A Seat at the Table: The Case for Making Professional Services a Strategic Function

A Seat at the Table:
The Case for Making Professional
Services a Strategic Function
January 2022

At the time, Andressen noted that technology,
after decades of innovation, was now capable of
transforming industries and reaching a global scale.1
Since then, the demand for software, delivered on a
subscription basis, has grown every year. A Deloitte
survey conducted in 2018 revealed the vast majority of
CIOs (93%) had either adopted or plan to adopt SaaS,
with over half saying they expect to use cloud software
for their most crucial apps by 2021.2
According to
Gartner, 70% of organizations have deployed or are
considering the deployment of subscription services.3
As the cloud became more ubiquitous, software
purchasing became more decentralized. Individual
business units, like HR, marketing, or the legal
department, could now purchase point solutions to
solve specific, department-related, problems.
By 2019, according to data from Okta, a leader
in single sign-on software, its average corporate
customer used 88 separate apps across their
business, up 21% from 2016.4
Entering 2020, software largely ate the enterprise
world. Then, everything changed. The COVID-19
pandemic forced almost all businesses to rethink how
they work and how they use technology: “We’ve seen
two years’ worth of digital transformation in
two months,” noted Microsoft CEO Satya Nadella in
April 2020. 5
Employees dispersed, offices closed, and demand for
remote tools and edge computing increased. The shift
to a hybrid work model has accelerated the transition
from “legacy, on-premises hardware to cloud-based
services that can power and secure the work-from-
anywhere economy,” according to Cloudflare co-
Founder and CTO Michelle Zatlyn.6
In 2011, Marc Andressen
famously said “software is
eating the world.”
“We’ve seen two years’ worth of digital
transformation in two months,”
of CIOs had either
adopted or plan
to adopt SaaS
Deloitte, 2020
of organizations
have deployed or
are considering
subscription services
Gartner, 2019
separate apps
are used across a
single business
Okta, 2020
1
Andreessen, M. (2011, August 20). Why Software Is Eating The World. The Wall Street Journal. https:/
/www.wsj.com/articles/SB1000142405
3111903480904576512250915629460.
2
Deloitte. (2020, January 7). The State of Cloud Adoption. The Wall Street Journal. https:/
/deloitte.wsj.com/cio/2018/11/11/the-state-of-cloud-
adoption/.
3
The Subscription Economy Grows More Than 300% In The Last Seven Years. Business Wire. (2019, March 21). https:/
/www.businesswire.com/
news/home/20190321005245/en/The-Subscription-Economy-Grows-More-Than-300-In-The-Last-Seven-Years.
4
Okta. Okta Businesses @ Work 2020 (2020). https:/
/www.okta.com/businesses-at-work/2020/.
5
Jared Spataro, C. V. P. for M. 365. 2 years of digital transformation in 2 months. Microsoft 365 Blog. (2020). https:/
/www.microsoft.com/en-us/
microsoft-365/blog/2020/04/30/2-years-digital-transformation-2-months/.
6
McAllister, K. (2021, April 12). The emerging technology for enterprise computing’s next five years. Protocol. https:/
/www.protocol.com/
braintrust/emerging-technology-in-enterprise-computing.
2
Workrails | A Seat at the Table

