research findings - aberdeen

Next Generation Service and Asset Management

Mark W. VigorosoVice President, Post-Sales Service Research

June 28, 2005

Maximizing Performance with M2M

© 2004 AberdeenGroup • 2

Agenda

• Who is Aberdeen?

• Background on Next Generation Post-Sales Service research

• Market pressures for M2M

• Obstacles to success

• Defining Best-in-Class

• Case studies

• Recommendations for Action

• Q&A


Aberdeen’s Value Chain World View

“Technology-driven Business Value”


Next Generation Post-Sales Service Research

Next Generation Post-Sales Service Benchmark Report

• Surveyed 129 service chain executives

• Key Take-away: Early adopters of M2M-enabled solutions can gain an edge on their competition by deploying these solutions in 2005.


Strategic Service Management Framework

Strategic Service Management is comprised of 4 critical pillars


Machine-to-Machine (M2M) Defined

• An emerging technology that allows original equipment manufacturers (OEMs) to connect their installed base of assets to the Internet and to monitor programmatically the health and performance of these assets in real time.

• In the simplest of terms, M2M represents the zero-latency convergence of the physical supply chain with Web-based enterprise solutions.


Critical Elements of M2M Solutions

• Hardware– i.e. microprocessors and sensors deployed at the

asset level.

• Software– i.e. applications to capture, synthesize, and

operationalize business data.

• Connectivity– i.e. wired or wireless infrastructure to enable

machines to communicate with enterprise systems and with each other.


Market Pressures Driving M2M Adoption

19%18%

50%

21%35%

50%

47%50%

54%

51%56%

63%

0% 10% 20% 30% 40% 50% 60% 70%

% of firms giving high importance

CustomerSLA/Warrantycompliance

Market shift from EAMto OEM-driven service

delivery

Shrinking profitmargins

Faster resolutiontimes expected

Best in Class

Average

Laggard


Strategic Actions Taken by Service Organizations

47%

42%58%

47%

45%58%

35%47%

67%

47%

50%71%

0% 10% 20% 30% 40% 50% 60% 70% 80%


Reduce in-w arrantyrepairs

Link support chain w ithsupply chain

Capitalize on cross- andup-sell opportunities for

service

Build customer retentionprograms

Best in ClassAverageLaggard


Obstacles to Successful M2M Implementations

44%31%

33%

28%44%

38%

40%

42%42%

58%

45%50%

21%39%

58%

0% 10% 20% 30% 40% 50% 60%

% of respondents

Prohibitive costs of M2Mhardw are and softw are

Information security

Users inexperienced w ithtechnology

Poorly defined businessprocesses

Misalignment of businessrequirements w ithtech.capabilities



Defining Best-in-Class M2M Adoption

Alignment of technician capacity, aptitude, and proximity with work order demand occurs in real-time

Alignment of technician capacity, aptitude, and proximity with work order demand occurs on a daily basis

No systematic alignment of technician capacity, aptitude, and proximity with work order demand

Organization

Process Trigger planned and unplanned service orders primarily based on verbal communication from customer

Laggards

Trigger planned service orders primarily based on customer and/or asset history; Trigger unplanned service orders based on verbal communication from customer

Industry Average

Trigger planned and unplanned service orders primarily based on data captured directly from the serviceable asset

Best in Class


Defining Best-in-Class M2M Deployments

Embedded intelligent devices that transmit data on assets’ condition, repair history, etc.

Desktop or handheld Web-based status, tracking, order processing, and communication tools

Paper or spreadsheet-based status and tracking tools

Technology

Customer and asset data captured in real-time from the serviceable asset and stored in centralized database

Customer and asset data recorded by employees after the service order and stored in centralized shared files

Customer and asset data recorded by employees after the service order and stored in decentralized employee files

Knowledge

Best in ClassIndustry AverageLaggards


Defining Best-in-Class M2M Deployments

Field service performance measured at a strategic level – in real-time primarily by customer retention, profitability, and service revenue growth

Field service performance measured at a tactical level – asynchronously primarily by repair cycle time, service response time, and technician productivity

