By Shawn Santos, Senior Program Manager, SSPA
 In the service and support industry, as in many other sectors of technology, it is beneficial to take a first-quarter glimpse of the year ahead and survey the challenges—and opportunities—facing our business. Choosing the appropriate lens to assess the future of our industry is essential. It is important to look at the best-practitioners and thought leaders and learn how their collective insights have developed a clear view of the trends taking hold today.
What’s on the minds of service and support executives? While we can’t ignore key tactical issues such as people management, customer retention, operational efficiencies, service delivery, support metrics, and customer satisfaction, there are larger issues looming. Specifically, there are six big issues on the horizon that are clouding the future landscape and may prove to have a bigger impact on service revenues and margins than previously thought.
The “Six Big Challenges Facing the Service & Support Industry” is a culmination of key issues that have been identified through SSPA research, programs and data sources such as the Benchmark Study, Advisory Board Input, Industry Committees, Support Demand Research and J.D. Power & Associates Audit Feedback.
This article is the second in a multi-part series describing the top business issues that service and support executives are facing, along with current recommendations from the SSPA.
Critical Services Issue #3:
How do we Make Good Service Translate into Market Share Advantage?
"I've been workin' the numbers, and something's not right." – Kevin Bacon in the movie Apollo 13
The line above relates to the damaged Apollo 13 spacecraft's angle of approach as it limps back to Earth. The problem? Come in too shallow and the ship bounces off the planet's atmosphere, drifting through space for all eternity. Come in too deep and Apollo 13 burns up before it can splash down in the South Pacific. Neither fate is a pretty one.
A similar picture is developing for the service and support industry. In today’s fiercely competitive environment, technology companies are looking for ways to differentiate themselves in the marketplace. More and more dollars are spent on delivering better service and collecting more relevant metrics with the expectation of more loyal customers and improved financial performance. The goal is clear: achieve market share advantage by delivering better support. The only real question is: who will complete a successful mission, and who will burn up?
It’s more evident than ever that companies are realizing the true impact of service and support on revenue, margins, and company EPS. After all, in recent years services have become the critical component in IT sector revenue growth for both software and hardware companies. As of Q4 2005, services accounted for 60% of revenue in software companies with average gross margins of 62%. For hardware companies, services accounted for 37% of overall revenue with gross margins of 36% during the same period (source: Technology Professional Service Association's "Service 50".)
If You Build it, They Won’t Necessarily Come
Companies are responding to the momentous services contribution to overall revenue by focusing significant resources on better service execution with the intention of increasing customer satisfaction and differentiation from the competition. But what about increasing your company’s market share with great service?
When companies are building their support capabilities by progressively earmarking more resources and budget line items for service delivery (currently over 66% of global service and support budgets), it is vital that potential consumers and enterprise customers gain confidence in your service and support practices before they make purchasing decisions.
If you build it, they won’t necessarily come—at least not without some effort on your part. There are better ways to make your significant investments in service and support translate to market share advantage. It is essential that your organization is not simply delivering better service, but that your service delivery practices are utilized as a competitive edge in the marketplace.
3 Ways to Make Better Service Translate into Market Share Advantage:
- Understand your Customers – It is essential to keep current with the business environments of your customers as it directly affects your bottom line. In SSPA’s recent white paper, Defending Support & Maintenance Prices (DSMP), it is shown that companies that are successful defending their support contract prices (otherwise known as “fee defenders”) track the value they deliver to customers. 50% of fee defenders track customers’ downtime (versus 33% of frequent discounters), and 33% of fee defenders track product ROI that customers achieve (versus only 8% of frequent discounters.)
- Visibility of Great Service – Increase your return on investment for service and support not only by delivering great service and winning customer satisfaction, but by making better service more visible through media relations; press releases, articles, customer success stories, case studies, and other external communications.
The SSPA, known as the largest and most influential industry trade group for technology service and support, is leading the charge in promoting visibility of “good” versus “bad” service and support. The SSPA has become a pre-eminent issues advocate—its communications and education programs now inform business leaders and the public about the critical importance of technology services.
- Get Certified : J.D. Power and Associates Certified Technology Service & Support Program – Prove to your customers that you provide outstanding service by leveraging the brand of the most recognized authority on customer satisfaction - J.D. Power and Associates. Companies gain competitive advantage and defend against price discounts by certifying that they meet the new standard of excellence in the industry. Tap into the demand for vendors with world-class service and support:
- 84% of recently surveyed enterprise IT buyers consider the satisfaction of a vendor's current customers during the evaluation process.
- 87% of recently surveyed enterprise IT buyers indicate vendors with proven high customer satisfaction would have an advantage over competitors who could not prove it.
- Over 80% of recent survey respondents indicate that if a vendor is J.D. Power and Associates certified they would feel more confident about working with that vendor.
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There's more to come—this series is only a brief introduction to the key industry issues the SSPA will be exploring in coming months. The SSPA strives to help you understand the emerging trends in the service and support industry, and to compliment that effort with effective solutions to your business challenges.
Last month, we touched the following two critical services issues:
Next month, look for the part III in the series in which we will cover:
Critical Issue #4: What is the Future as We Move From Fixing Problems to Driving Product Value?
If you are an SSPA member and would like to discuss Critical Services Issues or how you can participate in and benefit from SSPA programs, contact Shawn Santos, SSPA Program Manager, or Trisha Bright, SSPA VP Member Programs. If you would like to find out more about an SSPA membership, please contact John South, SSPA Director of Membership Development, or click here for more information. |