he pandemic forced almost all businesses to
think differently about how they work and how they
use technology.
Previously understood operations, like employee
onboarding, internal communication, or customer
engagement, can be done anywhere and new tools are
needed to facilitate this work. And, as the pandemic
accelerated a digital transformation, other new
technology, like AI, VR, and automation, are continuing
to progress.
The economic turmoil caused by the pandemic has
led companies to reconsider their current technology
stack and how they sell software given the dramatic
shifts in consumption. To account for these changes,
companies will need to operate with a new mindset,
reconsidering how they build, deploy, and monitor
enterprise software.
Given this shift, it’s reasonable to assume that the
way new technologies are delivered and managed
should change as well. However, many companies
are still focused on installing, tailoring, and deploying
applications for customers. A sort of “set it and forget
it,” mindset that prioritizes landing a new customer and
growing the business through traditional acquisition.
But what this mindset fails to appreciate is the
importance of customer success as a growth engine.
Even at start-ups, existing customers account for
between a third to half of total revenue growth and
costs for revenue expansion from existing customers
are a fraction of those for acquiring new business.7
Professional services, specifically embedded services
organizations (ESOs) – those teams operating within
a SaaS company that deliver/implement the software
the company provides – help customers to design,
implement, and adopt new technologies. Because
customer success is growth, services are capable of
unlocking real value through customer retention and
improved customer satisfaction.
Services maximize subscription revenues and are
the backbone of a successful client relationship.
They increase adoption, lower churn and driven core
product revenue for software companies. Services
bridge the gap between what is sold and what
is achieved.
Now, as we enter a new phase of enterprise software
development and implementation, companies would
be wise to prioritize the services function as
customers accelerate the adoption of new,
transformative technology.
Yet, companies still view ESOs as a
cost center or a low-margin revenue
generator, leading to a lack of
strategic investment and focus on
this function.
That is a mistake.
T
7
Atkins, C., Gupta, S., & Roche, P. (2019, February 20). Introducing customer success 2.0: The new growth engine. McKinsey & Company.
https:/
/www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/introducing-customer-success-2-0-the-new-
growth-engine.
3

Coinciding with the rise in cloud-based software
(compared to on-premises software) has been a
change in focus for services organizations.
Around the time Andreesen said “software was eating
the world,” on-premises software vendors could drive
25% to 30% gross margins on professional services.
Services organizations were tasked with being a
revenue generator, at a time when implementation and
licenses fees were high.
As cloud-based software has become more ubiquitous
and technology has evolved to a level of tailoring
and customization previously limited to on-premises
solutions, the role of the services organization has
changed as well.
Now, because the SaaS business model is predicated
on keeping a customer for a long period of time,
ensuring a customer is successful when adopting a
new software is imperative. As a result, companies are
more willing to forego the upfront cost of professional
services (or in certain cases, remove the function
altogether). This could lead to lower margins for
services and helps perpetuate the misunderstanding
that services are non-essential or even a deterrent to
the growth of a SaaS business.
The history (and value)
of software services
Enterprise
Spending on
Cloud and
Data Centers8
8
Miller, R. (2021, March 19). Cloud infrastructure spending passed on-prem data centers in 2020. TechCrunch. https:/
/techcrunch.
com/2021/03/19/cloud-infrastructure-spending-passed-on-prem-data-centers-in-2020/.
4

Similar to Veeva, companies like Autodesk and UiPath,
benefitted from having professional services as part of
their go-to-market strategy.
Services drive recurring revenue by helping
customers to successfully adopt and apply software.
Customers buy software to enable and streamline
their business operations. An application may have
the features a customer needs but, if they cannot
use it effectively the benefits are diminished. When
customers succeed with the software they purchase
it increases the likelihood of sustained recurring
revenue and creates opportunities to expand the long-
term value of relationships.
For a SaaS provider, the importance of mitigating
churn through effective service delivery cannot be
overstated. When a company can properly implement
its software and make a customer successful over
time, the product becomes “stickier.” A “stickier”
product increases the switching costs for a customer
(the money and time it would take to find, sign, and
implement a competing solution), helping to keep them
on the platform.
Greater retention enables a business to grow far more
rapidly, to reduce the cost of customer acquisition,
and to slash the amount of capital required for the
business to grow. For publicly-traded companies and
startups looking for new investment, greater retention
also enables greater predictability of future revenues,
something investors and shareholders love.
9
Veeva (2021, March 2). Veeva Announces Fourth Quarter and
Fiscal Year 2021 Results. https:/
/ir.veeva.com/investors/news-
and-events/latest-news/press-release-details/2021/Veeva-
Announces-Fourth-Quarter-and-Fiscal-Year-2021-Results/default.
aspx.
We had a rule very early in the
company: you don’t give away
professional services.”
Peter Gassner, Founder & CEO of Veeva,
SaaStr Annual Conference 2007
However, consider the role of professional services in
Veeva’s rise to a publicly-traded, enterprise software
giant. Based on data sourced from the company’s
annual reports, Veeva benefited significantly from
services revenue in its growth, with services
revenue staying near or above 20% as a percentage of
total revenue.9
They lower churn and grow core
product revenue
Based on annual gross dollar churn
2019 KBCM SaaS Survey
Avg churn without PS
Avg churn where PS is
50% + of 1st year ACV
5

