Crossing the Chasm: How to avoid flip-flopping between OSS products and services models

Are you familiar with Geoffrey Moore’s famous, “Crossing the Chasm” concept from his book of the same name? It basically describes the large gap between early adoption of a product and getting it to mainstream utilisation. With the large amount of fragmentation in the OSS/BSS market, there are clearly many products that haven’t been able to leap across to widespread utilisation yet.

But that’s not what today’s article is about. Instead, we’ll use a similar concept to explain the challenges that vendors face when they decide to be product-only companies.

In the early stages of an OSS product (the left side of the chasm), the product vendor / developer also tends to be the only one that knows enough about the product to stand it up. It’s the only one that has the professional services resources that know how to install, configure, set up processes, integrate, set up automations, provide training, etc for each customer.

The vendor may wish to be a product-only company, but initially it must also provide services to ensure it’s set up well and early customers can actually use it. By delivering on these early product + services projects, the vendor will also gain valuable learnings about the product – how to improve, expand, optimise, refine, etc.

[Note that this diagram above is not a version of Moore’s but only borrows his concept of a chasm between two states of operation].

For the vendor to truly become a thriving product company that avoids services work (the product company is shown as the red part of the diagram), it needs to find other companies willing to take responsibility for providing value-add services (the orange part of the diagram). This takes a lot of hard work and serendipity. That’s why it’s shown as the chasm in this diagram.

For separate companies to provide the services for standing up an OSS product, they need to become largely self-sufficient. The transition to self-sufficiency requires significant commitment from the product and services companies alike. It takes a lot of work on both sides to create a symbiotic relationship.

The product company needs to create:

  • Products that are designed to be supported by third-parties (ie with as much friction removed as possible)
  • Partner / distributor contract templates and pricing plans
  • Partner information packs / portals
  • Partner training and train-the-trainer models
  • Sales and marketing materials
  • Admin and User Guides
  • Multi-tiered support
  • etc

The services company needs to invest heavily to deeply learn about the product from multiple facets:

  • How to install
  • How to configure
  • How to integrate
  • How to resolve issues / faults / fall-outs
  • How to administer
  • How to market and sell to end-customers (and how to identify the right end-customers)
  • How to update and support
  • etc

The services company needs to be convinced that there will be a steady supply of projects using the product before it will invest resources into learning the product.

The services part of the graph often holds larger revenues. However, it also generally comes with smaller margins and larger human-centric risks such as having the right size/scale of skills (not to mention that they are resources that are often required to be mobile to move to different end-customer locations). The product revenue component is often lower, but is more repeatable and generally comes with higher margins, which is why the product-only model is attractive to many vendors.

When you consider the 500+ vendors that are in our Blue Book OSS/BSS Vendor Database:

  1. A large percentage fall into the category of servicing their own products (left-side of the chasm)
  2. Many of the most famous OSS/BSS brands are arguably more services-biased (most people might think of them as product companies, but they get 70%+ of revenues from services. Their in-house developed products are really just differentiators that allow them to offer price-premium services)
  3. There is a much smaller sub-set that are heavily product-biased and have developed reliable, symbiotic partner / distributor relationships

Products and services require vastly different mindsets in terms of corporate thinking. It’s rare that a company excels at both. The ones that do are generally segmented into separate business units where product and service divisions operate quite independently. Most OSS companies are more naturally inclined towards one or the other. However, due to the dynamics described above, pre-chasm companies often flip-flop between being product-centric or services-centric until they can cross the chasm.

If you’re an OSS vendor, it’s recommended to have a clear strategy around which of the three models you wish to target. This will then help you to decide on strategies that will help you get there. The way you partner, sell, market, support, design products, create collateral, etc will vary depending on your approach.

If you would like to discuss your thoughts on crossing the chasm and how to structure your operations for your preferred approach, please connect with us.

PS. Where do you sit on each of the OSS Friction Continuums below? Where would you place your “dots” on each of the lines?


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