The Wikibon team was briefed recently by NetApp on its Professional Services (PS) business. The company has shifted its strategy from a few years ago when services was driving headcount growth at the company. This was at a time in the mid- to late-2000s when nearly every technology company was expanding its software and services business, as hardware margins got pounded. NetApp has moved back to more of a classic partnering strategy for professional services, and services in general, while still taking its own IP and applying it to its professional services offerings.
Key themes and initiatives for NetApp PS in 2011 include:
- Helping move customers from application siloes to shared, “flexible infrastructure,” e.g. virtualized environments and cloud (private and public)
- Leveraging all appropriate channels to meet customer needs, including direct service delivery as well as indirect through partners such as large systems integrators, VARs, and service providers. Accenture is a notable partner.
- Developing “solution suites,” a combination of products and services, for key areas including virtualization, backup and recovery, and Microsoft applications.
- Providing “fast-start” services when customers are looking for a rapid process of assessing their current IT architecture and then deploying appropriate new IT, aligned with their business goals.
Unlike larger competitors such as EMC, IBM and HP, NetApp has never really treated services as a distinct business within the company, but rather as a way to meet customer needs and support the product business. EMC can also fall into this category —- its executives say it will always be a technology company first —- but EMC has invested much more heavily in building its professional services business in recent years, in parallel with its product portfolio expanding well beyond storage hardware into areas such content management, security, e-discovery, and business analytics. We should note that both EMC and NetApp have partnered for field maintenance over the years, with EMC using Unisys and NetApp using IBM Global Services, among others.
Action Item: Services is a tough business and with few exceptions delivers lower profit margins than technology sales, especially software. The massive scale that HP and IBM have built into their services businesses in order to wring out decent profits in some segments is not available to most IT companies. We would encourage 9 out of 10 (or 19 out of 20) technology companies not to aspire to the IBM Global Services model but instead focus on those services offerings built on their own IP that will enhance their product portfolio, marketing efforts, and go-to-market strategy. Do what you do best, and outsource the rest.