Randy-
Profit margins are higher on products, however, you can generate many more dollars at a still respectable profit margin with services. Problem with services is people- can they hire the people to deliver the services. Also, what are we talking about for services? Training classes? I would expect that they are going to get a boost in training as people will be more inclined to buy training when dealing with five products (purchasing analyst studio) than 1 product- Rose.
If we are talking about starter projects- one week mentoring services- that is a great revenue opportunity. Short, low risk, "franchiseable" and pretty easy to roll out to an extended field. If they are talking about building a full-fledged technology consulting practice- i.e."we come in with the leading products and we provide the experts to do the work in these products," that is a tough model to build from scratch. Probably have to look more at an acquisition strategy to build that type of capability vs. going out and hiring the people.
One thing to consider is that Rational has built a very strong partner program of service companies. In essence, they have an battalion of small to medium sized companies providing different types of services. That is currently where some of the service revenue is going. How that changes in the future, who know?
One other point and then I'll shut up. Rational wants market leadership with all of their products. Guess what- with the upgrade opportunity, all of those companies that have Rose will be upgrading to analyst studio. Goodbye QSS Doors. Goodbye Caliber RM. Requisite Pro just obtained the greatest marketshare in the industry. RUP will be put on all those peoples desktops, setting it up to be an industry standard (clearly set up by the renaming of the product- Hans, you're going to have to write another book now...). SODA just took marketshare from their competitors. By leveraging Rose's and ClearCase install base, they are bringing along their other tools. Most interesting thing is that testing is clearly a "feature" product. I think Rational considers Mercury a much greater threat than QSS or Technology Builders, Inc. (Doors/Caliber RM). As I said before, watch out Mercury. |
