Tom Tunguz has a great article on professional services:
As the next generation of SaaS companies achieve maturity, they have begun to serve larger and larger customers, who in addition to demanding a great product, often request services. Professional services, as they are often called, entail training and customization. For product driven startups, the decision to offer professional services is a tricky one.
On one hand, the customer is always right and services often enable substantially larger contracts. On the other hand, selling hours to drive revenue decreases the efficiency of the business, by hiring more people in order to grow revenue linearly. In addition, many businesses operate their services divisions at a loss. But not all.
Professional services are a subject close to my heart. As an open-source software company, XWiki SAS derives a significant part of its revenue from professional services. The ideal we're striving for with our new XWiki Collaboration Suite offering is to find a way to enable customisation according to client needs while keeping upgrades as seamless as possible.
What we've found aligns closely with Tom's observations: the larger the client, the more likely they are to have custom requirements that you'll need to fulfil in order to close the deal. When applicable, product roadmap sponsoring is a great way to bridge that gap: your client gets the feature they need and your product keeps progressing.
It’s really tough. I think part of what you have to do, unfortunately, to survive early on is you kind of have to toe that line. And you have to always go back and say, “What we’re building is a software product that is going to be scalable, that’s going to be used by multiple companies.” But it also depends on what part of the market you’re selling into, what types of customers you have. If you’re selling $100k enterprise deals, you’re going to bend a little bit more to make sure it works for Oracle or some huge company, versus Bob’s Pizza Shop.
But it’s really delicate. I think we may have taken too stern of a line early on and said, “No thank you” to customers, where we said, “Here’s our vision of what the future is going to be, you need to agree with us.” And over time, maybe as we grew the engineering team, we grew our capability and we could ship features or variations more easily we tried to open our arms a little bit more and bring people in.
But you never want to be truly doing things that are one off. You want to say, “Is this going to be useful for the next 20 customers?”
How do you handle professional services at your company?