The first poll is aimed at gathering the overall labor related costs of support as a percent of total corporate revenue. The other two ask for the average labor related costs for handling a service incident (a case), from the time the incident is opened to closure (i.e., to customer restoration). To calculate labor costs please total salary or wages + overtime cost + cost of employee benefits + cost of applicable employment taxes – do not include other non-labor costs.

So if you provide software solutions on a SaaS/Cloud platform, will you please take a few moments to answer the following instant polls. We’ll share the poll results in a few weeks for all to see. You don’t need to provide any contact or company information, so the results are obviously confidential.

Thanks for your interest. And more importantly,  THANKS FOR YOUR INPUT - IT MATTERS!

MICHAEL ISRAEL

I have been absent from these blog posts for the past several weeks because I have been feverishly working – along with others in TSIA – on finalizing this new benchmark survey and benchmark tool. I’m proud to say we’ve finished our initial efforts, and the new benchmark survey and survey tool is now available to our member community.

The benchmark survey has undergone a radical transformation. We’ve developed completely new online software members can use to access the benchmark survey. The old benchmark survey questions have been revisited, revised, and updated, and we’ve added more than 100 new questions to the new survey.

The new online software includes many features aimed at easing the process of completing the survey, including:

• The ability to logon, log off, and log back on again later and resume the survey where you left off.
• Multiple user logins, which allows different people in an organization to complete those portions of the survey with which they are most familiar.
• Built-in “skip logic” automatically “hides” those questions in the survey that are not relevant to the survey respondent based on answers he or she provided to earlier questions.
• Detailed explanations and instructions tied to the questions eliminate different interpretations of the questions, thus ensuring consistency in the answers.
• And much, much more.

The new TSIA benchmark survey covers all major aspects of customer support operations:

• FINANCIALS, including:
  • Service & support revenue and growth, margins, cost center vs. profit center, service revenue allocations, SaaS/Cloud revenue allocations to service, etc.
• SUPPORT CENTER OPERATIONS, including:
  • Quality programs, direct vs. outsourced employee data, call handling statistics, service incident response & resolution times, multiple support channel data (phone, email, web portal, chat, social media, etc), priorities & types of incidents, support rep labor rates, costs per service incident, customer/support rep ratios, much more.
• FIELD SERVICE OPERATIONS, including:
  • Assignent & dispatch methods, response & resolution times, first visit fix rates, call back rates, SLA compliance, remote diagnostics & remote problem resolution data, training, muti-vendor services, field service labor rates, costs per field service incident, more.
• SERVICE SPARE PARTS, including:
  • 1st pass fill rates, backorder rates, call backs due to lack of parts, spares inventory values as a % of revenue, inventory variances to book values, parts used per incident, parts $ per incident, DOA & NTF data, security measures, spares planning methods, outsourcing practices, end-of-life practices, more.
• DEPOT REPAIR, including:
  • Customer repairs, “walk-up” or “drop-off” repairs, field technician repairs, RMA processes, advance exchange practices, “new” vs. “equivalent to new” exchanges, 3rd party repair vendors, turn-around-times, not-economical-to-repair (NER) thresholds, repair technician labor rates, etc.
• ENTITLEMENTS, including:
  • Maintenance contract & warranty data, methods of pricing contracts, list vs. net pricing, contract pricing fees, T&M fees & per incident fees, initial contract attach rates, contract attach rates during/at end of warranty, contract sales compensation practices, warranty credit allocations, much, much more.
• CUSTOMER SATISFACTION, including:
  • Customer survey methods, survey completion stats, customer satisfaction scores, satisfaction data by support channel (phone, email, web portal, chat, etc.), satisfaction by direct employee vs. outsourced employee, customer loyalty data, compensation based on customer satisfaction.

Of course, we also gather DEMOGRAPHIC data in the survey, such as industry and company size. So we can segment the data we gather accordingly for meaningful comparisons among our member companies.

