The Commoditization of the Digital Services Industry

The general thought for a digital services company is to attempt to set themselves apart from their competitors using some niche or other differentiator. As technology evolves, the standard services that have come to be known as “Digital Services” are becomming commoditized. Right about now, service industry professionals are yelling and screaming about how a computer can never do what a designer or developer can do. Let us, for sake of argument consider a few things.

Commoditize: to render (a good or service) widely available and interchangeable with one provided by another company

Looking at that definition, it is pretty straightforward. The argument seems to be more subjective in nature. A service professional will add “it will never be as good as what a digital services organization can do.” Well, I can also add to the definition a market variable that rebuts the argument.

Commoditize: to render (a good or service) widely available and acceptably interchangeable with one provided by another company

It comes down to value. The market, for the most part is focused on a value that comes down to timing and quality. The ability to give the client both of those items at the lowest cost is key to reaching the goal. And what is the goal? Read this. The goal is to make money.

The market is getting smarter and more knowledgable about the services they purchase. In order to stay ahead of the game a digital services company has to embrace the changes and use it to their advantage. Let us examine the typical web project process.

The standard stages of the process are:

• Discovery – The process by which a solution provider engages the client in a series of exercises to determine the issues they are facing, determine the audience and users of the application, determine the wants of the primary stakeholders, gather all content and resources available and analyze historical information.
• Design – The process by which a solution provider creates a plan for success based on the discovery stage and begins to implement that strategic plan. Some common items that are in this stage are the creation of wireframes, functional requirement documentation and then physical designs.
• Development – The process by which the plans and designs are executed by a solution implementation team. If the first two stages are done correctly, this is straightforward.
• Delivery / Deployment – The process by which the web application is moved from the staging environment to the production environment.

This process has a number of bottlenecks that slow everything down, suck profits and create strained relationships. Design usually takes 4x longer than planned and usually is “design-first” with no thought to technology constraints. Development usually takes longer than expected because of the natural tendency of a development group to not consider the unknown. Now you have a project that goes over time, over budget.

If you read “The Goal”, you will see that if focus is on local optima (attempting to optimize a single point in the chain) and not focus on the entire process as a whole, the system isn’t optimized and you lose efficiency.

So, what does this have to do with commoditization? So glad you asked.

Resource Sites

Sites like fiver.com and themeforest.net are pumping out goods and services that should make the digital services industry shake in their boots. Fiver.com can provide a multitude of professional quality design and marketing services for pennies on the dollar of what a big agency would charge. Themeforest.net provides pre-built websites, custom graphics, code and more for $2-$100. Many of the WordPress themes on this site are the foundations of some Fortune 500 marketing sites.

How can an agency compete with that? They cant.

It is simple math. But just because you can’t compete, doesn’t mean you cant leverage it. Instead of spending hundreds of people hours designing and developing the project from scratch, you can start with low cost, pre-built technology and then use your resources to customize the existing UX patterns and develop any additional needs not satisfied by the purchased resources. You gain time and because the templates are very high quality, you gain value. The more templates you purchase, the more you have in your offering.

Companies are hiring technology professionals to manage their technology projects. These professionals are using these services to power their efforts. Digital agencies are attempting to find more ways to cut costs because margins are shrinking. The first thought is always to outsource the work and what you are left with is poor quality, missed deadlines and damaged relationships.

The truth is, with pre-built themes, 2 designers and 5 mid-level developers you could build & launch 8-10 sites per month at an average price of 30K per site. Shaving months off of project timelines and increasing margins.

Embrace the commoditization of the digital services industry.