:
- Does the ability to value price contribute to the definition of a Professional Service?
- Does the way you view your consumer help define a Professional Service (does a “client” denote more of an ongoing Professional Service relationship than a one-shot “customer”)?
TOSSING IT TO THE BIGGER CROWD: YOU
In a way, this entire exercise reminds me of US Supreme Court Justice Potter Stewart’s oft-misquoted statement from his 1964 opinion on an obscenity ruling, paraphrased here as “I may not be able to define a Professional Service, but I know one when I see one”.
Maybe we’re looking at this from the wrong perspective. Instead of trying to come up with a unified description of Professional Services, perhaps it’s more important to answer the question “What is the need for Professional Services?”, a point brought up by Marcio Saito (@Marcio_Saito) during our last #ProfServ chat.
In that regard, I feel confident in the notion that (with a tip of the hat to Geoffrey Moore and his excellent book Crossing the Chasm) Professional Services fill the gap between what a consumer needs and what is available .
So now I’m tossing the question out to you. If you’ve got an opinion or a thought on this issue, please voice it – we’d all welcome your input as we continue to delve into issues of what it means to provide Professional Services.
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And thanks for reading – Fred.
UPDATE NOTE: This post was originally written, in a shorter format, as a lead-in to the January 20th, 2011 Twitter #ProfServ chat. After the chat, I decided to rework the post a bit to incorporate some of the insights gained from the chat as well as expand upon some of my thoughts that I was only able to briefly address in the original post.
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