© SSPA and TPSA 2006 HIGH TECH SERVICES The Role of Service Innovation In the Economy’s Most Famous Product Sector J.B. Wood President and CEO Service & Support Professionals Association (SSPA) Technology Professional Services Association (TPSA)

© SSPA and TPSA 2006 The Two Largest Industry Associations in Tech Services …for professional services…for customer support

© SSPA and TPSA 2006 SSPA and TPSA Support Major Tech Companies Across The Broad Technology Market Enterprise (>$1bn in revenues) SME (<$1bn in revenues) Home office and Consumer Networking Computing And Desktop HW Storage Infrastructure Software Client server applications HWSW HW Desktop SW SW Internet Office Products Office Products Medical Technology Consumer Technology Products 3

© SSPA and TPSA 2006 A Line-Up of Over 200 Member Companies 4

© SSPA and TPSA 2006 Nation% WW Labor %A%A %G%G %S%S 25 yr % delta S China India U.S Indonesia Brazil Russia Japan Nigeria Banglad Germany Top Ten Nations by Labor Force Size (about 50% of world labor in just 10 nations) A = Agriculture, G = Goods, S = Services >50% (S) services, >33% (S) services 2004 United States (A) Agriculture: Value from harvesting nature (G) Goods: Value from making products (S) Services: Value from enhancing the capabilities of things (customizing, distributing, etc.) and interactions between things The World is Becoming One Big Service System

© SSPA and TPSA 2006 Services revenues are growing across the software industry... The State of the Technology Services Industry Services revenues are growing across the software industry and have become the critical component in IT sector growth

© SSPA and TPSA 2006 Services revenues are growing across the hardware industry... The State of the Technology Services Industry Services revenues are growing across the hardware industry and have become the critical component in IT sector growth

© SSPA and TPSA 2006 Q Technology Services Universe: Q4 1996

© SSPA and TPSA 2006 Q The TPS Universe: Q4 2006

© SSPA and TPSA 2006 The Key Shifts As The High Tech Market Has Matured More Service Revenue Call Center Service Margins Professional Service Margins

© SSPA and TPSA 2006 The Service 50 Gross Margin Analysis 30%35%40%45%50%55%60%65% Hardware Companies 30%35%40%45%50%55%60%65% Software Companies 30%35%40%45%50%55%60%65% The Service 50 30%35%40%45%50%55%60%65% All Product Companies 30%35%40%45%50%55%60%65% Service Companies 30%35%40%45%50%55%60%65% PS in a Product Company 30%35%40%45%50%55%60%65% Support in a Software Co.

© SSPA and TPSA 2006 Call Center Service Professional Services Gross Margins Call Center Service INNOVATION: Technology, KM and Globalization Professional Services MODEST INNOVATION: Still Labor Intensive HAPPY CFO SAD CFO

© SSPA and TPSA 2006 The Big Questions For Customer Service Execs: “Are we running out of margin improvement opportunities? If no, then what is next? If yes, then help me prove it to my CFO.” For Professional Services Execs: “There has to be more than just process and service system improvement. Where is the capture and re-use of IP? Where is the scale? Where is the technology? Does more services have to mean more people?

© SSPA and TPSA 2006 The Three Pulling Forces On the Chief Services Exec Revenue Mix Business Strategy Solution Centric Valuation Analysts Product Centric Capabilities Product+ Staff Customers

© SSPA and TPSA 2006 THE MANAGEMENT IMPERITIVE: THE MANAGEMENT IMPERITIVE: Tech Companies Must Find Ways of Delivering More and Better Services To Customers But Avoid the Margin Drag of More People Service Innovation Is Key!

© SSPA and TPSA Mainframes PC & Client Server Web Product as Service Four Generations of Computing Over 40 Years…

© SSPA and TPSA Mainframes PC & Client Server Web Product as Service And Technology Services Have Not Had To Significantly Change Their Role… Support and Maintenance Services Professional Services

© SSPA and TPSA Web Product as Service Prediction: By 2015 Services Will Look Nothing Like What We Know Today Professional Services 2015 ??? Support Services TODAY Nine Years of Radical Change ? ? ? ?

© SSPA and TPSA What Will Drive This Change? 2015 ??? TODAY ? ? ? ? Support Services Professional Services Service Margins Will Temporarily Drop As Price Pressure Overtakes The Ability to Reduce Costs Street Will Begin To Ask About Services Margin Drag Lines Between Product And Service Blur Customers Demand More Value For Service Money Offshore Service Providers Take More Market Share Complexity Strangles Users and the Ability To Support Them Consumer and Enterprise Computing Converge Confusing Service Supply Chain Product Development Methodology Will Be Applied to Services Development Service Will Shift From People Based To Asset Based Services Commoditization Will Accelerate Service Innovation Will Accelerate

© SSPA and TPSA 2006 Five Key Areas For Service Research and Innovation in High Tech

© SSPA and TPSA 2006 Percent of Visitors To Support Website That Find The Answers They Are Looking For: 46% Percent of Support Cases Deflected From The Phone to Web Based Self Service 29.7% Most Frequently Used Web Resources #1 #2 Source: 2006 SSPA Industry Benchmark Survey #1 - The Capture, Management and Re-use of Knowledge

© SSPA and TPSA 2006 #2 – Servicing The Growing Complexity of Customer Systems 46% - Percent of staff that receives formal training on products from other companies 31% - Percent of customer problems requiring expertise on other company’s technology products 15% - Percent of customer problems requiring contact and collaboration with another company who shares the common customer (more than doubled from 2003) 4X – Cost of cases requiring multivendor cooperation Source: 2006 SSPA Industry Benchmark Survey

© SSPA and TPSA 2006 Please indicate the percent allocation of NEW incidents by type of customer issue 1 in 4 cases related to product defects or limitations #3 - Building Supportability Into Technology Products

© SSPA and TPSA 2006 #4 - Mountains of Data How can we turn mountains of transaction data into usable management information for services management, the sales force and product development teams?

© SSPA and TPSA 2006 #5 - The Service Supply Chain The Product Maker The Reseller or Integrator The Independent Service Provider The Consultant ?

© SSPA and TPSA 2006 Projected US Service Employment Growth, US Bureau of Labor Statistics.

© SSPA and TPSA 2006 What Does This Mean To You? Services will be THE word of the next decade in high tech: -Consumer services -Automation of professional services -New models for customer support -Software-as-a-Service Tech companies are searching for talent in both business and engineering disciplines who can add value to the discussion. You: Right place, right time.

© SSPA and TPSA 2006 …for professional services…for customer support Thank You and Questions

© SSPA and TPSA 2006 Five Key Areas For Service Innovation in High Tech 1.The Capture, Management and Re-use of Knowledge is progressing slowly. Where are the breakthroughs? –In electronic self help? –In professional services/consulting IP capture? 2.The Growing Complexity of the Customer’s Systems is increasing cost-to-serve and negatively effecting customer satisfaction. How can we apply innovative approaches to tracking the customer environment, the cause of problems and to facilitate cooperative service provision among different companies with common customers? 3.What are future approaches to Building Supportability Into Technology Products? –Predict environments conducive to problems –Sense developing problems –Take Pre-emptive actions (automated and non) –Collect information for service providers 4.Service organizations know more about the use of products and changing customers environments than any other part of the company. How can we Turn Mountains of Data Into Usable Management Information for services management, the sales force and product development teams? 5.The Services Supply Chain is becoming increasingly complex. Innovation around the “service system” business model that can help companies partner effectively will help both the quality of customer solutions and the bottom line.