Billing CSM as Hourly - Can it be successful?

Britt Hall

My org currently attaches a CS line item to SOWs, complete with hours/month of CSM time. I'm struggling with it on a few levels, and I'm curious if we can (or would even want to) make this successful.

As I see it: 
Pros: 

• We are not a cost center. It's clear that CS is a source of revenue.
• We have clear SOWs and can turn to them when clients push the boundaries.
• Resourcing plans are easier - we know how many hours we "owe" our customers and can staff to that number.

Cons:

• Lots of confusion (for customers and internally) between scoped pro services, managed services, and customer success.
• Hourly packaging gives customers a sense of entitlement to tell us what to do, including very tactical chores. They feel they paid for the time, and they can use it however they want. We fight to stay out of the reactive.
• Lots of admin in tracking and reporting hours.
• When it is appropriate to go above and beyond, we're held by the bounds of our SOWs. It's not impossible to invest in our customers, but it is harder.
   

Before I go full-force in steering us away from this model, I'm curious if anyone has done the hourly-CSM thing effectively. Would love to hear all of your thoughts/opinions and more pros/cons!

Jay Nathan

@Matt Myszkowski

Sanjeev

@Britt Hall Customer Success can have specific offering/skills that can be billed on an hourly basis. Technologists, Onboarding Specialists, etc. However I'm not sure if CSMs can be used as bill/hour resource. CSMs tend to have multi-dimensional roles ranging from Relationship Management to Revenue Generation. I'm sure you'd agree that for such dimensions hourly billing may not work.

Andrey Tirel

This sounds more like a professional services engagement. My old company toyed with the idea of a paid CS. If I were a decision maker, I would include the cost somewhere within the product/contract but not itemize it line by line.

i.e., include that CS it included in the standard project management pricing and all engagements

Britt Hall

Yep. I'm on board. We have a pro serv division under our global CS. They are hourly and run project-based work like onboardings, integrations, large migration projects, etc. Definitely don't want to change that model, but I'm in favor of pulling CSMs out of it, as you've mentioned.

Matt Myszkowski

Hi @Britt Hall 

While we at SAP charge as a separate line item we do it on an annual (or multi year) contract basis aligned with the software contract. Critically we do not sell a CSM, we sell an holistic offering where the CSM is part of 4 key components: education resources, success resources (mini consulting packages), enhanced product support & the CSM who coordinates all of this.

Billing on a an hourly or daily basis is very much a consulting style engagement which will drive different behaviors both within your customers towards your business, and by your CSMs.

Britt Hall

Thanks for the input. I'm with you! At this point, I'm considering that a line item for a CSM might even be ok (though I'd prefer to move that cost into the overall license cost ideally). But I am really feeling like we need to at the very least eliminate the hours model and move to a deliverables-based model instead if we're going to keep the pro serv style.

Andrey Tirel

And doing the consulting approach here, the relationship will be transactional potentially and have much higher delivery expectations, as the client "pays" for this. 

Alex Turkovic

I'm pretty much aligned with everyone here in that Professional Services should ideally be billed on an hourly basis, while CSMs should be baked into the subscription cost.

By un-tethering CSMs from billable hours, you are freeing them and allowing them to re-prioritize their work on activities which will drive higher value overall to the organizations (renewal uplift, expansion opportunities, etc.) In the end, while there will be a perceived hit to the P&L, changing the org to capex will drive higher long term returns and drive overall customer sentiment.

One exception might be offering a 'premium' level of coverage for an annual fee. This could take on various forms, but perhaps adding a technical account manager to the "team" associated with the account. Just an idea.

 

Scott Hopper

@Matt Myszkowski in Collaboration in Messaging at IBM, we could bill to the 1/2 day for customer engagements in our Field Support Team.  We were a line item in the premium contract that gave up to 10 pre-paid days of services and 3 Emergency on-site days.  

@Britt Hall, it gets very hard to scope partial days and even with a pre-paid route.  Having specific scopes that customer needs and/or wants is hard.  Beyond that, you need to have a process to train the tactical delivery team on the engagement so they can deliver the intended value.   System health and/or security are major functionality additions are great targets.  We also did 2-day roadshows (multiple customers)  on major releases which in a release all the time model, might be an accumulation of several changes.  

In a 2020 Covid world  I likely would push a team like that to do 1-hour sessions that might have multiple parts to them for complex functionality and do them as Facebook or LI Lives.  Look to build tools to auto-audit customer implementations.  Also, you need to push the CSM's to engage their customers on where they are struggling with the product. 

Britt Hall

Thanks, all. So many great insights, and one major confirmation - not a single one of you recommended sticking with this hourly model for CSMs. (We do have a professional services team of consultants and implementation managers that uses this model, which will go unchanged.)

Given this discussion and a few I've had with my local CS group, I think my first step will be to move out of an hourly model and into a deliverables-based model. That will allow us to more tightly control the nature of the work we do with our customers and should get us out of the "I pay for your time so do what I say" mentality. From there, we'll look at folding the CSM cost into license price entirely.

Alex Turkovic

Love it! Best of luck. These changes can be a massive mindset shift for folks on many levels.