SaaS Professional Services

January 2023

Welcome to The Cirrostratus Group January newsletter.

Professional services is often a key part of a SaaS business and it's important to keep your professional services strategy aligned with the overall business. TSIA survey information indicates that the prevailing strategy is to focus on customer adoption, outcomes and value but that implementation may not be aligned with that strategy.

Generative AI such as ChatGPT, discussed in previous newsletters, has generated a lot of press in the last month or so but more importantly it is having a significant impact on Microsoft and other cloud infrastructure businesses. ChatGPT is also becoming an important part of Microsoft's product strategy going forward.

More information about these two topics and the impact on your SaaS business is included in this newsletter and hopefully this will give you some ideas for adapting your business for the future.

Paul Ressler

The Cirrostratus Group

SaaS Professional Services

TSIA (Technology & Services Industry Association) just released their report on the State of Professional Services (2023). This is specifically about professional services in technology businesses and does not cover stand-alone consulting businesses.

In the report there is clear alignment on the primary strategic focus between C-level technology executives, internal professional services stakeholders and external stakeholders such as customers . Overwhelmingly (85%) say that customer adoption, outcomes and value is the primary strategic focus of professional services, not customer acquisition support, revenue contribution or margin.

However, the detailed responses, particularly related to professional services growth, indicate that the actual business is not aligned with this strategy. In fact professional service grew at an annual rate of 44% but the services that support the stated strategy are not the primary drivers of that growth. There could be a lot of things going on in the aggregate, but my conclusion is that this is a strong indication that it is a good time to revisit your professional services strategy and execution and make sure that the strategy is aligned with overall business strategy and that operations support that strategy.

Financial Force a major provider of PSA (professional services automation) software has a very good article about the challenges and predictions for professional services in 2023. This can provide you information of what it makes sense to focus on going forward in your professional services operations.

Generative AI - Industry Update

Microsoft announced their quarterly earnings in January for the period ending 12/31/2022. Although not a great quarter, cloud products were their financial strength. As explained by this TechTarget article one of the takeaway's from their reporting is that their CEO has indicated that they are expecting revenue from AI, particularly with Azure, to drive the growth of future revenue.

In addition Microsoft has announced an investment of $10 billion in OpenAI, the provider of ChatGPT. Microsoft expects to incorporate ChatGPT and other OpenAI products into Microsoft products. OpenAI uses Azure for the underlying compute resources for their products and model development.

The venture firm, Andreessen Horowitz has described their view of the structure of the generative ai stack and identified the areas where they believe that there are profitable and defensible market positions. One of these is the underlying cloud services used for AI. Clearly Microsoft believes this and therefore they are focusing on AI applications and tools on Azure. If you are considering adding generative AI capabilities to your product I'd suggest reading this article and their insights.

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