How Important (and profitable) Is Service To Your Organization?
Over the past few years, the service industry has had a mantra that service is becoming the profit center of the organization. While in many cases this is true, there are still several companies who’s C-level leaders don’t realize the profit potential that lies in their service operations.
According to a recent Aberdeen Group report, Service as a Profit Center: The CFO’s View, there can be several reasons for this. We’ll talk about two of them here: the need to involve senior level finance executives and using technology to track and analyze data.
INVOLVE SENIOR LEVEL EXECUTIVES
The first step in getting recognition for your service operation is to involve senior level financial executives. These executives will need visibility into the service-level data and need to be given the opportunity to forecast and budget for your service operation. Half of the respondents in the Aberdeen Group’s report stated that a top challenge to effective post-sales service management was the lack of organizational support and understanding of the importance of post-sales service. Getting these execs involved will spread the understanding and importance throughout your organization.
The report goes on to state that 71 percent of “best-in-class” companies report having profit-centric processes, forecasting and budgeting specifically for their service operations. The overwhelming majority of these companies saw an increase in service-level profits and revenues over the past two years, while 39 percent of them saw a decrease in service-level costs.
If the experience of these best-in-class companies is any indication, it’s clear that involving senior-level executives is the right path to take. But for these executives to make good decisions, they must have good data and be able to track and analyze it with good technology.
TECHNOLOGY IS YOUR FRIEND – USE IT
Many companies do use technology to track and analyze their service metrics. These companies’ executives most likely have a better view into their service operations, seeing exactly what makes, and costs, them money throughout the service chain.
Unfortunately, data from the Aberdeen Group report states that close to half of the companies they polled dedicate less than 10 percent of their IT budget to post-sales service initiatives. Technologies used to track post-sales service are usually combinations of existing systems and tools, rather than a best-of-breed solution. According to the report, the top two technologies used are spreadsheets and an existing financial/accounting system. This is hardly a best-of-breed solution and can cause much pain when trying to share the data or analyze it in any useful way.
According to the report, when looking at technology to track your service-specific data, you should look at these data types:
- Transaction: service orders, schedule information, contracts/warranties tracking, etc.
- Customer: preferences or special needs, current performance, history of activity, SLA commitments, etc.
- Asset: historical service trends, current performance, best practices for problem resolution, etc.
- Inventory: spare parts tracking, etc.
- Performance: field tech productivity, SLA compliance, first-time resolution rate, etc.
You’ll most likely find that when you have this technology in place, and make the data available to senior-level stakeholders, then your service operations will be seen as more important and potentially profitable.
You can download the full Aberdeen Group report here (registration and payment may be required): http://www.aberdeen.com/summary/report/
benchmark/RA_CFOsView_MVSD_3395.asp
Originally from the September 2006 Metrix eNewsletter