Field service performance not systematically tracked and measured

Performance Measurement

Best in ClassIndustry AverageLaggards


Top Ten Post-Sales Service KPIs

1. Customer satisfaction

2. Profitability

3. Customer retention

4. First-time resolution rate and speed to resolution

5. Service response time

6. Service revenue growth

7. Warranty and SLA compliance

8. Repair cycle time

9. In-warranty repairs

10. Technician productivity (i.e. work orders completed per day)


Best-in-Class Post-Sales Service Performance

139%

16%5%

263%

14% 15%

50%29%

13%

0%

50%

100%

150%

200%

250%

300%

% i

mp

rove

men

t si

nce

la

st t

ech

. in

itia

tive

Daily Work OrdersCompleted

Service Revenues Number of WeeklyEmergency OrdersBest in Class

Average

Laggard



71%

29%

62%

38%

35%

65%

0% 10% 20% 30% 40% 50% 60% 70% 80%

% of respondents

Paper or spreadsheet-based tools

Desktop or handheldWeb-based tools

Embedded devices thattransmit data on assets

Above averageperformance

Average or belowperformance



83%17%

62%38%

43%

57%

0% 20% 40% 60% 80% 100%

% of respondents

Data recorded by employees after serviceorder; stored in decentralized employee files

Data recorded by employees after serviceorder; stored in centralized shared files

Data captured in real-time from asset; storedin centralized database




Case Study: Applied Biosystems

Service profile: Service engineers repair and maintain 180,000 instrument systems installed in nearly 100 countries.

Challenge: Manual and reactive service processes engendered inefficient technician deployments and were degrading equipment uptime and customer satisfaction.

Solution Strategy: Leveraging remote monitoring technologies to enable faster equipment problem diagnosis, failure prediction, notification, and resolution.

Results:

• Immediate reduction of on-site repairs by one-third

• Increase in asset uptime

• Improved overall customer satisfaction

• Competitive differentiation and increased revenues.


Case Study: Bobst GroupService profile: Supplier of machines and services for the folding

carton, corrugated board, and flexible materials industries. The $1.2 billion company employees 5,800 people.

Challenge: Complex machinery at customer sites could be down for hours or days while waiting for the appropriate specialist to arrive. Maximize value of engineering assets without incurring the costs associated with a full-time maintenance staff on site.

Solution Strategy: Leverage M2M solution to build customer retention, up-sell and cross-sell existing customers, and increase service-based revenue growth.

Results:

• Shifted 50% of service calls to its service provider

• Provided value-add services to customers

• Increased equipment uptime, first time resolution rates, and customer satisfaction


Recommendations for Action

• For Laggards Minimize paper- and spreadsheet-based

processes

Measure. Measure. Measure.

It’s early in the M2M game…but don’t forget to get off the bench.



• For Average Companies Maximize the capabilities of your field force,

don’t try to eliminate them

Start with a pilot

Invest in user training and in identifying M2M champions



• For Best-in-Class Companies Re-evaluate existing post-sales service

processes and look for ways to leverage you M2M solutions to drive greater improvements

Consider re-engineering manufacturing processes to include wireless M2M readiness

Quantify the impact on customers’ performance


Research in store for 2005• June: Best Practices in Post-Sales Service

– Case studies of 10 leading field service organizations that are leveraging technology to drive business value.

• July: Post-Sales Service Solution Selection Guide– A tactical framework for evaluating and selecting the

best service technology solution to drive business value

• September: The Emergence of the Chief Service Officer– Hypothesis:


Q&A

Mark W. Vigoroso(617) 854-5278

[email protected]

http://www.aberdeen.com/


Agenda• Who is Aberdeen?

