More Related Content Similar to Support as-a-business sydney-showcase-042705 Similar to Support as-a-business sydney-showcase-042705 (20) Support as-a-business sydney-showcase-0427052. Copyright © 2004 Service Strategies Corporation
AgendaAgenda
The Business of SupportThe Business of Support
What is S Business ?What is S Business ?
Market Trends in the ServiceMarket Trends in the Service
BusinessBusiness
What Every Service ManagerWhat Every Service Manager
Should KnowShould Know
Support StrategiesSupport Strategies
3. Copyright © 2004 Service Strategies Corporation
The Business of SupportThe Business of Support
4. Copyright © 2004 Service Strategies Corporation
The Business of SupportThe Business of Support
A Corporate ViewA Corporate View
SupportSupport
InvestmentInvestment
SupportSupport
InvestmentInvestment
Impact ofImpact of
SupportSupport
Impact ofImpact of
SupportSupport
Return onReturn on
SupportSupport
InvestmentInvestment
Return onReturn on
SupportSupport
InvestmentInvestment
5. Copyright © 2004 Service Strategies Corporation
The Impact of SupportThe Impact of Support
Helps customers accelerate full product
deployment and utilization
Earns and sustains customer loyalty
Contributes to business profitability
Provides a source of customer insight
Goal – Translate Impact into Business ValueGoal – Translate Impact into Business Value
6. Copyright © 2004 Service Strategies Corporation
The Business of SupportThe Business of Support
By the NumbersBy the Numbers
9.1%9.1%
37.2%37.2%
$73$73
BillionBillion
Average support funding as a percent ofAverage support funding as a percent of
total revenuetotal revenue
Average contribution of support revenueAverage contribution of support revenue
to total corporate revenueto total corporate revenue
65.3%65.3% Average support marginAverage support margin
Amount spent fiscal year ’04 to fundAmount spent fiscal year ’04 to fund
support operations world-widesupport operations world-wide
*Gartner
World-wide support revenue earned inWorld-wide support revenue earned in
FY04FY04
$125*$125*
BillionBillion
7. Copyright © 2004 Service Strategies Corporation
What is S Business ?What is S Business ?
8. Copyright © 2004 Service Strategies Corporation
WHYWHY SS-BUSINESS?-BUSINESS?
Services contribute 35% of the
computer industry revenues and
60% of the profits.
Services deliver 61% gross profit
margin and 30% growth rate to
top-performing organizations.
Services have an average gross
margins that are more than 50
percent higher than products.
“We have a pretty extensive services business.
We have embedded services that go along
with the product. Then we have the
discretionary services, the professional
consulting, SAN (storage area network) design
and deployment, application development,
managed services--it's about a $2.6 billion
business for us and growing at roughly double
the rate of our product business.”
Michael Dell, President and CEO,
Dell Computer
(1) Source: The State of S-Business. James A. Alexander, AFSMI. 2002.
(2) How to Make After-Sales Services Pay Off. Bundschuh & Dezvane. McKinsey
Quarterly 2003 Number 4.
(3) DFBA Worldwide High-Tech Equipment Services Database
9. Copyright © 2004 Service Strategies Corporation
WHYWHY SS-BUSINESS?-BUSINESS?
The current annual growth rate of services is more than
double that of products.
Services possess the potential to expand revenue 4 to 5
times that of the product purchase.
Global 2004 market forecast is $1.4 trillion.
