How IT can push cost savings boundaries

Gartner has predicted the service industry will have to save 30% on costs to survive, so what technology should IT directors be...

Gartner has predicted the service industry will have to save 30% on costs to survive, so what technology should IT directors be looking at to make this a reality?

The global service industry has reached a critical juncture. Research by analyst firm Gartner shows that increasing customer defections and limitations in the implementation of technology are putting pressure on companies to reduce service costs by 30% during the next five years just to remain competitive.

With the continued economic uncertainty, the need to cut service costs while improving service quality is a major challenge for most organisations - not just the utilities.

"For service industries, customer experience is the only thing differentiating you from your competitors," said Alex Bona, research director at Gartner.

"There is the potential to save up to 30% on costs if you can identify the key processes that actually touch your customers - the issues customers care about. These processes then need to be optimised, not just from an internal efficiency perspective but also from a customer effectiveness perspective."

Service industries have certainly not had it easy in recent years. The effects of deregulation, consequent high customer churn, the increasing commoditisation of services, the economic slowdown and budget cuts have all taken their toll. So what technology can IT managers harness to help trim service costs?

Customer relationship management software is unlikely to save the day as it has largely failed to deliver on its promise of business improvement. Most implementations are sales and marketing automation by another name, and they neglect to address the key issues of people and process change management.

Instead, Gartner said service companies should be looking at the emerging market of integrated field service process automation and service manage-ment processes. It predicted that this area will be to this decade what CRM was to the last, but that there will be a far happier outcome.

Currently, more than 90% of businesses deploy piecemeal and home-grown field service systems that are poorly integrated, do not allow for process flows and cause businesses to squander opportunities to improve customer loyalty and capture critical customer information, said Gartner. This is where a new approach could create the potential to save 30% on costs.

Field service process automation and SMP embrace a whole raft of established technologies, including workforce optimisation and scheduling, contract and warranty management, depot repair and overhaul, supply chain management, product design, engineering and financial planning.

As a result, users are as yet unlikely to find one supplier offering more than 30% of a total solution, said Bona, although it is being worked on by established management software suite players including SAP, Oracle and Peoplesoft.

Finding a supplier capable of delivering field service automation and SMP in one package is not the only challenge. Not everybody is convinced the technology is able to deliver a 30% cost saving. David Roberts, chief executive of corporate IT forum Tif, is sceptical that the UK's service industries have this much slack.

"I was not aware the sector was on a steep downward spiral," he said. "I accept there is probably room for considerable improvement in terms of the use of software and IT services to support service delivery functions, but I do not believe companies could save 30% on their costs by investing as yet untold millions in relatively untried processes and software."

Roberts advised the service industries to ask their suppliers some important questions before investing in SMP software.

"Ask about the comparisons between the proposed new management model and some of the historical theories, for example, CRM and enterprise resource management, and how the new model is going to be validated.

"How can they be certain the software can deliver cost savings, and what would be the cost and effort needed, if indeed such savings are required? I would be very cautious in terms of estimates about the financial and resource commitments necessary to make such changes."

Gartner has also advised the service industries not to assume that software alone can deliver a 30% cost saving.

Network service provider BT Wholesale had to address cultural barriers when it first introduced field service process automation and SMP some 10 years ago.

The homegrown technology eventually evolved to automate the allocation of 150,000 tasks for 20,000 field engineers every day, scheduling the right staff to the right place at the right time.

"The technology works but you need to address its cultural impact," said Phil Dance, chief information officer at BT Wholesale. "For us, moving from having a human being dispatching staff to a piece of software telling them what to do required a big cultural change programme. The engineering workforce needed to see the system was meant to help them and improve customer service, rather than acting as Big Brother."

BT Wholesale said it is saving £100m a year, has improved productivity by 30% and has managed to reduce the number of its fieldforce control sites from more than 100 to three.

Implementing field service process automation and SMP has also enabled BT Wholesale to introduce new service offerings based on improved speeds of provision and repair.

The software, called Taskforce, is now being marketed by BT Brightstar incubator spin-off a.p.solve, which recently signed up BT rival NTL as a new customer.

Keith Attfield, IT director at Vivendi Water Systems, a specialist in water treatment, believes IT managers are increasingly open to such changes in their search for smarter ways of operating and saving money, but that they are often sidetracked by over-sold technologies.

"The answer is not to follow the latest acronym but to go back to basics and look at the way you do business, even simple things such as why you cannot supply invoices the way you would prefer," said Attfield. "That makes people focus on how business processes can be improved, and from that you can look for a technical solution."

The next couple of years will test whether Gartner's prognosis for the future of the UK's service industries is accurate or not. In the meantime, expect to see suppliers beginning to offer fieldforce process automation and SMP software promising to set a new standard in customer service.

Summary

  • Companies need to reduce service costs by 30% over the next five years to remain competitive, according to Gartner
  • Currently, more than 90% of businesses deploy piecemeal and home-grown field service systems which are poorly integrated, and squander opportunities to improve customer loyalty and capture critical customer information
  • Field service process automation and SMP technologies include workforce optimisation and scheduling, contract and warranty management, depot repair and overhaul and supply chain management
  • Users are unlikely to find one supplier that can offer more than 30% of a total solution.

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