Building a Consulting Services Start-Up Venture
Based on the 3Com Experience
(Originally published in the October 1999 issue of AFSMI's The Professional Journal.)
By Chu Chang, President and General Manager of 3Com Consulting Services
Recently published research suggests that skilled IT human resources - whether telecom, datacom or networking focused - are becoming more scarce at the same time that network complexities and demands for higher-quality services are increasing. As a result, a typical organization's internal IS staff is often forced to act as a full-time "fire-fighting" unit while larger, more important issues like network redesign, capacity planning, security policies, and future system migrations are tabled in the name of "insufficient resources". As such, these firms are increasingly finding that outside consulting and integration services provide a cost-effective alternative to developing and maintaining specific types of network skills and capabilities in-house and view outsourcing as the solution to this challenge.
We at 3Com believe that there are specific and distinct benefits to be realized from the growing shift to outsourcing that allows companies to leverage network consulting to make the most of their technology investment. By using outsourced consulting services, enterprises can better prepare for the new millennium which promises to be fraught with the presence of ever-evolving technology.
A number of key market drivers are currently shaping the high tech industry:
All of these factors drive enterprises to move from an environment of complex administration, to one of zero administration. Concurrently, the requirements for system uptime are increasing by orders of magnitude from an historical level of "one 9", to a current level of "four 9s" of availability (i.e., from 90% availability, to 99.99%, or higher). The need to replace stored, or forwarded traffic with real-time traffic, and device management with policy management, are further manifestations of how the total cost of networking ownership is changing.
- The continuing "explosion" of Internet, intranet, extranet, remote access and mobile networking technologies;
- The proliferation of new e-business initiatives that require a robust network infrastructure; and
- A desire to reduce the cost of ownership in today's network infrastructure.
All these market drivers also encourage a user-centric networking environment (Figure 1). This user-centric networking environment is based on a foundation of the public infrastructure/Internet; a personal access infrastructure; and an assortment of customer-specific equipment. Examples of customer-specific equipment include tools such as special purpose handheld devices, special purpose terminals, and other general purpose devices which enable users and organizations to be connected in an innovative, simple and reliable way. At 3Com, we believe that it is within this user-centric environment that the future of networking will flourish.
It was also based on the following principal beliefs that 3Com management decided that there were many strong reasons for why the outsourcing of network consulting services is an important and attractive alternative for businesses as they move into the new millennium. Reasons supporting this belief include:
For many businesses, at least one or all of these reasons that make outsourcing appear to be so attractive as a support alternative.
- Strong evidence that ongoing budget constraints are leading to increased pressure for organizations to deliver and/or acquire higher quality services;
- The dearth of skilled technical resources currently available in the marketplace;
- End users becoming more demanding as expanding Web access becomes an integral part of key business processes; and
- A new environment emerging where users are continually being faced with ever-changing new technologies.
Services industry analyst, William K. Pollock, president of Strategies For GrowthSM, suggests that, "the evolution of the market is speeding along so fast, that even the most accomplished IT organizations of yesterday are no longer able to keep up with the internal demands of many of the new technologies and their applications. Where outsourcing used to be an extravagant luxury for some in the past, it has become a practical necessity in the present."
Setting Up for Success
Setting up a successful consulting business venture within the company was clearly one of 3Com's most important goals. It grew equally clear that the execution of the plan required a strong, and focused strategic approach. As such, 3Com management built a program that it believed would align the strategic "fit" of its new consulting services with the company's overall core business strategy. However, before we moved forward as a company, we first ensured that we:
As a real world check to validate why, how, and to what extent we needed to move in this direction, we also examined a number of factors that ultimately supported our decision to move aggressively into consulting services as a specific line of business. These supporting factors included:
- Understood our customers' needs in each of the targeted segments;
- Developed targeted services offerings that were synergistic with our known core competencies;
- Considered the full impact of the anticipated product and/or maintenance "pull" potential; and
- Assessed the real probability of gaining and maintaining market leadership.
The key reasons to enter the professional consulting services arena, as far as 3Com management was concerned, was to "accelerate time to acceptance for products and solutions critical to 3Com's success," and to "help partners and customers see the solution and business value" of 3Com's total solutions portfolio. As consultant Regis McKenna, president of The McKenna Group, has said, "the key to success is the time to acceptance, not the time to market."
- Our customers were clearly demanding these services in terms of requesting access to 3Com partners with "best-of-breed" network expertise to help them realize their respective business objectives, and requiring assistance in minimizing the risks normally associated with technology transition;
- The availability of a full line of consulting services would serve to accelerate the market's, and our customers', acceptance of 3Com products, solutions and technologies;
- It would provide a strong opportunity to improve existing levels of client loyalty;
- It would serve to generate a constant, predictable, and high-growth revenue stream for the company and its stakeholders; and
- It would focus the market perception of 3Com more as a solution provider than merely as the provider of an assortment of products, services and technologies.
Once these underlying factors and reasons had been analyzed, it was not a "given" that all of senior management would buy into the concept. There were still many areas that required anything from a "sanity check", to a full market analysis. The first order of business, however, was to involve our key clients and partners in the business planning process.
This required interfacing directly with key clients to determine:
This approach was helpful in providing us with the ability to understand the full array of customer requirements, as well as the "hot spots" upon which they would ultimately determine our fate as a credible provider.
- Requirements in terms of consulting services;
- Expectations they would have from us (or any networking support vendor); and
- How strongly they believed we would be capable of delivering what they required.