• Background on Next Generation Post-Sales Service research

• Market pressures for M2M-enabled service

• Obstacles to success

• Defining Best-in-Class

• Best Practice case studies

• Recommendations for Action

• Q&A


Aberdeen’s Value Chain World View

“Technology-driven Business Value”


“Strategic Service Management” Framework

Strategic Service Management comprised of 4 pillars


From the halls of Interlog Summer 2005…• “Support is the number one priority over

manufacturing…” – mandate from Raytheon CEO

• “We will exceed our customer expectations with our superior products and services.” – CEO of ON Semiconductor

• Service maturity continuum: Product support Services for profit Services for growth Services leadership – Service Edge Consulting

• “Service is people…” – Bob Lambert, ASM America



• Surveyed 129 service chain executives

• Defining the M2M opportunity in the service chain

– An emerging technology that allows original equipment manufacturers (OEMs) to connect their installed base of assets to the Internet and to monitor programmatically the health and performance of these assets in real time.

– In the simplest of terms, M2M represents the zero-latency convergence of the physical and virtual supply chains.

http://images.google.com/imgres?imgurl=http://www.santarosa.edu/academic/hsp/images/check_guy.gif&imgrefurl=http://www.santarosa.edu/academic/hsp/faq.html&h=171&w=153&sz=4&tbnid=oEb99tA0BYcJ:&tbnh=94&tbnw=84&hl=en&start=10&prev=/images?q=check+mark&hl=en&lr=&rls=GGLD,GGLD:2004-42,GGLD:en



• Key Findings:

– Early adopters of M2M-enabled solutions can gain an edge on their competition by deploying these solutions in 2005.

– KPI impact: service costs, assets’ usable lifecycles, customer retention, revenue growth, competitive advantage.

– M2M solutions will drive value for OEMs, service providers, and end-user enterprises in utilities, telecommunications, healthcare, life sciences, high-technology, manufacturing, printing, and other sectors where efficient post-sales service is critical to business continuity.




60%

20%20%

0%

55%

21%

14%10%

33%

27%

20%20%

26%

32%

39%

3%

0%

10%

20%

30%

40%

50%

60%

% o

f re

spo

nd

ents

Utilities Telecom High Tech Manufacturing

Involved for more than 2 years

Involved for less than 2 years

Deployments planned within 18 months

No completed or planned M2M initiatives



Critical Elements of M2M-Enabled Service Solutions

M2M Technology Enablers Identified by Survey Respondents

M2M Solution Categories

1) Remote machine/equipment diagnostics

Hardware (i.e. microprocessors and sensors deployed at the asset level);

2) Conversion of asset data into actionable knowledge

Software (i.e. applications to capture, synthesize, and

operationalize business data);

3) Remote asset maintenance and repair functionality

Connectivity (i.e. wired or wireless infrastructure to enable machines to

communicate with enterprise systems and with each other).


Pressures Driving M2M Adoption in the Service Chain

19%18%

50%

21%35%

50%

47%50%

54%

51%56%

63%

0% 10% 20% 30% 40% 50% 60% 70%


CustomerSLA/Warrantycompliance

Market shift from EAMto OEM-driven service

delivery

Shrinking profitmargins

Faster resolutiontimes expected

Best in Class

Average

Laggard


Strategic Actions Taken by Service Organizations

47%

42%58%

47%

45%58%

35%47%

67%

47%

50%71%

0% 10% 20% 30% 40% 50% 60% 70% 80%


Reduce in-w arrantyrepairs

Link support chain w ithsupply chain

Capitalize on cross- andup-sell opportunities for

service

Build customer retentionprograms



Obstacles to Successful M2M Implementations

44%31%

33%

28%44%

38%

40%

42%42%

58%

45%50%

21%39%

58%

0% 10% 20% 30% 40% 50% 60%

% of respondents

Prohibitive costs of M2Mhardw are and softw are

Information security

Users inexperienced w ithtechnology

Poorly defined businessprocesses

Misalignment of businessrequirements w ithtech.capabilities



Barriers to Entry

• Costs: Initial instrumentation and development costs can escalate quickly especially for OEMs with large installed bases of legacy assets.

• Device certification requirements: Wireless communication devices must pass muster with various governing bodies such as the Federal Communications Commission (FCC), the PCS-1900 Type Certification Review Board (PTCRB), the Cellular Telecommunications and Internet Association (CTIA), as well as the cellular network operators.

