I was part of a panel that discussed growing service at the ESX Conference. Many of the firms attending were looking to expand their brand by adding an additional product line. The primary justification for adapting their business model is the lucrative service, RMR, available for this type of equipment once installed. This must be the case as profit margins, on the installation of the systems, was not very attractive. Additionally a significant investment would be required in design and engineering skills and a fairly steep learning curve. Everyone seemed to be in agreement that it was worth making the investment.
As the only service marketing person on the panel I made a point I find myself almost always addressing in my talks, ‘why do you need to install systems?” If the goal is the service revenue than maybe your best strategy is to focus on building the skills to service systems. Let others slug it out in the competitive installation arena. Obviously if you’re a manufacturer this may not be the solution. In the case of firms that distribute others products it’s a very viable solution. Not only do you get to reap the high margin service, but you also can focus your company resources on marketing and delivering service. Even the best firms struggle to operate their installation and service businesses at peak performance. All too often the installation business demands outweigh their service department’s needs. That’s another reason why firms that focus on service delivery can out maneuver installing firms. They are not chasing or involved in completing installations.
A similar discussion involves firms that want to expand their brand by servicing others equipment. In this case it does apply to manufacturers. Having the expertise in one brand is a huge benefit when looking at other manufacturer’s equipment. In most cases it enhances a single source offering that client’s desire and can lock out competition for future equipment purchases. This is not a chicken or the egg discussion. It’s not the chicken or the egg that came first…it’s the service.