10. Copyright © 2004 Service Strategies Corporation
SS-BUSINESS-BUSINESS
CUSTOMER SERVICES AND SUPPORTCUSTOMER SERVICES AND SUPPORT
PRODUCT SUPPORT SERVICES
Contact Centers, Field Service/Maintenance, Depot Repair, Parts,
Logistics, Installation, Telephone and Internet-based Technical Support,
Device Relations Management, Closed Loop Supply Chain
PRODUCT SUPPORT SERVICES
Contact Centers, Field Service/Maintenance, Depot Repair, Parts,
Logistics, Installation, Telephone and Internet-based Technical Support,
Device Relations Management, Closed Loop Supply Chain
VALUE-ADDED SERVICES
Project Management, Project Implementation, Systems Integration, Market
Research, Functional Outsourcing, Temporary staffing, Training, Asset
Management, Design for Serviceability, Software Support, and Benchmarks
VALUE-ADDED SERVICES
Project Management, Project Implementation, Systems Integration, Market
Research, Functional Outsourcing, Temporary staffing, Training, Asset
Management, Design for Serviceability, Software Support, and Benchmarks
PROFESSIONAL/CONSULTING SERVICES
Needs Assessment, Process/Infrastructure Analysis,
Strategy Development, Technology Design, Project Planning,
Solutions Evaluation and Recommendation
PROFESSIONAL/CONSULTING SERVICES
Needs Assessment, Process/Infrastructure Analysis,
Strategy Development, Technology Design, Project Planning,
Solutions Evaluation and Recommendation
11. Copyright © 2004 Service Strategies Corporation
Market Trends in the ServiceMarket Trends in the Service
BusinessBusiness
12. Copyright © 2004 Service Strategies Corporation
What happens in the marketWhat happens in the market
low
Time
dependencyonproduct
Product-led Business
•Data Center
•Mainframe
Product-related Business
•Maintenance Services
Services-led Business
•Professional Services
’70-’90 ’90 to ‘00 ’00 to ‘10
13. Copyright © 2004 Service Strategies Corporation
The IT Market shows attractive growth ratesThe IT Market shows attractive growth rates
82%82%
18%18%
83%83%
17%17%
84%84%
16%16%
2003 2004 2008
537 563
721CAGR
Professional
Services
Maintenance
Services
IT Services world
market in billions of $$
Gartner:Dec.2004
14. Copyright © 2004 Service Strategies Corporation
SS-BUSINESS-BUSINESS
THE SERVICES CONTINUUMTHE SERVICES CONTINUUM
1. Pure Services: We provide product support services and/or
professional services, but no products.
2. Services-Led: We are a services-driven business that also sells
products.
3. Services is a Profit Center, But…Yes, we sell services and try
to make some money on them, but our core business and our
focus are products.
4. Services is a Cost Center: We aggressively sell products;
however we also provide and charge for maintenance services.
5. Pure Product: We are a product company, period. (We
outsource all service or we handle only warranty and product
problems with our own people--usually at no charge.)
Pure Services
Pure Product
15. Copyright © 2004 Service Strategies Corporation
7.5%
62.5%
30.0%
4.8%
28.6%
66.7%
0%
20%
40%
60%
80%
100%
Profit & Loss Center Cost Center
Cost Recovery Revenue Generation Customer Satisfaction
Business MotivationBusiness Motivation
16. Copyright © 2004 Service Strategies Corporation
13.1%
7.4%
6.5%
9.1%
0.0%
5.0%
10.0%
15.0%
20.0%
Small Medium Large All
Support Funding Levels by Company SizeSupport Funding Levels by Company Size
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Support Sales ChannelsSupport Sales Channels
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Support Sales EffectivenessSupport Sales Effectiveness
18.5%
85.4%
90.5%
35.0%
83.5% 84.1%
0%
20%
40%
60%
80%
100%
Attach Rate Renewal Rate
Channel Partners
Corporate Sales
Dedicated Sales Group
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What Every Service ManagerWhat Every Service Manager
Should KnowShould Know
20. Copyright © 2004 Service Strategies Corporation
Unit Cost Financial MeasuresUnit Cost Financial Measures
Cost per Case
Detail Breakdown by product
New versus mature product
Phone versus e-case
Cost per FTE
Detail Breakdown by grade level
Fully burden cost
Understand monthly fixed cost
Explain monthly variable cost
21. Copyright © 2004 Service Strategies Corporation
Average Cost to Close by TierAverage Cost to Close by Tier
$61.3
$155.6
$167.6
$304.5
$0
$50
$100
$150
$200
$250
$300
Tier 1 Tier 2 Tier 3 Engineering
CosttoCloseCosttoClose
22. Copyright © 2004 Service Strategies Corporation
Service RevenueService Revenue
Revenue per customer
Detail Breakdown by contract type
Maintenance contracts
Warranty service
Value added services
Revenue per Channel
(partners)
Revenue per Employee
Support center
Field Service
Professional Service
Service Contract renewal rates
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Revenue ContributionRevenue Contribution
ServiceService
RevenueRevenue
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Support Programs OfferedSupport Programs Offered
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14.5%
18.5%
22.6%
25.9%
0%
10%
20%
30%
40%
Basic Standard Premium Mission Critical
Support Program PricingSupport Program Pricing
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Profitability MeasuresProfitability Measures
Service profitability
Support Center
Field Service
Professional Services
Margin analysis
By customer contract type
Profit margin per Service Employee
Service Contribution to company profitability
27. Copyright © 2004 Service Strategies Corporation
Return on InvestmentReturn on Investment
ROI to Justify:
Service Tools
Knowledge management
Self Help, etc
Staffing
Training
Product enhancements and fixes
Customer Loyalty
28. Copyright © 2004 Service Strategies Corporation
Why “Loyalty”?Why “Loyalty”?