We can honestly boast that no other survey anywhere gathers the breadth and depth of the data the TSIA benchmark survey gathers about service and support operations. If you are a TSIA member, we urge you to complete the new benchmark survey at your earliest possible convenience.

If you are NOT YET a TSIA member, I personally encourage you to check out this valuable association for service and support organizations here. You can also CONTACT ME and I’ll put you in touch with right people who will explain all the benefits and details.

Thanks for your interest – IT MATTERS!

MICHAEL ISRAEL

A couple of months ago Bill Rose, founder of the SSPA (now TSIA) fielded a survey about the backlog status of service incidents. In that survey we also asked a simple question about the cost of a service incident. I can report the data gathered from that baseline question here.

I removed extreme outlier numbers before calculating the averages. For example, one company reported $10,000 per incident. While that may be an accurate cost for that company, it unduly distorts the average. A few other companies recorded service incident costs of $0.00. I don’t know how one has a service incident cost of precisely zero dollars. I removed both of these outliers before calculating the averages. The resulting average costs per service incident reported by the survey respondents are:

• Hardware service providers = $306 per service incident
• Software service providers = $233 per service incident

There’s no further breakdown here, just an initial baseline figure. As I mentioned, our new TSIA member benchmark survey will gather more detailed information about the costs of providing service to your customers.

If you’re a TSIA member, I hope you will complete the new survey as quickly as you are able. If you are not member of the TSIA, I encourage you to consider membership. Our extensive, expanded, and exclusive member benchmark survey captures service and support operational data that is simply not available anywhere else, or from any other organization in the world. Contact Me if you would like to learn more.

Thanks for your interest – IT MATTERS!

MICHAEL ISRAEL

• Kopin, who won the competition, featured a headset that not only includes the usual ear piece and microphone, it also includes a video screen positioned in front of the wearer’s eye. The device is called “Golden-i“. It’s a fully functioning PC that seems well suited for environments where field service technicians need hands free access to exploded view parts diagrams, maintenance manuals, schematics, etc.
• ServiceMax, who positions itself as the only complete field service management solution that is totally “cloud” based, introduced “ServiceMax Chatter“. ServiceMax Chatter enables real-time collaboration among field service technicians, managers, and all others involved in service delivery. ServiceMax even demonstrated how “chatter” received a distress call from a piece of equipment in the field.

But my attempts to describe what these companies demonstrated during the “Service Revolutions” competition didn’t do either of them justice. Thankfully though, their demonstrations (along with those of all 7 other competitors) were recorded. To get the full impact of their demonstrations and of their solutions’ capabilities I encourage you to watch the videos; they’re about 6 to 7 minutes each. The judges comments are also included in each video. To recap from my last blog, the judges were: John Ragsdale, vp of technology research at the TSIA; Dr. James Spohrer, director of IBM University programs; and Geoffrey Moore, managing director at TCG Advisors and well known author of Crossing the Chasm, Inside the Tornado, and several other best selling business books.

• Click here to see the full video of the Kopin presentation, including judges comments,
• and here to watch the complete ServiceMax demonstration along with judges observations.

Thanks for your interest – IT MATTERS!

MICHAEL ISRAEL

Nine companies made it into the finals and were selected to present their “cool” and revolutionary demos to the entire TSW conference audience of approximately 700 people. A panel of three very distinguished judges commented on each solution presentation:

• TSIA’s own VP of Technology Research, John Ragsdale
• Dr. James C. Spohrer:
  Director of IBM University Programs. Dr. Spohrer founded IBM’s first Service Research group in 2003 at the Almaden Research Center with a focus on Service innovations.
• Geoffrey Moore:
  The well known best selling author of Crossing the Chasm, Inside the Tornado, The Gorilla Game, and Living on the Fault Line. His most recent book is Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution. Mr. Moore is a managing director at TCG Advisors.

While the judges had an opportunity to comment “American Idol” style, the audience did the actual voting. Each member of the audience was given a wireless handheld device with which they could cast their vote from 1 (“way cool”) to 5 (“not cool”) for each of the nine demos.

