Creating Value in the Value Chain

As companies have sought to reduce costs or increase revenues, service suppliers have focused on their part of the value chain to increase their offering's inherent value.  Business Process Outsourcing (BPO) vendors have made their particular contributions through becoming very efficient, whether it be 3PL order fulfillment suppliers, Finance and Accounting (F&A) providers, or others.  Off-shoring is one way these companies have become efficient through delivering labor arbitrage savings.  Further, these offshore service providers have become very good at breaking down processes and then taking over those activities that can be done cheaply and effectively in their service factories.

Software vendors have taken a different tack.  While there are still many single-function software offerings, increasingly attacking more parts of a given business process can be served by one or more integrated offerings.  Siebel has done very well by taking a number of service chain functions and integrating them together, such as warranty and customer relationship management.  While there are still pure-play warranty software products, customers are starting to feel the value of integration that a product such as Siebel offers is greater than the value of a series of best-of-breed solutions.

Here is the real question - if that is the case, have we as an industry arrived at the point where we can only expect incremental overall improvements with the lion's share of the expected benefits realized through integrated software solutions?  While software products yield great advantages and need to be part of an overall solution, my answer to how increased value is realized is not just a particular piece of software, but rather how that software can become part of a mosaic of platforms, software, and BPO solutions focused on a business-focused outcome.

Let's take the perspective of our customers for a moment.  If we as service providers implement the exact same solution for each of our customers, we have by definition removed one lever they could use to create unique competitive advantage.  Ever increasing complexity in software solutions tends to move our customers toward the same end state and same value equation.   Put another way, our customers will invest a lot of money to gain an advantage on their competitors, only to find that their investment has only allowed them to keep pace.

Service providers need to take the time to craft a unique solution for each customer based on the building blocks available through standardized offerings.  That is the "secret sauce" that successful vendors will bring to their customers.  Success will be measured through improved performance of our customers, and more business for service providers.