Service firms must cut costs by 30% to survive

Service sector companies must cut their costs by 30% during the next five years just to remain competitive, analyst firm Gartner...

Service sector companies must cut their costs by 30% during the next five years just to remain competitive, analyst firm Gartner has warned.

The cuts must go hand in hand with improved customer satisfaction and retention, which is emerging as the sole differentiator between organisations providing services.

Deregulation, high customer churn, increasing commoditisation of services, economic slowdown and consequent budget cuts are all creating a critical situation in the service sector, Gartner said.

The failure of sales and marketing automation to deliver on its promise of business improvement to service organisations has also left its mark.

Alexa Bona, research director at Gartner, said last week, "The service industry has reached a critical juncture but companies could remain competitive through integrated field service process automation and service management processes. The emerging market will be to this decade what customer relationship management was to the last.

"Companies neglecting this area will find themselves in an increasingly commoditised situation where they will fail to differentiate," he said.

Field service process automation and service management processes embrace a whole raft of technologies including workforce scheduling, supply chain management and financial planning. As yet, users are unlikely to find one supplier offering more than 30% of a total solution, said Bona.

David Roberts, chief executive of the Corporate IT Forum Tif, said companies should carefully evaluate how emerging software will support Gartner's predictions. "What cost and effort is needed to make these savings, if indeed such savings are required? I would be very cautious about the financial and resource commitments necessary to make such changes," he said.

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