Service Contract Revenue Generators are Often Overlooked

Service contracts, which have been overlooked historically by most manufacturers, are now being viewed as important new revenue generators. Beyond providing substantial repeatable revenue streams, maintenance service contracts also play an integral role in connecting manufacturers with their channel partners and end customers. They yield improved brand loyalty and better communication with customers, and also provide a means for channel partners to boost sales while strengthening their allegiance to a manufacturer.

Unfortunately, the process of uncovering opportunities required for effective maintenance contract management is highly complex. Service contracts are often sold through a two-tier channel consisting of a distributor and a VAR, making sales processes complicated, leading to missing links in the collection of customer contract data. Challenges arise because adequate systems are not in place for properly registering or effectively tracking the sale of maintenance service contracts. In addition, data is stored in disparate systems, requiring time-intensive mining and management–an undertaking that most IT departments would rather avoid. Compounding the issue, distributors work with hundreds or even thousands of resellers, who in turn may also represent numerous manufacturers, each with individual business rules and methods for product registration. Consequently, the quality of registration and service data is often compromised which not only leads to delays in end-user service entitlements, but also hinders service sales and service renewal efforts. The result is lost sales and an unnecessary strain on end-user and partner relations.

For the reasons outlined above, it’s apparent that many companies have insufficient visibility into their maintenance annuity revenue streams. It’s not that the data doesn’t exist; it’s that there are far too few effective tools and processes in place to allow the existing data to be leveraged. Most organizations have at least five years’ worth of asset and maintenance data that they can turn into major revenue streams today. Because these same companies have been so focused on identifying new customers, they have neglected this opportunity. Or, they simply have lacked the internal capability to turn that data into information that they can fully benefit from.

Outsourcing the management of this data is one alternative that can provide the benefit of outside expertise in data management and data exchange, as well as reduced internal costs. Regardless of whether this task is performed by external or internal resources, the solution to uncovering the hidden service revenue gems is finding a way to integrate data from multiple applications and behind multiple databases, and then creating a single system of record by which the data becomes information. As a result, the information becomes intelligence. This uncovered intelligence, when presented effectively, creates any number of revenue opportunities, including service renewals, uncovered or unregistered assets, and product refresh or end-of-life opportunities.

To get a better handle on maintenance contract opportunities, every company should focus on improving its product registration rates. Successful registration triggers contracted maintenance obligations and establishes a valid record of maintenance activity. In addition, registration information provides ongoing refresh opportunities as manufacturers and their channel partners look for ways to generate incremental revenue from their existing customer base.

Many manufacturers are teaming up with their distributors and VARs to create systems for better managing maintenance contract data. In the technology sector, distributors such as Ingram Micro, Avnet, and SYNNEX have already initiated service data management solutions as well as Web portals like Managed Maintenance’sONEview” that enables Service Providers and VARs to easily identify and capitalize on service sales opportunities. In many cases, end customers can access ONEview, giving them the capability to stay on top of service contract expirations and other benefits and resources available to them.

In the constant battle to gain new customers, companies often neglect to understand the value that existing customer relationships hold. Indeed, industry analysts suggest that 50 percent or more of the potential revenue from service contracts is not being captured, resulting in billions of dollars in lost revenues for manufacturers, distributors, and VARs alike. If your company is missing out on this tremendous opportunity to better serve its customers, then it may be time to uncover service revenue opportunities that exist today in many different forms or places within your organization. Whether you bring in a service provider to identify and organize your maintenance agreement data, or attempt to dig up these opportunities yourself, the information is there, and all you need to do is find a way to leverage opportunities.

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