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Copyright © 2005 Service Strategies Corporation Presented by John Hamilton, President Managing Support as a Business
Copyright © 2004 Service Strategies Corporation Agenda The Business of Support The Business of Support What is S Business ? What is S Business ? Market Trends in the Service Business Market Trends in the Service Business What Every Service Manager Should Know What Every Service Manager Should Know Support Strategies Support Strategies
Copyright © 2004 Service Strategies Corporation The Business of Support
Copyright © 2004 Service Strategies Corporation The Business of Support A Corporate View Support Investment Impact of Support Return on Support Investment
Copyright © 2004 Service Strategies Corporation The 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 Value
Copyright © 2004 Service Strategies Corporation The Business of Support By the Numbers 9.1% 37.2% $73Billion Average support funding as a percent of total revenue Average contribution of support revenue to total corporate revenue 65.3% Average support margin Amount spent fiscal year 04 to fund support operations world-wide *Gartner World-wide support revenue earned in FY04 $125*Billion
Copyright © 2004 Service Strategies Corporation What is S Business ?
Copyright © 2004 Service Strategies Corporation WHY S-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 (2) How to Make After-Sales Services Pay Off. Bundschuh & Dezvane. McKinsey Quarterly 2003 Number 4. (3) DFBA Worldwide High-Tech Equipment Services Database
Copyright © 2004 Service Strategies Corporation WHY S-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.
Copyright © 2004 Service Strategies Corporation S-BUSINESS CUSTOMER 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 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
Copyright © 2004 Service Strategies Corporation Market Trends in the Service Business
Copyright © 2004 Service Strategies Corporation What happens in the market low Time dependency on product Product-led Business Data Center Mainframe Product-related Business Maintenance Services Services-led Business Professional Services to 0000 to 10
Copyright © 2004 Service Strategies Corporation The IT Market shows attractive growth rates 82% 18% 83% 17% 84% 16% CAGR Professional Services Maintenance Services IT Services world market in billions of $$ Gartner:Dec.2004
Copyright © 2004 Service Strategies Corporation S-BUSINESS THE 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
Copyright © 2004 Service Strategies Corporation Business Motivation
Copyright © 2004 Service Strategies Corporation Support Funding Levels by Company Size
Copyright © 2004 Service Strategies Corporation Support Sales Channels
Copyright © 2004 Service Strategies Corporation Support Sales Effectiveness
Copyright © 2004 Service Strategies Corporation What Every Service Manager Should Know
Copyright © 2004 Service Strategies Corporation Unit 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
Copyright © 2004 Service Strategies Corporation Average Cost to Close by Tier Cost to Close
Copyright © 2004 Service Strategies Corporation Service 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
Copyright © 2004 Service Strategies Corporation Revenue Contribution Service Revenue
Copyright © 2004 Service Strategies Corporation Support Programs Offered
Copyright © 2004 Service Strategies Corporation Support Program Pricing
Copyright © 2004 Service Strategies Corporation Profitability 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
Copyright © 2004 Service Strategies Corporation Return on Investment ROI to Justify: Service Tools Knowledge management Self Help, etc Staffing Training Product enhancements and fixes Customer Loyalty
Copyright © 2004 Service Strategies Corporation Why Loyalty? Goal = Loyal Customers Loyal Customers = Profitable Growth Customer Retention Increase Customer Repurchase and Wallet- share Acquire New Customers through References
Copyright © 2004 Service Strategies Corporation Making the Case to Management: 3 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
Copyright © 2004 Service Strategies Corporation Support Strategies
Copyright © 2004 Service Strategies Corporation Support Strategy The Future of Support Transition from support of products to support of customers 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
Copyright © 2004 Service Strategies Corporation Customer Trends The 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
Copyright © 2004 Service Strategies Corporation Pursuit 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
Copyright © 2004 Service Strategies Corporation Scorecard Employee Satisfaction Customer Satisfaction Accountability & Process Financial Results
Copyright © 2004 Service Strategies Corporation Quantify Support Value Support contribution and success is most often measured in financial terms The full impact of support is assumed, but seldom quantified
Copyright © 2004 Service Strategies Corporation Thank You Any Questions ? John Hamilton President Service Strategies Corp.
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