What does it
mean to prioritize
services?
For many professional services teams, their primary charter
is to successfully implement the company’s products.
Increasingly the charter has expanded to include client
adoption with a focus on reducing time to value.
Services, when structured properly, sold efficiently, and
delivered seamlessly, can help teams achieve these goals, but
it requires commitment from leaders across the organization
to prioritize this function.
A company that prioritizes the services
function does two things particularly well:
Aligns the role of services to
match the company’s goals
Creates an efficient services
sales process
6

When thinking about the role of services in an
enterprise software company, leaders must
understand where the company fits in the market.
This means taking account of product-market fit,
the needs of its customers, and maturity of the
partner ecosystem.
The goals of an early-stage enterprise software
company likely do not reflect the goals of an
established, mature enterprise. The same can be said
for the services business. Professional services at a
mature software company perform different functions
than those at an early stage company.
For established, mature software companies, like
Salesforce, professional services are often outsourced
to a network of qualified partners, responsible
for the design, implementation, and success of a
customer engagement. With a significant customer
base, enterprise companies can prioritize community
development and scaling their services offerings
efficiently by providing self-serve features and
connecting customers across markets.
A common misconception is that a dedicated services
function is bad business for an early stage startup.
However, for a company that is early (or creating
a new market category) with complex, enterprise
software, dedicating resources to ensuring customer
success is a smart business decision.
Aligns the role of
services to match the
company’s goals
7

t this early stage, a company can use services to
play multiple roles, including strategic advisor, partner,
support lead, and solutions architect. In these roles, a
company can help a customer determine the value of
the product to its business, ensure the product works
successfully, and begin to better understand how to
price licenses and services as they scale.
Because services are so closely aligned with a
product’s success (and future revenue), it could be
a mistake not to see the function as strategic, and
therefore, worthy of strategic investment.
Just as a product evolves as it gains product-market
fit and becomes more widely adopted; so, too, must the
services offerings available to a customer.
In the early market stage of a product, a company will
need to vary its services offerings to appeal to this
particular set of consumers. Focus is on validating the
product, gathering important product feedback, and
ultimately establishing a long-term partnership with
the early stage adopter.
Later, as the product adoption crosses the proverbial
“Chasm,” the services offerings will need to reflect this
new position. Customers will expect speed to value and
seamless deployment, and potential buyers will want to
know why a product is better than others in the market.
Regardless of a company’s stage, the role of the
services organization should match the
company’s goals.
Likewise, for an established company operating at a
large scale, a misallocation of services resources could
result in a costly customer engagement and a negative
impact on overall revenues.
EARLY MARKET
Innovators Early
Adopters
Early Majority Late Majority Laggards
THE
CHASM
MAINSTREAM MARKET
Prioritize successful
product deployment
and the development of
a strategic partnership
with the customer
Build network of partner vendors
to support customer engagements
at scale and create a customer
ecosystem that supports evangelism
and community
A misalignment could result in a
poor implementation and overall
product experience resulting in
customer attrition; a costly result
for any company looking to gain
product-market fit or grow in a
new market.
A
8

