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TECH TALK: Business to e-Business: 10 Transformations: Products to Services

January 27th, 2001 · No Comments

Time was when a customer bought a product and that was it. Things are changing now. Customers want solutions to problems. This means the integration of product and service. The first interaction with a customer may not be the last, but the start of a lifelong association which could benefit both buyer and seller. For the seller, it offers an opportunity to generate additional revenues from the same (hopefully, satisfied) customer. Each sale is not therefore to a new customer, and every customer is not the same. From the buyer’s point of view, a seller who understands the customer can now offer better and more personalised products and services. Loyalty has its advantages – both for individual customers and enterprises, as deeper relationships can be now built between buyers and sellers.

In the last decade, as companies have implemented ERP, CRM and SCM solutions, they have not just been the products from the software companies, but also consultation, re-engineering and implementation services from various specialised organisations. Oracle has thousands of consultants which help in implementing its platform across a company. Just the ability to sell a product is not good enough to effect the sale to enterprises; what is needed is a bundled solution.

This combination of product and service has been there in the past too. For example, when we bought a car, we were also sold insurance as a service. A TV without the cable service was unthinkable. The cellphone is useless without the accompanying wireless service. The PC industry was in many ways insulated from this – people bought a computer, and then loaded it with various software packages. This is where the change is likely to happen in the future as software becomes a service. Application Service Providers (ASPs) are the first generation of IT utility companies. Mohanbir Sawhney and Deval Parikh offer this view on services:

In a connected world, intelligence can float freely like molecules in the ether, coalescing around temporary problems whenever and wherever needed to solve customer problems. In the knowledge economy, firms need knowledge and intelligence to compete, but where the intelligence is physically located may be irrelevant. In the absence of a network, software and computing power need to be located within a company’s boundaries. But in the networked world, they have become services that can be delivered over the Internet.As the Internet becomes more reliable, Dell’s customers may simply buy computing, not computers.

This shift from products to services is extremely favourable for people-rich countries like India, who now have the opportunity to emerge as the next capital providers to the world – in this case, the capital is intellectual people through people. The move towards services also means that companies will tend to outsource to experts in the area, thus forcing the creation of closer “supply networks”. It also creates opportunities for new intermediaries in the new service-centric computing environment.

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