Why Service Is The New Cash Cow
London, UK, 9 November 2015 – Service is becoming a rich new revenue stream and an entire new business model for manufacturers, according to ServiceMax, the leading field service management solution for a new era of business. With most companies struggling to grow new equipment sales on a global scale, savvy business leaders are finding their service departments can be much more profitable than ever before. This is one of the reasons – the servitsation of companies as a new revenue model – that’s making CEOs look at their service departments in a whole new light with a service income mindset.
According to the Advanced Institute of Management, one third of large manufacturing firms are now ‘servitised’ - integrating services with products to create bundles that are of greater value than products alone. In the US, that figure is nearly twice as high at sixty per cent. In the UK, where ninety nine per cent of business is generated by SMEs, around forty per cent of manufacturing companies are now thought to be servitised. The Internet of Things is expected to take things a step further with sensors and devices connected to the internet to maintain communication among users, manufacturers, products and service providers for pro-active maintenance before something breaks.
“Service is actually the product,” said Dave Hart, Vice President Global Customer Transformation at ServiceMax. “Over time, we’ll begin to see a much more widespread understanding and appreciation of this fact. But it will take time. There’s been a prevailing business model been based on putting a lot of effort into just optimising profits from sales. Everything after that, including service, has been about minimising costs. As the business landscape has changed, so too have customer requirements. The shift now is towards an outcomes-based business model, with service providers committing to providing predetermined service levels and prices aligned with customer requirements.”
Product as a service can be a win-win for customers and manufacturers alike. Customers get the assurance of first class service, the expertise to maintain it, and avoid a large upfront capital expenditure, while manufacturers get a recurring revenue stream, and visibility into any product ‘hot spots’ before they happen. As the above infographic shows, with increasing customer demand for managed services, rather than break-fix repair service, manufacturers are taking a fresh look at what service strategy best fits their organisation and customer needs.
ServiceMax leads the massive and global industry of field service management software -- an $18 billion market worldwide. The company continues to reimagine and create solutions for the 20 million people globally who install, maintain, and repair machines across dozens of industries as the only provider of complete end-to end mobile and cloud-based technology for the sector. ServiceMax goes to every length -- from joining technicians on service calls to publishing the industry's leading online publication -- to help customers discover untapped innovation, unleash new revenue streams, drive efficiency, and most importantly delight their end-customer. To learn more, please visit www.servicemax.com.