The “Indian” Software Engineering Dilemma
TBK Consult delivers management consulting to software driven companies. Thus, all our clients are software driven businesses. Software engineering service providers obviously have the exact same target group. Their “idea” is that if they could strike a deal with TBK Consult and we would open the doors to our clients, then the software engineering service providers would pay us a commission on the revenue they would generate.
They call it a win-win arrangement. I call it a win-loose arrangement.
Providing software engineering services is a mature and respectful business. There is a huge need for software engineering services and sourcing it from third parties rather than employing the resources in-house makes sense in a lot of situations. However, from the inquiries we receive there seem to be a lack of understanding of some fundamental business principles. I will review these principles in this post
The Customer Value Proposition
The inquiries we receive are almost identical in the way the companies present their “Customer Value Proposition”
- We master these technologies (a long list of programming languages, databases etc.)
- We offer low prices
Most people in the software industry will agree that there is more to developing software than programming. Programming in itself is maybe 5-10% of the effort. The software development value chain is long and requires many more competencies than mastering the technical frameworks. Domain experience, design, product management, project management, prototyping, UI expertise, integration, testing, support, documentation and communication (between people) are some of the other elements in the process.
A genuine Customer Value Proposition from a software engineering service provider must state which part(s) of the value chain they focus on and how they manage the interfaces in receiving and delivering their contributions. It is the communication (human, not technical) between the client and the service provider which is most critical. Many projects fail because of the lack of understanding or mis-communication between individuals.
Read more about Customer Value Propositions.
Ideal Partner Profile
Reaching out to TBK Consult for a partnership seems to be based on a lack of a partner strategy, partner program and ideal partner profile.
Study www.tbkconsult.com for a few minutes and you will clearly see that we are engaged in helping our clients sell more and especially sell more internationally. We are NOT engaged in the process of developing their software based products and services.
A visit to the TBK Consult web site will also reveal that we are consultants, not resellers. We don’t promote any third party products or services to our clients. We use third party concepts such as ValuePerform from ValueMaker, Business Model Generation from Osterwalder, NABC analysis from the Stanford Research Institute, Crossing the Chasm from Geoffrey Moore and so on. But we do not recommend any third party products and services.
As management consultants we are trusted advisors to our clients. How could we recommend a third party to our clients and then receive a commission on the transaction? Sorry, but that would kill our business.
TBK Consult cannot possibly be an attractive partner for a software engineering provider. I don’t see how we would fit “the ideal partner profile” of any software engineering service provider.
Read more about building partnerships.
Partner Value Proposition
If you want to drive your business through partners (resellers, value added resellers etc.) you must have an attractive Partner Value Proposition.
“You get 6% of the revenue you generate” is NOT a value proposition.
Based on the partner strategy and the ideal partner profile you must define the entire value chain: What does it take to find, win and keep happy customers.
Your partner Value Proposition must address each step in the value chain and define what you require and what you provide to make the value chain work. You must have a specific approach for helping the partner through the bootstrapping phase, which obviously is the most difficult and risky.
The “Indian” Dilemma
And now comes the most interesting phenomenon.
While all these software engineering providers are intensively arguing why it makes sense to outsource business processes (software development) to specialists, they have a hard time reciprocating. There are obviously areas within sales and marketing where they desperately need help. Sourcing this competence from a third party specialist in Europe is close to impossible.
Their “value proposition” of offering cheap resources into high priced areas doesn’t generate enough profit to allow them to source consultants like TBK Consult to help them get an effective marketing and sales strategy in place. Hiring “on location” sales people is also impossible for most. Low prices means low gross margins and paying a professional sales rep. €200.000 a year becomes impossible.
All the big software engineering service providers have people on the ground in Europe and have stopped competing on price only. They have solid customer value propositions and genuine partner programs. The smaller providers will have to define very focused strategies and find the areas where they can provide more attractive value. Offering software programmers at a low price is the not the answer. Having someone working on the side on a commission based scheme is not going to generate solid growth.