There’s this widely-held view that marketers want to buy analytics as a service because that’s where they see tangible Return on Marketing Investment. However, many technology vendors want to sell analytics as a product.
This results in a dilemma of whether to position analytics as a product or service.
While Palantir from USA and Mu Sigma from India are two companies who have succeeded by packaging their analytics offerings to resonate with a service-oriented positioning, many other technology companies have opted to take the product positioning in the analytics space. This may be because product companies enjoy the following real / perceived advantages:
- Product development is intellectually more satisfying
- Product results in IP
- Top talent prefers working on products
- By coding someone else’s requirements, service offers little scope for creativity or innovation
- The service business model is perched precariously close to a risky outcome-based model
- Product companies enjoy a higher valuation-to-revenue multiple than services companies
- Most investors fund only product companies.
At this stage, it’s clear that many of the underlying factors of this dilemma extend beyond analytics and cover a fairly wide swath of other technologies, especially ones in the high-ROI sales and marketing space.
Before exploring ways to address this dilemma, let me clarify that I’m using the term “service” to refer to a managed service delivered using a technology platform. In this context, it’s not the same as the second “S” in SaaS: The term “service” in “Software As A Service” emphasizes the typical business model of SaaS of being sold as monthly subscriptions à la cable, Internet and other “services”.
Coming back to the dilemma, Systems Integrators can bridge the gap between what a vendor offers (product) and what the customer wants (service). But very few product companies are able to reach the critical mass required to attract SIs.
Therefore, the product-or-service dilemma can’t be cast away so easily.
One way to break out of it is by adopting the Component Based Solutions Assembly approach. Mooted by Gartner in the early 2000s, CBSA helps vendors to enjoy the advantages of a product company with its component development core and still deliver highly tangible ROI solutions via massive customization.
While CBSA is more complicated to devise and execute than a pure-product or pure-service approach, it has proven very effective in breaking out of the product versus service dilemma. To translate CBSA into faster deal flows requires sophisticated marketing and selling skills. With our experience of taking many CBSA solutions to market successfully, we can be of help there.