• Multiple communications standards: Global system for mobile communications (GSM); code division multiple access (CDMA). Many companies are waiting for more open communications standards to emerge.


Defining Best-in-Class M2M-Enabled Service

Level of service optimization measured with operational metrics and customer-facing metrics

Embedded intelligent devices that transmit data on assets’ condition, repair history, etc

Customer and asset data captured in real-time from the serviceable asset and stored in centralized database

Vice president or higher-level executive oversees profit-and-loss (P&L) for service operations; ser-vice workers receive compensation incentives for achieving customer satisfaction targets

Trigger planned and unplanned service orders primarily based on data captured directly from the serviceable asset

Perform. Mgt.

TechnologyKnowledge Mgt.

OrganizationProcess

20%

50%

30%

0%

10%

20%

30%

40%

50%

Best in Class Average LaggardBest-in-Class


Case in point: Kodak Versamark

• Services more than 9,000 installations of high-speed, digital color printing solutions

• Measures the quality of customer relationships based on the customers’ overall productivity

• Kodak leverages an M2M solution to locate and remedy equipment problems before they negatively impact the user’s production capabilities

• By analyzing data captured directly from its printing equipment, Kodak can often trigger a corrective action without ever deploying a field technician.


Aftermarket service performance measured at a tactical level --asynchronously primarily by repair cycle time, ser-vice response time, and technician productivity

Desktop or handheld Web-based status, tracking, order-processing, and communication tools

Customer and asset data recorded by employees after the service order and stored in centralized shared files

Director-level executive oversees cost-cutting and productivity targets for service operations; corporate culture is based on customer satis-faction, but there are no customer satisfaction targets or incentives for service workers

Trigger planned service orders primarily based on customer and/or asset history; Trigger unplanned service orders based on verbal communication from customer

Perform. Mgt.TechnologyKnowledge Mgt.

OrganizationProcess

AverageDefining Best-in-Class M2M-Enabled Service


Aftermarket service performance not systematically tracked and measured

Paper or spreadsheet-based status and tracking tools

Customer and asset data recorded by employees after the service order and stored in decentralized employee files

Service is viewed as purely cost, and there is no discrete management or P&L for service operations.

Trigger planned and unplanned service orders primarily based on verbal communication from customer

Perform. Mgt.TechnologyKnowledge Mgt.

OrganizationProcess

Defining Best-in-Class M2M-Enabled Service

Laggard



139%

16%5%

263%

14% 15%

50%29%

13%

0%

50%

100%

150%

200%

250%

300%

% i

mp

rove

men

t si

nce

la

st t

ech

. in

itia

tive

Daily Work OrdersCompleted

Service Revenues Number of WeeklyEmergency OrdersBest in Class

Average

Laggard


Case in point: Siemens Medical Systems

• Siemens has 200,000 medical systems and devices deployed world-wide, 70% of which are under active service contracts.

• Siemens leverage M2M-enabled solutions to spur supplemental revenue streams with value-added services.

• The company leverages the remote system management capabilities of its M2M solution to offer real-time equipment monitoring, over-the-air software distribution and upgrade, and remote repair services


M2M-Enabled Processes = Performance Gains

66%34%

62%

38%

41%

59%

0% 10% 20% 30% 40% 50% 60% 70%

% of respondents

Trigger all service orders based on verbalcommunication from customer

Trigger planned service orders based on assethistory; Trigger unplanned service orders based on

verbal communication from customer

Trigger all service orders based on data capturedfrom the asset




Case in point: EMC

• Information storage company has relied on M2M-enabled service solutions since the early 1990’s to remotely monitor more than 100,000 hardware and software assets.

• Benefits: increased customer satisfaction from improved proactive support procedures, strengthened competitive advantage, and reduced service costs.

• The company continues to add more functionality to further automate the remote asset diagnostic process and to expand value-added services like “self-healing” capabilities.