The nine finalists were divided into three categories: “Service Practitioners”, “Start-Ups”, and “Commercially Available Solutions”. A winner was then chosen from each category based upon the audience vote. The winners were:

• Service Practitioners Category – Xerox, for its Maintenance Assistant at the Device demonstration
• Start-Ups Category – eXaudios, for its Next-Generation Voice Analysis solution for call/contact centers
• Commercial Category – Kopin, for its “Hands-Free” Wireless Headsets for mobile computing and communications in industrial environments

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

From a field service perspective, two of the nine demonstrations were particularly striking and relevant to me, so I want to highlight them here:

Kopin’s Hands-Free Wireless Headset

As mentioned, Kopin was the winner in the commercial category. Kopin’s demonstration grabbed the audience’s attention immediately. The presenter didn’t say anything to start; he just donned a headset much like a telephone headset, except this one had a small video screen in front of one of his eyes in addition to the ear piece and the microphone. Then he began speaking simple commands into the microphone. With each command a new screen appeared. Of course we, the audience, were seeing the screens on large displays in the auditorium, but he was seeing them on the small video screen in front of his eye. The screens he pulled up during the demonstration were schematics, parts diagrams, trouble shooting aids, etc. It was immediately apparent to me, and to other field service practitioners I’m sure, how this solution could be applied in the real world to help field service technicians diagnose, isolate, trouble shoot, and resolve problems. Leaving them free to use both hands to work on the device and not have to fumble with keys on a laptop or handheld device. Kopin calls the product “Golden-i”, and the company promotes it as the world’s first mobile computing-communication system to provide a familiar PC experience and “Hands-Free” operation. This is speculation on my part since I don’t know the details, but unit cost may be a consideration for companies with hundreds or thousands of technicians. However, the practical application and uses seem quite apparent.

ServiceMax Chatter

ServiceMax provides what is traditionally known as Service Management Software. You might think of it as CRM specifically designed for Field Service operations. What sets ServiceMax apart from similar vendors is that the company provides a complete suite of field service software functionality on a Software-as-a-Service (SaaS) basis. The solution is based entirely on the Salesforce.com platform.

ServiceMax demonstrated the newest offering in their solution suite: ServiceMax Chatter. Chatter is an instant, real-time collaboration tool that automatically pushes relevant data to the right people. ServiceMax demonstrated the flow of a service work order that was managed automatically by Chatter:

• device installed at a customer location uses phone home technology to send a “product chatter” notifying the vendor that there is an issue
• “chatter map” graphically displays the location of the service call and other service calls, as well as the location of potentially needed technicians and parts
• the work order is then routed through the ServiceMax work force optimization system to assure the most appropriate technician is assigned to the task
• ServiceMax Mobile displays product and service history, parts information, entitlement details, etc. to the technician on his/her mobile device
• the field service technician uses “chatter” to instantly collaborate with other technicians worldwide for technical support or other needs

Although ServiceMax Chatter was not the winner in the commercial category, it did get the most positive comments from the three judges. In fact, if I may paraphrase John Ragsdale (the Simon Cowell of the trio), he said he hadn’t seen anything he considered to be really new from the service management vendors in several years. But he considers this to be pretty revolutionary, I agree. All three of the judges were quite impressed with this demo.

These were the two demonstrations that struck me as the most relevant and potentially appealing for the Field Service community. I gave them both a 1 (one). Companies with field service technicians who need to access and or interact with data while simultaneously working on equipment should examine Kopin’s “Golden-i”. Firms looking to implement a Service Management System, or planning to replace their legacy Service Management System, should add ServiceMax to their list of potential vendors.

Thanks for your interest – IT MATTERS!

MICHAEL ISRAEL

Unfortunately, only 17 companies provided information. Fewer data points than I had hoped to gather; enough to provide some information though. But the data doesn’t identify any clear trend, in fact it seems to point to somewhat of a dichotomy in the way companies allocate service and support revenues internally. As you will see from the below results, service revenue allocation practices are widely diverse.

