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“Transactional services start out as something that we have done a number of times,” according to Devin Rickard, Senior Director of Business Process Quality and a former Director of Professional Services at Symantec, the security, storage, and systems management solutions company. For Rickard, high-volume services included installation and configuration of security, storage, or availability solutions. Most engagements ranged from four days to three weeks.
Jay LaCroix’s service team at Internap, an enterprise-level internet service provider, installed and configured intelligent outbound Cisco router controllers with the objective of optimizing bandwidth performance for large enterprises. Jay said, “We did a few hundred router deployments a year and it was probably 80 hours of work to do all the planning, design, and implementation for the engagements.” There was some customization for the client’s network but for the most part, the work was the same every time.
Transactional services are repeatable because they are high-volume, according to Mason Jones, senior managing consultant with Houston-based Entelligence LLC, a services firm that specializes in providing transactional services under product makers’ brand names. Entelligence engagements run from three days to three weeks, on average.
“We have heard transactional services referred to as rapid deployment services, rapid deployment model, quick starts, and packaged services. The thing they all have in common is that the projects are short in duration, performed under fixed statements of work, and associated with products,” said Jones.
Under whatever name, the short duration and defined nature of the work helps define and separate transactional services from services delivered as part of a longer-term enterprise professional services relationship.
Fixed-Price Proposals Help Define the Value for Customers
At Symantec, Internap, and Entelligence, the high volume of similar service engagements has made it possible for each firm to define what is included in their transactional engagements, and what is not.
If you want to be clear about what is included in typically fixed-price transactional service engagements, you need to draw the line on what is included and what is not. On router installations, LaCroix and his group prepared a sales slick, “a packaged data sheet with a fixed price”, to discuss with customers. The deliverables were listed on the sheet, along with the budgeted days of effort. If the customer wanted more, that is where we would need to write a custom statement of work.
Of course, when you are in the service business, time is money, LaCroix said. “Behind the curtain, we developed an estimate of the average amount of work that would be required, and we priced based on that. From an operational delivery standpoint, we reviewed our actual performance against what we quoted—at least annually—to see if we were still within the profit margins [that we had established].
Symantec, Internap, and Entelligence agree that the value proposition is simple from the customer’s perspective: Fixed price, fixed work, and fixed deliverables.
Transactional Services Are Easier to Sell
The fixed nature of the transactional proposals makes them easier to sell, providers agree. When little customization of the statement of work (SOW) is required, transactional engagements are easy add-ons to a product sale. Fixed statements of work - or "data sheets", as LaCroix described them - are often presented to customers by sales executives at the time the product is sold, without further involvement from sales engineers or technical service team.
“The sales team could say, ‘Here is the solution that we offer. This is the price. This is what we can do for that price’”, LaCroix said. The customer can either agree or the sales team could confer with the technical service team to determine if the potential engagement warrants customization. It may not, but at least the customer has been informed that services are required to get the most from their product purchase.
Jones at Entelligence agrees. When product companies define and sell services by stock keeping unit (SKU) just like they do with products, “attachment of the service is almost automatic,” Jones said.
Demonstrable in Pre-Sales
“Transactional services should be easier to sell than more consultative services in part because they may be more demonstrable to the client during pre-sale. If the product company can refer prospects to a willing reference account; an example installation; or for simple services, a data sheet, it should be easier for customers to see what they are buying. This is especially important if the client has neither procured nor evaluated services before,” Jones said.
Anything that can be done during the sales process to make the value of services tangible should be done. Jones shared some strategies that his service teams use: Clearly documenting how the services support or enable product features and capabilities helps customers see how services will help them get the benefits that they want.
“Another effective strategy is to create scripted demonstrations that can be quickly scheduled and performed by a sales person or technical service team, or made available to the customer in a self-service fashion,” Jones said. “During the demonstration, the benefits of the transactional service engagement can be explored right along with the product features.”
Strategy Determines How You Deploy Transactional Services
When product companies view services as supporting customer satisfaction and ongoing license sales you are more likely to see a high proportion of transactional services. “Whereas, as with us if your services organization has its own revenue and profitability targets, then you are more likely to see less transactional services, and more consultative services,” Symantec’s Rickard said.
But most service-providers want to weight their service business toward strategic relationships because cost of sales and other overhead can be spread over more revenue, and profit margins are better, according to Jones.
That is, in fact, a key point of value for transactional service provider Entelligence. “We help our clients focus on their strategic customers by specializing on transactional services,” Jones said. “We protect their brand on the transactional business, and our clients can concentrate their resources on their enterprise customers.”
Transactional Services Can Challenge Margins
Product makers say that they provide transactional services like installation because customers expect them to. And product makers know, they say, that decreasing the time it takes for customers to get the value they want from their purchases relates directly to higher customer satisfaction.
But, for product companies used to performing a full assessment for strategic customers, transactional services can be a risky, low-margin, business, Jones said.
“While product makers might prefer to perform a full assessment with every customer, many customers won’t pay for that. But they still need some services to get the value out of their purchase,” Jones said. “That’s why it is important to segment enterprise services from strategic services, and manage them differently.”
Managed well, transactional services can be an opportunity for product companies to protect and grow their reputation with customers. Without a defined process to manage transactional services, margins and customer satisfaction are often at risk, service companies say.
Transactional Services Specialists Focus on Growing Margin
It seems that product companies are, like Symantec, making a strategic decision: Are they going to set up and optimize for the enterprise consulting services that account for most of their service revenue? Or are they going to organize around delivering transactional services? Can they do both?
“A lot of companies don’t recognize that the [transactional service] segment has unique characteristics and, therefore, has unique requirements as a line of business,” said Gary Doughty, Vice President of Sales at Entelligence.
According to Entelligence, transactional services are often tucked away within a product manufacturer’s much larger professional services organization. But, “We have found that you can’t support your transactional business with the same organizational structure that supports your enterprise services,” Jones said. “From a fiscal, process and execution standpoint, supporting 20 transactional projects a month is very different than supporting a few enterprise consulting projects ranging from two weeks to six months. The alignment is not right.”
Doughty observed that lumping transactional services in with other lines of professional services often impacts overall margin, customer experience, and new product sales. That can put a strain on product and software companies. “Companies will often admit that they need help,” said Doug Chandler, an analyst covering storage solutions with the research firm IDC.
“The reality is that many technology companies struggle to keep up with the changing demands with the right skill sets on hand when the demand increases. This may revolve around new-product roll-outs for example, when suddenly you have new requirements around planning, integration and eventually support,” Chandler continued. “And some companies are better than others at planning the requirements for these types of services.”
Product companies that that treat transactional consulting services as a separate practice can customize processes to the needs of transactional business, and enjoy better margins, and more satisfied customers, Doughty said.
“Product companies need to become very efficient in the transactional services segment in order to improve margins and deliver excellent customer experiences, especially when these services touch 80% of their customers", Doughty explained. "Companies will have to come to grips with the fact that they are spending lots of time and resources on services that account for about 20% of their services revenue.”
by Daniel Davison, Principal, BentonsEdge LLC.