Involving our key clients in the business planning process also allowed us to determine key customer buying patterns that served as a predictor of how our consulting services portfolio contributes to both our company's reputation and image, as well as its bottom line. As an example, we quickly discovered that, by and large, 3Com customers were not only prepared, but extremely willing, to pay premium prices for enhanced levels of expertise in designing, delivering and supporting their networking solutions. This hypothesis had long been an accepted one within the company; however, the strategic analysis and assessment of the market potential for these proposed consulting services finally allowed us to qualify and quantify what the benefits of such a venture could be - both for 3Com, and our customers.
The next step was to decide on the structure of the new consulting services organization. We decided to build the 3Com Consulting Services organization as a separate entity with a distinct internal board of directors. This approach was advantageous for the following reasons:
Another stakeholder external to 3Com that we needed to address was our channel partners. Again, with this independent business model, it enabled us to:
- Increases the overall visibility of the new business;
- Creates a separate organization dedicated on making consulting services a success;
- Enables a much needed cultural shift from a product- and services-, to a solutions-orientation; and
- Allows for each of the participating directors' organizations to interface with the new consulting services organization, thereby empowering them to provide total solutions to their respective customers as well.
Partnership is essentially a "two-way street", and we wanted to ensure that through these new strategic partnerships and alliances, our customers would be the real winners. Overall, the proposed new business model truly allowed for the establishment of "win-win" relationships between 3Com and its strategic services partners (Figure 2).
- Actively team with our channel partners to compare complementary competencies and strengths;
- Refer the implementation component of specific client engagements to the most appropriate partners; and
- Save our channel partners from having to invest in driving the market on their own.
Strategies For GrowthSM's Pollock agrees that, "the use of strategic partnerships to enhance an organization's ability to provide total solutions to its customers is a critical component of any professional consulting services offering. No single organization needs to do it all - it just needs to make it all happen." However, Pollock also warns that "the organization must take its partnership role very seriously in order to ensure that its customers will consistently receive the levels of support they require and expect." It is particularly in this area where we feel that 3Com has excelled.
Executing the Plan
One of management's greatest concerns was building a revenue stream quickly to cover the new business venture's operating costs. The need to establish a revenue stream early on in the process is a critical factor to ensure that management "buy-in" remains "bought in". There is nothing like financial success to support the internal justification for a new services offering. Designing the professional consulting services portfolio to meet the specific requirements of specific types of customers ultimately makes it easier to find those customers once the new offerings are ready to go to market. Once you have found these customers, the revenue stream will not be far behind.
In our case, we decided to target "uncrowded" niche offerings since we had the advantage of leveraging 3Com's existing strengths and using our company's strong brand name to effectively market the specialized solution. The advantages of focusing on niche offerings include:
Of course, there are also a great number of caveats that must be addressed before such an aggressive venture can be successfully undertaken, as credibility is absolutely key to the success of a professional consulting services business. As such, the combined impact of word of mouth and customer success stories plays an extremely important role in articulating and communicating a company's credibility to the marketplace. Moreover, any company planning to embark on a consulting services venture needs to ensure that its portfolio consists of a set of services that coincides with its delivery capabilities. It would be of no real value to offer the consulting services that your customers want, if your organization simply does not have the internal capabilities to effectively deliver them - or deliver them at all.
- Higher margins
- Less competition
- Recognized expertise in consulting services
- Facilitated opportunities for market leadership.
Getting to market is also a critical factor impacting the potential success of the offering. To make this work most effectively, our experience has shown that a consulting services sales force that is aligned with the company's overall sales strategy works much better than one that is separate and distinct. Further, success is more likely to be assured if additional commissions are paid to the company's salespeople if any of the consulting services are included in the sale.
The advantages of an integrated consulting services sales force are clear:
The most important caveat, however, is the recognition of, and the ability to deal with, the need to transform the sales organization to one with more of a solutions mindset, from one with only a narrowly focused product or services mindset.
- It will more likely be synergistic with the company's large installed base accounts;
- It can serve to assist and augment the product sales force in its ability to close large solution deals; and
- It will provide facilitated access to accounts where relationships have already been established.
Within this solutions mindset environment, the most effective marketing strategy to promote the expanded portfolio would focus on the following:
Other areas of importance with respect to the company's ability to successfully bring these services to market include:
- The use of relevant customer testimonials to add and articulate credibility to the expanded offerings;
- The establishment of partnerships with leading, "hot" application and infrastructure vendors;
- The building of "communities of interest" on the Internet that can also serve as possible reference points; and
- The ability to work with customer forums and user groups to validate the solutions that are being offered, and generate higher levels of awareness.
- An early, and heavy, investment in the required methodology to make it all happen;
- ISO 9000 certification, to ensure excellence of quality and the repeatability of solutions;
- Consistency of solutions delivered to customers;
- Consistent training requirements and benefits for the consultants; and
- The positioning of the professional consulting services organization as a differentiator against competing product vendors.
Adding consulting services to a technology-focused organization is far more complex than merely adding another product or service line to the existing portfolio. It requires a wholesale shift in thinking and culture before a company can successfully make the transformation from being solely a product and services vendor to being a total solutions provider. In order to do so, the company must first:
It has been hundreds of years since the great astronomers determined that the universe does not actually revolve around the Sun; that, instead, the planets revolving around the Sun are merely a small part of a much larger, and expanding universe. This concept was not initially widespread in its acceptance, but was one that ultimately proved to be the only right way to approach the enormity of the universe. The same may be said about the transformation of the services universe from one that has been a product/service-centric environment for far too long, and has only recently evolved into a solutions-oriented environment that focuses directly on the service and support needs of an increasingly demanding user-centric universe.
- Take the necessary steps to understand its customer and market environment;
- Link its potential success directly to its core business strategy;
- Focus on a few critical value-added solutions to get started;
- Build support through a core base of stakeholders; and
- Execute both the financial and implementation plans with equal ferocity.
Chu Chang is President and General Manager of 3Com Consulting Services. He may be reached via e-mail at email@example.com.