In last week’s post, Service & Support Management Has Earned a Seat at the Executive Table, I highlighted some findings from our recent Maintenance Pricing Practices survey. Those highlights underscore the importance of placing a senior executive in charge of maintenance and support operations. The data from this broad based survey clearly indicate that profit margins from service operations benefit when a senior vice president or higher level exec is in charge of service.
A few more tidbits of information from the survey and the subsequent in-depth report.
- Compensation practices matter. When service management compensation is based at least in part on service profitability, average profit margins on service revenues can rise by an average of 2.7%.
- Training matters. When those responsible for selling service contracts receive training in these three fundamental areas: negotiation skills, sales training, and service & support value proposition, average service revenues can rise by as much as 3.5% and average margins can improve by more than 2%.
- Enterprise hardware companies are more likely to consider service operations a profit center than are enterprise software companies. More than three-quarters of all enterprise hardware companies claim to operate service as a profit center. Only about half of software companies see service and support as a profit center, which is somewhat surprising given the high margins service yields for those software companies that do operate service as a profit center. This might have something to do with the fact that many software companies now embed support as part of their Software-as-a-Service (SaaS) or cloud computing solutions and don’t charge customers separately for support under their subscription or edition agreements. TSIA will gather more information about this in our new benchmark survey.
The full report, Maintenance Pricing Practices, is available to TSIA members and is available to non-members for a fee.
Thanks for your interest – IT MATTERS!
Michael Israel
Tags: Hardware Service, Maintenance Revenue, Service Margins, Software Support