Most Tech Sectors are Joining the Service Evolution :: AO
I have been meaning to write for a while on the product / component model versus a service driven model. The blog above made me think some more about this so maybe it�s a good thing that I had not attacked the issue previously. In common with most early stage VC�s much time in evaluating a businesses prospects are spent looking at its �to market strategy� or how will it sell this great product.
My thinking evolved as we reviewed a follow-on investment in a NGIN product / component company and tried to attract other investors. To a man (strange thing about VC investing) they all wanted the Company to invest in building out its service business. The Company stood firm � said no and is bootstrapping itself to profitability. The Company�s view � correct in my view � is that in large telecom solutions the system integrators / service providers will be the big companies: IBM GS, Ericsson, Nokia etc. They are not alone in addressing services as the panacea to the capex drought. It is in the services business where the market is truly crowded � if you are in any doubt ask LogicaCMG or CGEY. Providing the components that build the systems that these service providers are going to install makes a lot more sense than competing in the service business.
I should have hit the Blog This button on an earlier announcement of funding for AePona, another in the OSA / Parlay space. It has a huge service infrastructure � 100�s of people supporting, installing and building apps for a substandard product. Its service guys are going to become disillusioned that they are competing with better technical products that are available across multiple platforms, and they will be tied to competing in tenders where there product fits � AePona neither becomes a best-of-breed integrator, nor a best-of-breed product provider. It�s pretty damn good at marketing though.
Then as I pondered whether this was a telco specific problem, a company in an entirely different space says that it will be a preferred provider because its competitors sell both sub-systems and full solutions.
In conclusion � technology companies can compete by providing better technologies. Service providers will compete by packaging those solutions and making them (very) relevant to the end user. I will stay clear of service strategies; it is too frightening to compete with IBM and HP�s service delivery arms. That leaves the investing question � is there enough left to make good returns on product / component businesses. The logical answer is yes if the entry price is right.
12 May 2003
Most Tech Sectors are Joining the Service Evolution :: AO
I have been meaning to write for a while on the product / component model versus a service driven model. The blog above made me think some more about this so maybe it�s a good thing that I had not attacked the issue previously. In common with most early stage VC�s much time in evaluating a businesses prospects are spent looking at its �to market strategy� or how will it sell this great product.
My thinking evolved as we reviewed a follow-on investment in a NGIN product / component company and tried to attract other investors. To a man (strange thing about VC investing) they all wanted the Company to invest in building out its service business. The Company stood firm � said no and is bootstrapping itself to profitability. The Company�s view � correct in my view � is that in large telecom solutions the system integrators / service providers will be the big companies: IBM GS, Ericsson, Nokia etc. They are not alone in addressing services as the panacea to the capex drought. It is in the services business where the market is truly crowded � if you are in any doubt ask LogicaCMG or CGEY. Providing the components that build the systems that these service providers are going to install makes a lot more sense than competing in the service business.
I should have hit the Blog This button on an earlier announcement of funding for AePona, another in the OSA / Parlay space. It has a huge service infrastructure � 100�s of people supporting, installing and building apps for a substandard product. Its service guys are going to become disillusioned that they are competing with better technical products that are available across multiple platforms, and they will be tied to competing in tenders where there product fits � AePona neither becomes a best-of-breed integrator, nor a best-of-breed product provider. It�s pretty damn good at marketing though.
Then as I pondered whether this was a telco specific problem, a company in an entirely different space says that it will be a preferred provider because its competitors sell both sub-systems and full solutions.
In conclusion � technology companies can compete by providing better technologies. Service providers will compete by packaging those solutions and making them (very) relevant to the end user. I will stay clear of service strategies; it is too frightening to compete with IBM and HP�s service delivery arms. That leaves the investing question � is there enough left to make good returns on product / component businesses. The logical answer is yes if the entry price is right.
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