I’m often asked by founders and CEOs of IT consulting firms, “What are smart CEOs doing to add value to their tech consulting companies?” My quick response is they are finding ways to become solution providers. This response begs the follow-on question: “What do you mean by a solution?” The answer to this question warrants further discussion.
Solutions solve bottom-line problems and deliver bottom-line results. Solutions have well-defined customer value propositions. For example, whereas an IT consultant solves a resource or capability issue for a client, a SaaS or managed-service offering provides a cost-effective way to create automated, streamlined, connected processes that achieve huge
improvements in operating performance. That said, solutions have to go beyond a
simple bundling of products and services, and providers need to deliver the value that was identified and promised. If CEOs of these IT consulting firms evaluate capabilities found inside their companies and within the industry, they can define their own specific solution set.
Typical solution components are:
Product IP: A discrete item with traceable expenses and revenue, i.e., with “physical/tangible” attributes. Can be hardware/system or software or data
Other IP: Templates, methodologies, frameworks, pre-configured solutions
Service: An organized activity with specific expenses and revenue, i.e., with “non-physical/tangible” characteristics. Generally IT-enabled or related.
Professional Service: Application of know-how to achieve a desired result.
Solution: A set of two or more products (software and/or data) and/or services that satisfy the needs of some customer value propositions, along with the information and know-how required to effectively deploy and realize the benefit of the solution.
The benefits of offering value-adding solutions to an IT consulting or service business might be:
- Obtain a larger “footprint” within the customer (more product users) or increased transaction service volume.
- Stickier or locked-in recurring revenue streams with upside growth potential
- Higher fees and margins
Successful solutions players do not view solutions as an additional offering to their target markets, but rather as a fundamental new approach that replaces mature product- or service-centric, go-to-market approaches.
To summarize, a solution is a collection of components intermingled to provide a seamless, implementable, and holistic resolution to a customer’s business issue.
Overall, the IT industry is moving toward some form of a hybrid company model where services firms begin to develop more intellectual property (IP), such as software or managed-service delivery frameworks, and IP or software vendors begin to offer expert services or Software as a Service models. The goal is to provide a total solution. I will talk more about hybrid models in a future post.