Why Partners Who Charge for Technical Assessments Have Higher Growth and Profit

www.service-leadership.com
WHITE PAPER
Total Profit Solutions for IT Companies™
Why Partners Who Charge for Technical
Assessments Have Higher Growth and
Profit

© 2017 All Rights Reserved – Licensed Material – Page 2
Table of Contents
Context.................................................................................................................................................................2
How High Performing Partners Position Technical Assessments..................................................2
Why Charging for Assessments Results in Higher Performance for Solution Providers......3
What is a High Value Customer?............................................................................................................3
The Typical Pre-Sales Process..................................................................................................................4
Creating an Advantageous Exception..................................................................................................4
Starting Off on the Wrong Foot .............................................................................................................6
Maximizing Win/Win Outcomes ............................................................................................................6
The Operational Maturity Levels of Charging for Technical Assessments.............................7
How Low Performers Position Assessments..........................................................................................8
OML Progression Considerations ..............................................................................................................9
Context
The Service Leadership Index® shows that, in each of the ten partner Predominant
Business Models©
, those in the top quartile of bottom line profit1
, earn about 2.5 times
higher profit percent than those at Median profitability for the same business model.
They also grow about 40% faster.
This higher financial performance is unrelated to the size, location or age of the partner,
and it is also unrelated to choice of vendors or customer segments. It is positively
correlated to management skill, which we call Operational Maturity Level©
.
A key aspect of Operational Maturity Level is how the partner approaches doing the
necessary technical assessment to produce a scope of work (SOW) and bill of materials
(BOM or list of needed hardware and software), to deliver a given solution to the
customer.
How High Performing Partners Position Technical Assessments
Solution Providers in the top quartile of financial performance, most often charge the
1
To be specific, Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization or “Adjusted EBITDA”.

customer for these technical assessments, even if the customer is a new one. Low
performing Solution Providers most often do not charge for technical assessments,
whether for new or existing customers.
Solution Providers who charge for technical assessments are able to perform high
quality assessments for most or all of their engagements, which results in significant
benefits to the Solution Provider and the customer:
• Better identification and expression of the business value drivers sought by the
customer, and of additional value drivers not yet perceived by the customer,
• Higher value services and solutions (i.e. bigger, richer deals) being delivered with
lower labor cost and fewer errors,
• With higher quality (on-time, on-specification, on-budget) delivery and, as a
result,
• With higher customer satisfaction which results in faster revenue growth.
In addition, charging for the technical assessment:
• Helps the Solution Provider learn to positively differentiate itself earlier in the
sales process, and
• More often provides them access to higher-level decision makers in the most
desirable customers.
In these ways, high performing Solution Providers drive more deals towards higher value
add, improving their financial results.
Why Charging for Assessments Results in Higher Performance for
Solution Providers
High performing Solution Providers use an array of methods to attract, qualify,
differentiate themselves with, influence, and close, high value customers.
What is a High Value Customer?
High value customers are specifically those who are seeking a premium solution to their
business needs, and who seek to mitigate the risk that the implementation of that
solution will fall short of expectations. For the Solution Provider, this means a customer
who will pay a win/win price for a full, rich solution.
At any given time, and for any given geography and customer segment (size or vertical),

about 25% of customer decision makers are seeking to address a business need in this
way; they are high value prospects. The top performing Solution Providers, regardless of
business model, deliberately seek out these prospects, at the expense of seeking out
run-of-the-mill prospects. Even though there are fewer of them, the bottom line and
growth impact are material:
• Greater profit and greater value delivered result in greater reinvestment and
greater differentiation in the marketplace.
By refining their sales (including pre-sales) process to qualify for, appeal to, and win
these high value prospects, the Solution Provider increases their financial performance.
A key way they do this, is to charge for technical assessments, a step that lower-
performing Solution Providers perform most often at no cost.
The Typical Pre-Sales Process
Because many Solution Providers struggle to generate leads at the C-level, they often
first enter prospect accounts at lower levels. Typically, then, they seek to differentiate
themselves by introducing their pre-sales engineers (sometimes called Solution
Architects or other more formal names).
This is the correct step: the role of the pre-sale engineer is to, as quickly as possible,
determine the right solution for the customer (including needed services and bill of
materials) in the form of an assessment, and to impress the customer, with the hopes of
differentiating the Solution Provider.
In winning the high value prospect, this approach generally fails. Because the Solution
Provider is calling too low in the account, while the pre-sale engineer may succeed at
these tasks, it is unlikely that success alone will produce the desired differentiation.
The most common outcome is the prospect saying, “Thanks for involving your great
pre-sales engineer; they really helped out.” This is nice, but not enough to influence the
decision-making process in their favor, simply because they did good (free) work for
someone who can’t materially influence the buying decision.
Creating an Advantageous Exception
Therefore, a key purpose of charging for the technical assessment, is to cause the
prospect’s procurement process to deal with an exception: one potential bidder wants
to be paid for something the other potential bidders will do for free, that is, provide a
quote or proposal.
To low OML Solution Providers, this sounds patently suicidal. High OML Solution

