The New Competitive Differentiator for Equipment and Service Companies
Up to 50% of a manufacturer's profit comes from the service side of the business. Yet industry research reveals IT investment in service processes remain disproportionately low. For all that's been heard and written about various business automation technologies, equipment manufacturers, distributors and pure service companies need something more—or at least something different—to exploit their true business potential.
According to market research, businesses that sell and service capital equipment can improve margins by 20% to 60% through improvements to field service operations. Moreover, through deployment a Service Lifecycle Management (SLM) strategy, companies can capture up to 70% of service revenue that is missed in the latter half of product lifecycles.
SLM succeeds as an enterprise solution for service businesses where technologies such as CRM, ERP, SCM and best-of-breed field service automation fail. Among business drivers, SLM aims to maximize market share and profit margins in addition to the operational efficiencies for which tactical solutions are deployed. Return on investment goes beyond reducing costs of sales and service delivery to more enriching goals of reducing churn and capturing more revenue per customer. Benefits align with boardroom visions of extracting more profit from a more stable customer base and increasing the long-term value of new customer additions. For these reasons, SLM should be an easier IT spend for corporate to back.
Where SLM Fits
Figure 1 illustrates the relationship of SLM with existing technologies. Left to right represents the customer lifecycle. Bottom to top represents the ascending levels of customer interactions from ERP to CRM. The bisecting centerline denotes support for pre- and post-deployment business processes during customer lifecycles.
Figure 1. Service Lifecycle Management in Technology Spectrum
An SLM strategy incorporates many applications delivered with CRM, SCM and ERP products, but seeks greater integration among the business processes these technologies automate. In all, according to one analyst firm, there are18 business processes across the customer lifecycle that need to be integrated to reap full benefits.
The 10% of companies that have achieved SLM deployment have relied on substantial custom IT systems integration for their competitive advantage. There is however a more practical alternative to implementation. For most companies that have yet to automate their "18 business processes" let alone integrate them, emerging solutions will be the difference between market success or a less fortunate fate.
For equipment manufacturers, distributors and service companies, product service carries an overriding influence on sales. Customer Service and Support (CSS) from contact center to escalated technical support, field services, depot services and all attendant support processes are hardly the forte of CRM companies who owe their rise to sales and marketing automation. For proof, refer to any of the bounty of failed implementation stories dogging CRM companies that have tried to expand suites with equipment service applications.
Field service suites that can provide the necessary CSS functionality are devoid of sales and marketing capabilities. Few integrate field/depot processes such as service parts planning and defect management with supply chains and ERP. All are tactical solutions for improving service delivery and cost management.
SLM focuses on a strategic enterprise solution for growing revenue and market share. It can be perceived as a CSS-weighted CRM solution with product service a controller of other interconnected front- and back-office business processes. A fundamental tenant of the strategy is to recover a larger percentage of available service revenue longer into customer lifecycles. This is achieved through the coalescence of interdependent business processes operating synergistically to support proactive revenue producing customer interactions.
Proactive Versus Reactive Processes
Break/fix service in response to a customer request or remote diagnostics is a reactive process. Preventative maintenance to pre-empt a need for break/fix service is a proactive process.
Waiting for a customer to request replenishment of an equipment consumable is a reactive process. Knowing when a consumable supply is about to expire and alerting the customer to reorder is a proactive process.
Basing new products and services on only sales data and third-party forecasts is reactive to the market. Integrating the company's own captured customer intelligence and product/service profitability into the marketing analytics can help define the market.
These are elementary examples—SLM gets far more sophisticated—but all convey the strategy of anticipating customer needs to increase the frequency of interactions longer into customer lifecycles. The strategy builds customer reliance on the service provider and perceptions of the provider's excellence—from which customer loyalty is borne. More to the point, the service provider increases revenue opportunities from customers and reduces churn to hold and grow market share. (One industry study reveals that businesses not automated to support SLM are twice as likely to lose customers than SLM leaders.)
More Than Operational Efficiency
Most companies view objectives and returns on service automation investments strictly in terms of improved workforce and inventory efficiencies. This view drops the priority of service automation spending that must compete with other IT projects. The fewer dollars allotted also narrows the scope of projects to piecemeal tactical improvements. For example, field service scheduling and dispatch can be automated without hooks to integrate numerous related processes such as warranty and claims management, document management, product defect management, correlating service parts inventory with production parts inventory, or enabling sales and marketing access to post-deployment customer interaction histories.
The additional and loftier goals of growing revenue and market share enable SLM practitioners to justify greater IT spending. With that said, how much IT investment can a company be willing to make to automate and integrate as many as 18 business processes?
For sure, building an SLM business case for C-level buy-in requires research, a clear strategic vision, substantial assessment of existing business processes, and a plausible project roadmap. Executive leadership and commitment are musts. A great place to orient oneself to SLM concepts and how they apply to various manufacturing and service businesses would be a series of reports recently released by AMR Research.
Depending on a company's prior investments in tactical solutions, many components of an SLM strategy may already be in place. In such case, the project roadmap would describe milestones and methodologies for moving CRM, ERP, SCM and best-of-breed applications from unconnected reactive to integrated proactive business processes, and adding missing components.
Assessments of existing systems may favor replacing one or more components to update capabilities and platforms for an SLM vision. The expense to companies that regularly invest in automation would be largely that of integration performed by inhouse IT staffs and/or consulting firms. Companies that have been slow to adopt automation face a larger but manageable challenge.
Pre-Packaged SLM Solutions
There is, of course, no such thing as a ‘pre-packaged solution.' SLM proponent Astea International Inc. however will lay claim to most deliverable technology today and best business value for implementing an SLM strategy.
With a 23-year evolution from provider of field service automation to customer support/field service suites to ‘service-centric' CRM suites, Astea is steeped in SLM-savvy product investment, professional services and ‘best practices' domain expertise. The company's strong service automation roots and historical focus on solutions for equipment and service companies add to huge advantages over generic CRM providers. A four-year product expansion into sales and marketing applications integrated with service and other enterprise integration applications distance the company from one-time field service competitors in an SLM market space.
Astea's flagship AllianceEnterprise Suite (Figure 2) establishes a solid SLM core rich in infrastructure, portal and mobile capabilities, and a product roadmap that continues to move forward on a Web services and Microsoft.NET track. The suite's integrated applications for field/depot services, multi-channel contact centers, sales and marketing are augmented with APIs to integrate other suites such as ERP and best-of-breed functionality such as remote equipment monitoring and diagnostics (Device Relationship Management). The suite is multi-currency, multi-lingual and easily customized using meta data, graphical metaphors and wizards in lieu of expensive custom programming. All elements are in place to reduce implementation and ownership costs for deploying an SLM solution—even for companies that have been slow to adopt earlier automation.
Sales and customer service processes for capital equipment industries differ from those of consumer industries for which generic CRM is designed. Product lifecycles are longer, services and support more complex, and equipment uptime often mission-critical to customers' businesses. Visionary companies have seized the initiative to integrate and focus all business processes to benefit customer relationships. In so doing, they have opened access to service revenue once lost in the latter stages of product lifecycles and increased market share—giant leaps beyond automating processes to reduce operating costs.
Competitive landscapes will shift, and SLM will be the reason. The lone caveat will be how companies achieve such an ambitious undertaking. At least one solutions provider to manufacturers, distributors and service businesses is strongly positioned to help. ◙