Professional Services Divisions as Potential New Profit Centers for Pathology Vendors
Posted Oct 05 2009 10:02pm
In a recent note, I commented on the professional services division of Aperio as a relatively novel component of digital pathology companies (see: Emergence of a Professional Services Division at Aperi o). Ole Eichhorn, the CTO of Aperio, emailed me the following comment to this note, which I quote with his permission:
One key point about having a professional services team is that [this approach requires] a relatively open system to build on....The professional services team is a sort of “third party for hire” that [Aperio's] customers can use to create interfaces, customize the product, and otherwise work with them to craft a tailored solution. Our team builds onto existing interfaces and plug-in APIs at each point, they never modify our baseline code. Another point which won’t surprise you: most radiology PACS vendors have professional services teams and they’re an important part of their businesses. I remember meeting with [a PACS vendor that told me that] 25% of their revenue came from professional services.
Lot's of interesting food for thought in this short passage. First of all and in order to develop a professional services unit, the product being offered by a vendor such a digital pathology system needs to have an open architecture. Put another way, you can't make money and serve customers modifying an unmodifiable product. He also make mention above of plug-in APIs, which can be defined in the following way in the Wikepedia: an application programming interface (API) is a set of routines, data structures, object classes and/or protocols provided by libraries and/or operating system services in order to support the building of application.
The second concept raised by Ole is that a professional services division works with a customer to develop new applications without altering the "baseline code." The product keeps improving using customer input but without modification of the core hardware/software, which must be sold to other customers. Compare this with the Epic EMR with most modifications generated by the centralized corporate R&D rather than by customers (see: Some Additional Insights into the Epic Corporate Culture ). Improvement cycles for such products tend to be slower and they also tend to drift toward "vanilla" over time, making them easier to maintain.
Lastly, he makes mention of a PACS vendor with 25% of revenue derived from professional services. It seems to me that with this type of contribution to the bottom line, a professional services unit starts getting some "respect" within the company. Put another way, the links between it and the company marketing & sales unit become weaker. The professional services consulting division becomes empowered to turn to products and solutions outside the company if and when necessary to increase consulting sales. This, in turn, leads to a virtual circle or cycle, a feedback mechanism whereby the customer sees the consulting services offered by the company as more tied to quality improvements for them and generates even more business. The company products, I am sure, will always remain as the central focus on the solutions proposed by the professional services unit but with alterations at the margins, based on the special needs of the customer.