Providers know that if they don’t do this, they will be relegated to again competing for
the lowest margins deals with the least ability to differentiate. In short, once the Solution
Provider figures out how to charge for assessments, they know not doing so, is suicidal.
The request to be paid for the assessment deliberately generates an exception in the
prospect’s procurement process. Here is how this exception is dealt with by prospects of
differing value to the Solution Provider:
• Among the lowest value customers, that Solution Provider is immediately
discarded from the process. High performing Solution Providers hope this is so; it
frees to them go find more qualified prospects.
• Among the mid-value customers, the procurement process will surface the
exception to the decision-maker. “Two of the partners will do the assessment for
free, but one wants to be paid.”
o Some mid-value decision-makers will drop the partner who requested the
fee from the process. The high OML Solution Provider will gladly accept
this as an invitation to avoid wasting time and instead go find a higher
value prospect.
o However, a portion of the decision-makers will say, “Really? Hmmm, let’s
talk to them and find out why.” This gives the Solution Provider a higher-
level audience. Even if they decide during that audience, to do the
assessment partly or completely for free, the Solution Provider is in a
better competitive position.
• Among the highest value customers, procurement will inform senior
management: “Two of the partners will do the assessment for free, but one wants
to be paid.” The decision-maker will say, “Good work. That’s the one we want to
talk with first.”
o They know that obtaining the highest value solution with the lowest risk, is
best accomplished with a fully-informed, collaborative approach that the
Solution Provider cannot afford to do for free.
o Moreover, also for risk mitigation reasons, they are seeking the Solution
Provider with the business acumen to be a reliable partner. The Solution
Provider who charges for the assessment, or who at least requests to
charge for it, stands out well in this regard.
Instead of relying simply on the technical impressiveness of the pre-sale engineer to

differentiate the company, the Solution Provider’s sales process forces an exception
which explicitly seeks to gain the attention of the decision-maker, and early on, to get
the decision-maker to make a value-based decision. This also enables the Solution
Provider to make a value-based decision about the prospect, as early as possible.
Starting Off on the Wrong Foot
The other benefit to both parties of paid assessments, is in increasing the likelihood
that, once the parties have agreed to do business together, the service or solution will
be delivered as expected.
Whether the sale is a solution (i.e. a system and its implementation) or an ongoing
service (such as a Managed or Cloud Service), the likelihood that its design,
implementation and operation will be successful, is heavily reliant on the accuracy and
completeness of the assessment. The assessment is the foundation on which rest the
successful design, implementation and operation what is being purchased.
If the assessment is poorly done – most often because it is provided as a loss-leader –
then the foundation of the relationship, and the business value to both parties, is
weakened. The odds are high that either its design, implementation and/or operation
will not go as expected, resulting in financial and operational surprises, usually for both
parties.
No-cost assessments are typically poorly resourced by the Solution Provider, either in
insufficient time, skill, tools or some combination. Likewise, because the customer has
no financial commitment to the assessment, they frequently fail to provide access to
systems, sites, people and information needed to do a good one.
A collateral effect is that any additional values that could have been found with a robust
assessment, remain undiscovered, and the value of the transaction is minimized for both
parties.
Maximizing Win/Win Outcomes
The ideal outcome is for all parties to win: the customer, the Solution Provider, and most
specifically, within the Solution Provider, the sales team and the service team.
When the assessment is charged for, it’s done well, and done under the gaze of the
thoughtful decision-maker. The typical results are:
• High value customers are most often attracted,
• The best-justified, broadest and deepest solutions and services are procured,
• The customer gets the best business value with the least risk,

