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Free can be awfully expensive

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Dear Dr. Yeahbut …

I’m a CIO. I’ve been reading your stuff long enough to remember when you introduced us all to the idea of “Digital,” even though you didn’t call it that. Now I need your advice.

Like a lot of companies that are going Digital we’re wrapping IT-based value around our company’s core products and services. Now, more and more of our sales representatives are asking IT for custom services they want to give away.

This was fine when the requests were for our largest clients and prospects. But no good deed goes unpunished, and our sales reps have been going steadily down-market with these requests, pointing out that our company culture emphasizes fantastic customer service.

I’ve tried explaining that it costs us almost as much to provide custom services for our smallest clients as it does for our biggest ones. But I’m having a hard time holding the line without creating the perception that I don’t have a “customer service attitude.”

Any thoughts on how I can keep IT from drowning in requests for freebies?

Dr. Yeahbut says …

I don’t know what you’ve already tried. Here are some thoughts, ideas, and notions that might be useful to you.

Free sometimes makes sense. You’re right to figure offering free stuff to your company’s biggest clients might make more sense than offering similar stuff for smaller ones. But (I am, after all, Dr. Yeahbut), they can also make sense with some smaller clients, namely, those with potential to grow to become a major ones.

The business model for providing fantastic customer service is that it leads to increased retention and “walletshare” – the fraction of the client’s total spending for what your company provides that you get instead of your competitors.

But even if that is the goal, if your company isn’t going to recoup the cost of providing the custom whatever-it-is, then logically the cost should come out of Marketing’s budget, not IT’s.

Establish an ABC cost structure for IT’s Digital services. In a Digital world, the potential IT “surround” for the company’s core non-Digital (would that be Analog?) products and services is, if not infinite, unbounded. To rationalize pricing, not to mention the self-defense advantages, consider dividing your suite of IT Digital Surround services into three buckets:

A services are core, standard services. You provide them at no additional charge.

B services are premium services. You provide them at a reasonable additional cost. You manage that cost by parameterizing the services to make them configurable.

C services are tailored services, the ones I imagine are eating you alive. Do everything you can to provide tailored services on a time-and-materials basis.

Unless, that is, you can satisfy the client’s underlying need with a B service.

Apply the Not-Yes/Not-No rule. This is the rule that says the two wrong responses to any request are “Yes” and “No.” The right response to any request is “I’d love to do this for you. Here’s what it will take.” Then explain what it will take, which includes advice on how to run the request through the established governance practices your company uses to set IT’s priorities.

It’s recursion time. If your company hasn’t already established governance practices to set IT’s priorities then a top IT priority is establishing governance practices for setting IT’s priorities.

Requests for free IT stuff should be added to the rest of the requests for IT-related services that are already sitting in the IT enhancements queue or appropriate backlog. There’s no reason a sales rep should be in a position to make requests for IT that don’t go through the same evaluation process as everyone else’s requests.

They might get favored treatment, but that’s a different matter.

Enforce TNSTAAITP. That’s “there’s no such thing as an IT project,” and in this context it means that the governance practices in question aren’t really practices for governing IT’s priorities. They’re practices for governing priorities, period.

Bob’s last word: Somewhere in all of this, someone will offer up as justification for the request that “the client wants this.” Please, and I can’t emphasize this enough, resist the temptation to reply, “And I want a pony. And a Robot Commando. And an Easy Bake Oven.”

Especially in business settings, sarcasm needs to be its own reward because all of the other rewards you’re likely to get won’t make you happy.

Bob’s sales pitch: Launching a project with a novice project manager? Give them Bob’s best-selling book written specifically for people who are smart and motivated, but who haven’t managed projects before, Bare Bones Project Management. Reviewers say:

“Hard to Find More Value per Page.”

“One of my ‘Top Ten’ Management Books”

“Bare Bones PM is awesome!”

“The author is fantastic; don’t let this be the only book you read by him.”

“I was a novice to project management and this book was a godsend.”

“Arrived on time; delivered at the correct address.”

Comments (2)

  • Sorry, Bob — I REALLY respect you and have been a subscriber to your e-mail services for YEARS… BUT, I teach business and specifically Intro to Business where a product is defined as (paraphrased) a good, service, idea, etc. Therefore, the phrase “products and services” (see the paragraph that begins “Like a lot of companies…”) is a total pet peeve of mine — products ARE services, so it’s redundant to say “products and services.” You should just say PRODUCTS! 🙂

    • Well, yes. And no. One definition of “product” includes anything businesses sell. Some services are products.

      But in many contexts, “product” implies something tangible … a thing … as distinguished from services, which aren’t tangible. Then there’s services that are product wraparounds, like, for example, free technical support.

      So I’m happy with “products and services” to make it clear I’m talking about everything a vendor might do for a customer.

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