As the services portfolio evolves, so too should the go-
to-market model that sells it.
But the selling of services in an organization is
unnecessarily complicated, time-consuming, and
labor-intensive. And when done poorly, it has
downstream impacts on the business as a whole.
For example, oftentimes the wrong teams are
responsible for the selling of services, add-ons, or
renewals. A sales person tasked with closing new
businesses cannot dedicate the necessary hours to
supporting a renewal or a services attachment.
Based on industry data, sales and
embedded professional services teams
burn an average of 600+ hours/month
on manual tasks associated with
getting to signature on a statement
of work.
This lack of productivity has a direct impact on
revenue. According to Gartner in a survey conducted
in 2020, 58% of sales managers report they struggle
to accomplish all the tasks they have been given in the
time allotted. And 52% state they have to work around
organizational processes in order to get their work
done. This burden, caused by internal processes, can
negatively impact a sales manager’s overall quota
attainment by 18%.10
Create an efficient
services sales process
10
Gartner Says High-Performing Sales Managers Prioritize Customer Facing Activities to Scale Commercial Impact. Gartner.
(2020). https:/
/www.gartner.com/en/newsroom/press-releases/2020-07-29-gartner-says-high-performing-sales-
managers-prioritiz.
9

perationally, companies seem to rely on
spreadsheets and document templates to manage
this important business. Additionally, companies
utilize manual, non-systematized, non-scalable, and
oftentimes unsecure processes to fill in the gaps.
The typical services sale might be familiar: sales
people are limited in time and under-motivated
to sell something that does not drive a high
commission. Operations and customer support
people are burdened with having to manage customer
expectations due to an improperly quoted services
deal. Revenue leads and executives have to sweat
the margins on a deal, because there isn’t a process or
system in place to ensure that a software + services
deal is properly quoted and margin-positive for
the business.
In order to help unlock the full capabilities of your
services organization and guarantee that you’re
delivering the right experience to your customers, you
need to improve the upfront services sales process.
Technology can help.
Given the importance of services in driving value
for companies, the consumerization of business
processes & systems, and the impact automation
is having on transforming how work gets done,
companies like WorkRails are changing how services
are sold for both buyers and sellers.
Technology can help companies standardize services,
integrate them with CRM and PSA systems, and align
internal and external stakeholders through guided
selling tools, leading to a level of automation and
scale that most would have never thought possible
when selling something as complex as software
services. The time to build custom SOWs and generate
proposals can be reduced to minutes and hours from
weeks and months.
Imagine what your team can
accomplish with nearly 600 hours
back per month.
O
10

A seat at the table
After a year when we saw “two years of digital
transformation in two months” and companies are
embracing workplace flexibility, it is clear that there’s
no going back to the old ways of enterprise computing.
And to manage this transformation, companies,
regardless of size or scale, will need to embrace
services to power how customers adapt to the new
“work-from-anywhere” economy.
For embedded services organizations, the challenge
has been to develop a high-quality consulting business,
despite primacy placed on product proliferation and
adoption. However, as services take on a more strategic
role within innovative technology companies, a new
focus is being placed on empowering the services
organization to drive client adoption, optimization,
and renewals.
Prioritization of the services function
is key.
It means dedicating resources and time to rethink your
existing services portfolio to better align with your
broader strategic goals. As a start-up trying to build
a new market, focus could be on building customer
evangelists by developing strong relationships based on
shortening customers’ time to value on your product.
For a mature company, looking to grow at scale, it might
mean focusing on building a network of partner vendors
to support a high volume of customer engagements.
Additionally, companies should not overlook the upfront
services sales process. A technology-enabled process
not only makes it easier to sell services, but improves
the productivity of every department connected to the
services process.
Companies who focus on the services function will
need to position the services leader prominently within
the company by building greater alignment with sales,
support, and product development.
Services, in their ability to increase adoption,
encourage renewal, and minimize churn, are a
company’s superpower. They should be prioritized
through the alignment of services to match strategic
initiatives and through the development of an optimized
services sales motion. And, more simply, by being a
visible, reputable part of the organization, with a seat at
the table.
Simply put, services should be
viewed as a strategic function, not a
support function.
11

Ready to elevate the services function
and take advantage of this superpower?
Contact info@workrails.com to learn more.
WorkRails makes it easy
to sell services.
Our platform automates the end-to-end services sales
process and provides an e-commerce-like selling experience,
so companies like UiPath, Veeva and Gainsight and their
customers are able to scope and configure services, build
proposals and generate SOWs in minutes, not months.

A Seat at the Table: The Case for Making Professional Services a Strategic Function

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