       Revenue Allocation            Number of Poll Respondents

• 100% to Service/Support                                         8, or 47%
• 90% to Service/10% to Engineering                               zero
• 80% to Service/20% to Engineering                               zero
• 70% to Service/30% to Engineering                               zero
• 60% to Service/40% to Engineering                               zero
• 50% to Service/50% to Engineering                          1, or 5.9%
• 40% to Service/60% to Engineering                          1, or 5.9%
• 30% to Service/70% to Engineering                          1, or 5.9%
• 20% to Service/80% to Engineering                          1, or 5.9%
• 10% to Service/90% to Engineering                          4, or 23.5%
• 100% to Engineering                                               1, or 5.9%

Truth be told I think the 4 responses for 90% of revenue going to engineering probably really belong in the 100% to engineering slot. That’s because I didn’t provide a “100% to engineering” answer option in the actual poll.  How naïve of me.  I didn’t really expect people to respond that engineering would get 100% of the service revenue. Yet one of the first emails I received in response to the poll was exactly that – 100% of the service and support revenue was actually allocated to the engineering organization, NOT to service and support, and this was from a very large software company. I realized then that I had made a mistake by not providing that option as a possible answer in the poll. My suspicion is that everyone who answered “90% to engineering” probably would have answered “100% to engineering” had that option been available to them in the poll.

To summarize the poll responses more broadly:

• 47% allocate all of the service/support revenue to the service organization
• 47% allocate all or the majority of the service/support revenue to the engineering organization
• 6% split the revenue equally

As I said earlier, no definitive trend here, which is not surprising given the relatively small data sample. Even so, the data does highlight a stark contrast in philosophies about how service revenue should be allocated internally.

TSIA members will be interested in knowing that we’ve added this question to our updated benchmark survey. So we’ll gather this data on an ongoing basis going forward from more than 300 member companies. As a result, we’ll have a much more significant pool of data on this topic in the coming months.

Thanks for your interest – IT MATTERS!

MICHAEL ISRAEL

When Technical Account Managers (TAMs) or similar dedicated resources are offered as part of a service portfolio:

• Service Revenues see a 4.5% boost
• Service Margins can increase by as much as 6%

The following efforts and tactics to minimize contract discounts and extend contract durations contracts pay off:

• Requiring an executive in your organization to sign off on maintenance contract discounts can yield a 2.5% revenue bonus
• Multi-year contracts tend to increase margins by nearly 1%

A sales team inside your service organization will be most successful at selling maintenance contracts:

• Sales teams embedded in service organizations discount maintenance contracts 3% to 6% less on average than their counterparts in product sales.

Training the sales team responsible for selling maintenance contracts reaps rewards:

• Training in the value proposition for service and support can increase service revenue by 2.5%
• Sales skills training yields a 4.5% jump in service revenue
• Basic negotiations skills coaching can produce up to a 6% rise in service revenue

The initial maintenance contract “attach rate” can have significant financial implications:

• Firms with initial contract “attach rates” greater than 50% enjoy service revenue contribution as much as 9% higher than average
• and margin contributions up to 2.5% better than average

When customers delay signing maintenance contract renewals it pays – FOR THEM:

• The probability of receiving a discount with a one month signing delay of 11%
• A 1 – 2 month signing delay creates a discount probability of 23%
• A 2 – 3 month signing delay yields a discount probability of 34%
• And a 3 month or longer signing delay earns the customer a whopping 49% probability of getting a discount on their renewed maintenance contract.

The higher the level of the senior service executive in your company, the greater the financial benefit for the organization:

• Firms with VP’s or above leading service operations see 3.3% higher service revenues than average, and 1.1% better margins
• Companies with SVP’s or higher at the helm can see increased revenues in the double digits, and 3% greater margins

Executive compensation based on the financial performance of the service organization will bear fruit:

• Service revenues can increase by 5% to 6% when the top service exec’s comp is based at least in part on the financial performance of the service organization
• 6% to 7% boosts in margin can also accompany this practice

You can access and listen to the complete webcast here. A PDF of the slides presented in the webcast can be downloaded here.

