Technology businesses give insight into the future of services

by NIck Frank on March 26, 2011

If you want to get a feel of where Services are going the product world, you could do worse than look at Technology and software sector for clues. These are the businesses that have grown exponentially through product innovation that has helped drive the eye watering development of technology in our societies.

Typically they started with a strong product focus in either software, hardware or both that propelled them into market leading positions. As new entrant gained traction in the market, these business invested more and more in features to go faster, longer, more integrated and easier to use than their competitors. But how did the user’s cope in this ever more complicated world. The TSIA observed that a consumption gap started to open and widen. This is the gap between the potential value a product can offer a customer, and the actual value the customer gets from the product in its very day use.

This consumption gap spawned the development of professional services, such as consulting and project management, all aimed at helping the client get the most from their investment. Look no further at how the revenue mix for companies such as Oracle have swung towards services, or the rise of IBMs consulting business.

But what does this tell us about other industrial sectors? With the increasing digitalisation of industrial products, the potential to create new features through clever controls and operator interfaces is exploding. For example remote diagnostics appears to be offered by many equipment manufacturers, but do their customers get the true value out of the product. The answer we have found, is that increasingly they do not. Faced with more complex products, and a trend to outsource fixed costs such as maintenance, it becomes very difficult for a manufacturing business to maintain the performance levels of their equipment over time. Hence the great opportunity for OEM suppliers to step in with maintenance contracts, engineering consulting and other value added services.  A huge revenue and profit opportunity awaits those business that can take a leaf out of the technology book, and ensure their customers get the very most out of the products they supply.

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