Many services companies have experienced growing pains this year, blaming "slowdowns in spending" and "longer sales cycles." But there are deeper issues at work here.
The fundamental problem was reliance on the wrong business model. Under the end-to-end service model, companies sought to excel at every aspect of Internet development—from strategy, marketing and design, to systems engineering and integration. The emphasis was on the breadth of services, not the depth of expertise. Too many companies tried to be all things to all people.
In stark contrast, recognizing and nurturing a core competency pays huge dividends. The focused vendor is better positioned to understand the needs of clients and has the ability to quickly adapt to changing market forces. Lacking focus, too many vendors grew too fast, spread themselves too thin, and ultimately labored to attract clients with end-to-end projects. That created tension, forcing end-to-end vendors to make tough choices, such as take on work utilizing only part of their offering, or keep looking.
How can companies in the services space survive? Most firms have a certain skill—something they strive to do better than anyone else. One of the first rules of business is to focus and constantly develop that skill. The end-to-end tack must be reevaluated; not only will there never be enough end-to-end work, but that business model also will hinder efforts in differentiation. Specialization helps attract business. Potential clients want someone focused on their problems—not on trying to sell unneeded services.
If service providers had grown the old-fashioned way—by developing their core skills—far fewer would be ailing. By taking misguided leaps instead of baby steps, end-to-end vendors missed much along the way. Unfortunately, those missed steps were important to practice, so that eventually they could stand and walk on their own.