• The service team gets to shine and also have good margin,
• The sales team earns the highest commission and has a happy customer, making
them eager to sell again,
• The Solution Provider has the highest profits, the best referrals and testimonials
and the more eager sales people, and therefore the best growth.
Once the Solution Provider tries this method and has a bit of success, they will generally
try it again. If they try it twice, the odds are good they will integrate it into their process
for every opportunity going forward. Once they do, their internal enthusiasm and
external reputation will stand out in comparison to their former peers.
The Operational Maturity Levels of Charging for Technical Assessments
The OML Trait called “Charging for Technical Assessments” is one of between 30 and 45
OML Traits associated with each of the ten Predominant Business Models in the Solution
Provider business.
For those wishing to quickly assess the OML of a Solution Provider with regard to this
Trait, here are its the OML scoring questions:
1. How often do you do technical (technology) assessments of prospects or
customers to whom you wish to sell something?
a. We do assessments when asked by the prospect or customer.
b. For about half of the Sales opportunities we have, either when asked by
the prospect or customer, or when we feel their technology situation is
complex or risky enough that it would better serve them and us to do an
assessment.
c. For most or all (>90%) of sales opportunities, whether the prospect or
customer requests it. It's part of our standard sales cycle and there has to
be a good reason to not do one.
2. How do you perform technical (technology) assessments?
a. We send out the most senior technical person we have available, and they
know from experience and/or a basic checklist, what we need from an
assessment. They communicate the results back to whomever is crafting
the quote or proposal, in informal written and verbal form.
b. We have a formal assessment checklist and process, and multiple senior
people are trained on it. We also have a formal assessment report format
that is used to capture and communicate all relevant results back to

whomever is crafting the quote or proposal. Assessment results are
formally included in the quote or proposal process virtually without
exception.
c. We have a formal assessment checklist, process and tools, which are
automated together in a relatively seamless process (as compared to
multiple manual components). This includes the feedback into the quote
or proposal process. Assessment results are formally included in the quote
or proposal process virtually without exception.
3. What level of resource is needed to perform a technical assessment?
a. We send out the senior-most resource available.
b. A high-mid-level to high-level resource.
c. A low-mid-level to low-level resource.
4. How is the cost of doing a technical assessment recovered?
a. The cost is absorbed by the Service department. It is not billed to the
customer.
b. The cost is billed by the Service department back to the Sales department.
It is not billed to the customer.
c. The fee for the assessment is billed to the customer but is credited back to
the customer if the customer proceeds with the engagement for which the
assessment was done.
d. The fee for the assessment is billed to the customer, and is not credited
back to the customer even if they proceed with the
Solution Providers with lower financial performance, typically answer “a.” or possibly “b.”
to most or all of these questions. Those with higher performance, typically answer the
highest or second highest lettered answer, to most or all of these questions.
How Low Performers Position Assessments
Low-performing Solution Providers most often either don’t see the importance of
conducting anything but a bare-bones assessment, or they see the importance of it, but
are unable to execute robust, high value assessments, precisely because they do not
understand how to charge for them and therefore can’t afford to do them.
Mistakes stemming from treating assessments as a sunk cost in the pre-sale phase

include:
• Trying to reducing the labor cost by eliminating all but the minimal technical
description and list of products, leaving out business justification and business
value,
• Trying to reducing labor cost by assigning the least costly resource, which often
produces faulty or incomplete assessments,
• Trying to reduce investment by avoiding building assessment tools which can
produce higher value assessments (for both parties) in shorter time, increasing
competitive advantage.
Low performing companies often view the charging for assessment as a likely objection
on the part of the prospect, and thus an obstacle to the solution sale, not an aid to it.
This in turn makes them reluctant to request being paid for the assessment.
As a result, because they must do them for free, they effectively “short sheet” the
assessment by doing them in a too-cursory manner.
Not surprisingly, this produces less accurate and less complete assessments, which in
turn most often results in smaller deals with lower quality service delivery and lower
margins. This results in unhappy customers, which in turn results in unhappy Sales
representatives, and together these contribute to slowing services and solutions sales at
declining margins.
High-performing Solution Providers understand that in the hands of a capable Sales
team, the assessment is used to identify qualified leads, to differentiate their company
and to gain the prospect’s commitment to take action on their offerings.
Further, requiring the prospect to pay for the assessment, encourages maturation in the
Sales representatives’ skills, such that they become better able to convey the value of
the engagement and the solution to the customer in a differentiated way.
Asking the prospect to pay for the assessment also drives the higher performing
Solution Provider to assure that the assessment process and deliverables are effective
and of high quality, irrespective of who on their team is conducting the assessment.
This produces happy customers and happy Sales representatives. Happy customers
drive referrals and happy Sales representatives are more effective in selling advanced
services and solutions.
OML Progression Considerations

