In a world where embedded “intelligence” is permeating every facet of the global economy, manufacturers are uncovering unprecedented business opportunities in the products they develop. Similar to Henry Ford’s revolutionary approach to the manufacturing process, the Internet couched in the IoT (Internet of Things), is transforming how the delivery and servicing of products are changing the way product-centric organizations view their business.
In a recent article by the Harvard Business Review, “Smart Services” leaders delivered by traditional manufacturers are generating more than 50% of their revenues and 60% of their margin contributions from services (in opposition to product sales). These are incredible results for the commodity dependence reality of these organizations. Where at one time service contracts were viewed peripheral to manufacturers, today they have become core business opportunities to help drive the necessary profit margins seen less and less in the products they sell.
The embedded software available in products as simple as the toaster to the highly complex MRI machine, has introduced a newly interconnected economy that leverages the power of the internet feeding critical information about these products back to its creators. In turn, manufacturers are using this valuable and timely information to create smart services to effectively communicate back to their consumers in growing areas of preventive maintenance, remote servicing and product upgrades. This is especially true for highly complex products that require high value activities to deliver on their promise. Take the MRI machine example. It’s a highly complex product by nature that requires a whole slew of service opportunities from installation and configuration, to training and servicing. Incorporating a feedback loop between these machines in the field and the manufacturers, empowers companies to deliver higher quality services and uncover other business opportunities for upgrades with minimal costs and human intervention.
So, what does this mean for the Professional Services Automation (PSA) market? Where at one time the majority of opportunities sat with professional services organizations, now with the rise of the IoT in the products we consume, embedded service organizations are leading the pack in the adoption of PSA software. In fact, in a recent 2017 SPI Professional Services Benchmark Report, embedded services organizations (at 86.8% adoption rate) were 10.5% more likely to use Commercial PSA solutions over Independent professional services organizations (at 76.3% adoption rate).
To learn more about the results of the SPI Research on the PSA Marketplace, feel free to view the recording of a recent webinar covering this topic.
About the Author: Neil Stolovitsky has over 16 years of IT experience with end-user, consulting, and vendor organizations, along with extensive expertise in business development, software selection, and channel strategies. He has published numerous white papers and articles covering Professional Services Automation, Enterprise Resource Planning (ERP) for service industries, Project Portfolio Management, IT Governance, and New Product Development to a global audience. Neil currently holds the position of Senior Solution Consultant with Upland Software.