Thanks for your interest – IT MATTERS!

MICHAEL ISRAEL

In this live 60-minute TSIA webcast, we will explore:

• Strategies companies are using to successfully protect, or even improve, these essential maintenance revenue dollars
• How a wide variety of companies are currently managing the pricing, sales, and renewal processes of their maintenance contract business.
• Important insights into actions companies can take to protect, and potentially grow critical maintenance revenues and margins
• And much more …

This webcast will be of particular interest to all those in Enterprise Hardware industries who are feeling the pinch from their customers on maintenance pricing.

This is a public TSIA Field Services webcast, so it is open to all who wish to listen in. The webcast will begin at 9AM Pacific time, Noon Eastern time on Wednesday, April 14. Registration is free; you can quickly sign up for the event here.

I look forward to your participation.

Thanks for your interest – IT MATTERS!

MICHAEL ISRAEL

Does the support organization get the bulk or even all of the maintenance revenue? What percent of the maintenance revenue does the engineering group that is responsible for fixing bugs and creating maintenance updates and releases get? We’d like to know what’s conventional in the industry. Or do practices vary widely?

To help us gather the information we’ve provided an instant poll, which you can see in the panel immediately to the right of this blog page. Please indicate the choice that most closely matches your practice by selecting the appropriate option in the list.

So far we’ve heard revenue allocation ranges that are literally all over the board – what’s your practice?

All input is guaranteed to be strictly confidential, and we’ll aggregate and publish whatever findings we gather in a subsequent blog post a few weeks from now. Give us your input and we’ll share what we learn.

Feel free to contact me if you’d like to discuss further, or learn more about the TSIA.

Thanks for your input and your interest – IT MATTERS!

MICHAEL ISRAEL

We published our landmark Maintenance Pricing Practices report in January. Now I’m happy to announce that this significant research is available to our entire TSIA member community and to the non-member community as well. TSIA Field Service members can download the report here. TSIA Support Services members can access the report here. If you are not a TSIA member but you would like to learn how you can obtain a copy of the report please contact Diane Brundage of the TSIA at diane.brundage @ tsia.com. Or you can drop me a note at michael @ tsia.com and I’ll point you in the right direction.

The Maintenance Pricing Practices report contains valuable data about how companies price, sell, and renew their service and maintenance contracts. It also reveals the strategies many companies are deploying to protect, and even grow, maintenance revenues in the face of increasing customer pressure to lower these prices. Following are highlights of just some of the data and recommendations included in this research:

• Examine the management structure of your service organization. Firms with senior vice presidents (SVPs) or higher leading their maintenance and service activities produce the largest service profit margins, enjoying a potential average boost of more than 4%.
• Seriously consider adding technical account managers (TAMs) or similarly named dedicated resources or services. Companies that offer such dedicated resources achieve up to 12% higher initial service contract attach rates. They also report an average increase in service revenue of up to 10%.
• Give those responsible for selling maintenance and service contracts essential sales and negotiation skills training. Teach them the value proposition of service and support. A well trained sales team can generate up to 4% more service revenue, and nearly that much more service profit margin. They are also adept at selling more premium and longer-term contracts.
• Designate a specialized team to sell service contract renewals. In addition to sales training, teams that specialize in selling service contracts are, on average, more successful at selling contract renewals without concessions or discounts.
• Evaluate adding evergreen or auto-renew clauses to service contracts; evergreen contracts have a high incidence of automatic rollover to a new contract.
• Avoid delays in signing service contract renewals; delays inevitably lead to discounts.
• Focus on converting expiring warranties to service contracts. High warranty to contract conversion rates drive up margins in hardware companies.
• Compensate senior and line management based on service profitability. Such compensation plans positively impact service margins in enterprise hardware.

If you’re a member, please visit our website today and download your free copy. If you’re not a member, contact us to learn how you can obtain a copy – or better yet, become a member and get access to this and all future such research!

Thanks for your interest – IT MATTERS!

MICHAEL ISRAEL