83%17%

62%38%

43%

57%

0% 20% 40% 60% 80% 100%

% of respondents

Data recorded by employees after serviceorder; stored in decentralized employee files

Data recorded by employees after serviceorder; stored in centralized shared files

Data captured in real-time from asset; storedin centralized database



M2M-Enabled Data Mgt. = Performance Gains


71%

29%

62%

38%

35%

65%

0% 10% 20% 30% 40% 50% 60% 70% 80%

% of respondents

Paper or spreadsheet-based tools

Desktop or handheldWeb-based tools

Embedded devices thattransmit data on assets



M2M-Enabled Technology = Performance Gains


M2M Spurs Next Frontier in Performance Mgt.

• First two tiers of service performance measurement: internal service delivery productivity, and asset-specific SLA compliance

• Next tier: M2M will enable OEMs and service organizations to quantify and communicate the financial impact of an optimally maintained asset on the end-user enterprise, and to better understand how their particular asset interacts with other assets at the end-user enterprise.

• Quantifying this impact on the customer is the key to true best-in-class “service chain” performance optimization, as distinct from internally-focused service delivery optimization.


M2M Spurs Next Frontier in Performance Mgt.

Case in point: BP Solar

• Physical sensors on their photovoltaic arrays capture data about specific weather conditions such as solar irradiance, temperature, and wind speed, and then create virtual “performance” sensors against which thresholds and alarm triggers are applied

• BP Solar customer Whole Foods Market captures and displays its energy-use data in real time via the Web, in the hopes of appealing to its uniquely environment-conscious customer base

– WFM touts its reliance on natural energy sources in its own marketing and customer loyalty and retention programs.


Best Practice Case Study: Applied Biosystems

Service profile: Service engineers repair and maintain 180,000 instrument systems installed in nearly 100 countries.

Challenge: Manual and reactive service processes engendered inefficient technician deployments and were degrading equipment uptime and customer satisfaction.

Solution Strategy: Leverage remote monitoring technologies to enable faster equipment problem diagnosis, failure prediction, notification, and resolution.

Results:

• Immediate reduction of on-site repairs by one-third

• Increase in asset uptime

• Improved overall customer satisfaction

• Competitive differentiation and increased revenues.


Best Practice Case Study: Bobst GroupService profile: Supplier of machines and services for the folding carton,

corrugated board, and flexible materials industries. The $1.2 billion company employees 5,800 people.

Challenge: Complex machinery at customer sites could be down for hours or days while waiting for the appropriate specialist to arrive. Maximize value of engineering assets without incurring the costs associated with a full-time maintenance staff on site.

Solution Strategy: Leverage M2M solution to build customer retention, up-sell and cross-sell existing customers, and increase service-based revenue growth.

Results:

• Shifted 50% of service calls to its service provider

• Provided value-add services to customers

• Increased equipment uptime, first time resolution rates, and customer satisfaction



• Evaluating/Selecting an M2M Solution – Answer the question: Does M2M fit your service

environment?• Criticality of serviceable assets• Value of the serviceable assets• Frequency and variability of service requirements

– Why not wires?– M2M-readiness of your assets– Single point of solution accountability– Solution providers’ proven deployment track

record in your industry



• For Laggards Minimize paper- and spreadsheet-based

processes

Measure. Measure. Measure.

It’s early in the M2M game…but don’t forget to get off the bench.



• For Average Companies Maximize the capabilities of your field force,

don’t try to eliminate them

Start with a pilot

Invest in user training and in identifying M2M champions



• For Best-in-Class Companies Re-evaluate existing post-sales service

processes and look for ways to leverage M2M solutions to drive process improvements

Consider re-engineering manufacturing processes to include wireless M2M readiness

Quantify the impact on customers’ performance


Research in store for 2005• This week: Best Practices in Post-Sales Service

– Case studies of 10 leading service organizations that are leveraging technology to drive business value.

• July: Post-Sales Service Solution Selection Guide– A tactical framework for evaluating and selecting the

best service technology solution to drive business value

• September: The Emergence of the Chief Service Officer– Hypothesis: Aftermarket service is emerging as a key

driver of profits and competitive advantage and must be managed strategically by senior executives.


Q&A

Mark W. Vigoroso(617) 854-5278

[email protected]

http://www.aberdeen.com/

research findings - aberdeen

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