My SaaS and startup DNA includes a lot of experience in running professional services organizations. But knowing how professional services revenue is valued in the market (not as much as you would think), and how hard it can be to maintain high margins, I can never recommend a SaaS launch a professional service offering.
But of course, it depends. There are some companies, for whatever strategic reason, that need to offer professional services.
Under What Circumstances Might You Need to Offer Professional Services?
- To make up for a weak or complex product. If the product isn’t do-it-yourself, you may need to offer services in order to foster product adoption and assist customers in getting to value. What you really need to do is re-design your product to make it easier to adopt…but baring your ability to do that, professional services can bridge the gap.
- To help forge a new market, or lead the path to a new way of doing things. If you are creating a market or a radically different way of doing things in an existing market, you may need to offer some professional services in order to help customers ‘get it’ and see value in it. The best tool (your product) is useless in the hands of a bad craftsman (your customer who doesn’t know any better).
- In the enterprise (sometimes). If you are Slack, and you move into the enterprise, your customers probably don’t need professional services. But if you are Adobe or Oracle, they might. Your customers may need help designing, implementing, and running a strategically sound deployment of your product. You can either create an ecosystem of third-party consultants who provide the services (like Atlassian has, for example), or you can build your services organization internally.
How Professional Services Best Fit Into Your SaaS Model
If you decide professional services have a place in your SaaS then focus on helping customers achieve their desired outcomes, adopting your product, and realizing value. What I typically see is a set of services offerings that hit one or more of these areas:
- Setting up the SaaS (implementing and integrating), using best practices (primarily when the customer needs expertise, extra hands on deck, fast turn around, or strategic assistance).
- Using the SaaS on behalf of the customer on an ongoing basis, acting as an extension of the customer’s internal team. This is common when the customer does not have the internal resources or expertise to execute.
- Consulting around best practices and improvements (similar to a “coaching” service), providing recommendations and guidance for the customer to execute on their own.
- A higher level of support beyond what is offered in the standard subscription.
When considering pricing professional services in support of the SaaS there are two common strategies. One is to provide the services at a low margin (low cost to the customer), essentially not using services as a big revenue driver but instead using it as a customer engagement and retention lever. The argument for this is that it helps with product adoption/usage, which helps increase customer retention. A different approach would be to monetize as any other consulting/services firm would, seeking to maximize margins – perhaps even charging a premium for your deep product expertise.
Either way the services should always be designed to support and enhance the use of the product. Don’t forget that if you must have professional services they should be designed around the product.
Professional services in a SaaS? It has to start, and end, with the product.
This blog was originally authored by SaaSX. Republished with permission.