Incorporating fee-based assessments into the sales process should be done carefully.
Less experienced Sales teams will often not understand why charging is important, and
may view it as slowing down the sales cycle rather than positioning them to increase
value to the prospect and to increase the Gross Margin production of the relationship.
Progressing on this OML Trait tends to take the form of an “overnight success” that
takes some time to actually occur:
• Building a robust assessment capability is a relatively straightforward task; most
service teams already have a “wish-list” of things they would do in the ideal
assessment, because most are suffering from the effects of poor assessments.
However, they may need guidance and training on how to capture, evaluate,
design for and express business value to the customer.
• Moving the Sales team to adopt the paid assessment will take time, but generally
succeeds with persistence and repetition. Putting in place incentives to reward
the Sales team to win payment for the assessment is essential. At forst, it can be
as much as 50% of the assessment fee, or even more. As the Sales team see that
prospects will indeed pay for a high value assessment, and as they see the
outcomes in terms of larger, richer deals, the incentive can be reduced. The key is
to get them to try, and then to get them to charging for at least 90% of
assessments.
While some Solution Providers can mature on each of these two dimensions relatively
quickly, we do not recommend skipping levels. This is because consistent maturation
across the levels will produce a stronger outcome in the end on this OML Trait.
It is important to recognize that the assessment is not simply a highly competent
individual; rather it’s an approach, a process, and one or more discovery tools. A
common pitfall is to rely on a great engineer rather than investing in a documented
approach that can be consistently conducted by multiple (less costly, more available)
team members. Relying on a competent individual won’t scale, and the Sales team will
be concerned if they are selling assessments that can’t be conducted in a timely manner
by any designated member of the engineering team.
The Sales team also has to build their skills to add a “must-do”, and then “must-pay”, for
assessments against competitors who may do the assessment for free. They will seek
the prospects who understand that, “You get what you pay for,” and that the assessment
will be valuable to the prospect whether they the Solution Provider who provided it, or
not. The Sales team needs to be able to explain how the Solution Provider leverages
best practices to produce an assessment deliverable whose value to the customer stands

on its own, and delivers assurance of meeting business needs and of risk reduction.
The Service team has to deliver a mature assessment that can be constructed in a
routinized manner with consistently strong results, by any member of the Service team.
The investments required to build and deploy a paid assessment are mostly soft dollar
costs and typically are not substantial. Many of the discovery tools, which can be
utilized to conduct a very thorough assessment, are inexpensive or free. It is critical to
effectively free up the senior engineering time to build and maintain the assessment
methodology, along with drafting the training and related enablement materials to train
their peers and the Sales team.
As the Solution Provider matures its ability to charge for assessments, the initial signs of
success are that first one and then more of the Sales representatives are achieving some
success in selling paid assessments. With this early success comes real data, where the
Solution Provider sees that the customers who pay for the assessments do yield greater
revenue, Gross Margin, profit – as well as more references and higher sales
commissions.
As both the Service and Sales teams increasingly benefit from the paid assessments, it is
important that the Solution Provider keep investing to refine the assessment process –
e.g., to improve cycle time, to lower the costs to conduct an assessment, and to improve
the customer deliverables, especially with regard to maximizing deal size. It is also
important that the Sales team continues to drive up compliance so most, if not all,
customer engagements start with a paid assessment.

Service Leadership is dedicated to providing total profit solutions for IT Solution Providers, directly and
through industry consultants and global IT vendors. The company publishes the leading vendor-neutral,
Solution Provider financial and operational benchmark: Service Leadership Index®
. This includes private
diagnostic benchmarks for individual Solution Providers and their business coaches and consultants. The
company also publishes SLIQ©
, the exclusive web application for partner owners and executives to drive
financial improvements by confidentially assessing and driving their Operational Maturity Level©
.
Service Leadership offers advanced peer groups for Solution Providers of all sizes and business models, and
individual management consulting engagements for Solution Providers from US$15mm to US$3bb in size
worldwide. In addition, Service Leadership provides global IT vendors with advanced partner enablement
assets, partner ROI models, management consulting and advanced peer groups, as well as executive and
industry best practices education and speaking. Please visit www.service-leadership.com for more information.
Notice: The terms and concepts of SLIQ©
, Service Leadership Index®
, (S-L Index™),
Predominant Business Model©
(PBM©
), Operational Maturity Level©
(OML©
), the OML
scoring questions and answers, Normalized Solution Provider Charts of Accounts©
(NSPCoA©
), Total Cost of Managed Services©
(TCMS©
) and Service Factory©
are
proprietary to Service Leadership, Inc. All Rights Reserved.
About Service Leadership, Inc.

Why Partners Who Charge for Technical Assessments Have Higher Growth and Profit

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Semelhante a Why Partners Who Charge for Technical Assessments Have Higher Growth and Profit

Semelhante a Why Partners Who Charge for Technical Assessments Have Higher Growth and Profit (20)

Mais de Fortinet

Mais de Fortinet (13)

Último

Último (20)

Why Partners Who Charge for Technical Assessments Have Higher Growth and Profit