Goal = Loyal Customers
Loyal Customers = Profitable Growth
Customer Retention
Increase Customer Repurchase and “Wallet-
share”
Acquire New Customers through References
29. Copyright © 2004 Service Strategies Corporation
Making the Case to Management:Making the Case to Management:
3 types of ROI for Customer Loyalty3 types of ROI for Customer Loyalty
Customer
Acquisition
Premise:
New customers
are more
expensive to
Acquire
Focus: Retention
Future Purchasing
Levels
Premise:
Ask customers
about future
purchases if
satisfaction issues
are fixed
Focus: Repurchase
Customer
Value
Premise:
Track revenue
& profitability
of customers
based on
transactions
Focus: Activity-
based Value
30. Copyright © 2004 Service Strategies Corporation
Support StrategiesSupport Strategies
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Support StrategySupport Strategy
The Future of SupportThe Future of Support
Transition from support of products to support of
customer’s business
More emphasis on business critical services
Alignment and scrutiny of support performance goals
with corporate business objectives
Shift in emphasis from operational to business metrics
Support spending justification shifts from cost
reduction to ROI
Emphasis on revenue generating opportunities
Emphasis on optimization
Search for latest silver bullet is replaced by emphasis on
optimizing process and knowledge
A New Value Proposition
New ways to define, market and sell support products
32. Copyright © 2004 Service Strategies Corporation
Customer TrendsCustomer Trends
The Future of SupportThe Future of Support
Value Proposition
Greater demand for quantification
of support value
SLAs
Emphasis on service level
commitments
End-of-Life
Reluctance to adopt new
technology forces review of
support policies
33. Copyright © 2004 Service Strategies Corporation
Pursuit of World Class SupportPursuit of World Class Support
Support must be recognized as a strategic necessity to
further the corporate mission
The support mission must be focused on maximizing
the value of customer relationships not simply support
financial performance
The impact of support must be expressed as tangible
business value
Support funding decisions must be evaluated base on
the return on the investment
Manage Support as a business
Balanced Scorecard
34. Copyright © 2004 Service Strategies Corporation
ScorecardScorecard
Employee
Satisfaction
Customer
Satisfaction
Accountability
& Process
Financial
Results
35. Copyright © 2004 Service Strategies Corporation
Quantify Support ValueQuantify Support Value
Support contribution and
success is most often
measured in financial terms
The full impact of support is
assumed, but seldom
quantified
36. Copyright © 2004 Service Strategies Corporation
Thank YouThank You
Any Questions ?Any Questions ?
John HamiltonJohn Hamilton
PresidentPresident
Service Strategies Corp.Service Strategies Corp.
Editor's Notes The first stage we had almost only retro-active maintenance and finding out on the spot what really happened and then taking the needed actions.
For quite some companies at the time services was considered as a « freebee » as sales made the profit.
Later on it changed because OEM’s found out that beyond the sales part there was still a long life ahead for keeping the products running ( between 7 and 15 years). As the technologies did hardly change so did the skills sets.
The second stage we saw more contracts coming (SLA’s) , more customized offering of repair (emergnecy calls, spares on side , engineers on site, etc.)
More and more repair mix of swapping hardware and updating of software .But still all was focused on repairing and maintaining functionalty
Professional and/or value added services are becoming the profit- and reveue makers.
Many of us talk about “Loyalty”; but we still sometimes confuse it with Satisfaction