The Path to Aftermarket Service Success

Feb. 14, 2019
Software may be the key to unlocking greater profits for security integrators

The race is on for security integrators to realize revenue growth in aftermarket service, and software that enables digital service contract management may be a critical factor in balancing competitive contract pricing, profitability and customer satisfaction.

The specialty trade contracting sector has seen revenue growth of 4.4 percent in the last five years, according to business research firm IBISWorld; however, with forecasts for 2018-2023 anticipating lower revenue growth of 2.5 percent, it is important that contractors look to make their operations as profitable as possible.

In response to this, integrators who sell, install and support security and fire protection systems have begun to offer advanced aftermarket services to their customers. This is supported by research firm IHS, which finds that even as far back as 2015, service/maintenance made up 24 percent of worldwide security integrator revenues and was the fastest growing segment in the security integrator sector (read more at www.securityinfowatch.com/12246667).

IFS, a company that develops enterprise software for service-focused operations, as well as manufacturers and distributors, conducted a study that suggests there are significant gaps in how well contractors in HVAC, electrical, plumbing, security, roofing and other trades can execute on contracts for aftermarket service.

Among the study sample, 22 percent were involved in security and fire protection/sprinkler system contracting; of those, 35 percent faced gaps when it came to the ability to handle customer-specific contracts with unique rather than standard payment terms or service level agreements.

Tom DeVroy, Senior Product Evangelist for IFS, says the task of planning for services required during the lifecycle of a product today should be largely automated. “Companies should be able to use field service software to automatically generate all planned maintenance as a result of a contract,” he says. “This should include specific model or equipment-based tasking, including compliance or inspection activity, materials usage, part usage, and performance standards.”

Empowering Subcontractors

Technology barriers also prevent full realization of revenue from field service – in fact, just 15 percent of technologies empower field technicians to upsell or sell new service contracts, and only 25 percent enable them to issue new estimates.

While 89 percent of trade contractors in the study indicated that they use subcontractors, a little more than 10 percent give their subcontractors a mobile app to tie them seamlessly into their field service management software and value chain.

A progressive approach to enterprise technology is crucial. Company executives who said their enterprise software does a good job of preparing them for digital service contract administration indicated they were much better prepared than those who indicated their software prepared them poorly.

According to DeVroy, digital technologies will replace cumbersome methods of subcontractor communications going forward. “Companies using subcontractors need to manage skills assessment, control the bid process, work authorization, subcontractor performance, invoice approval and not-to-exceed control,” he says. “Ideally, they want subcontractor invoice approval to be checked against subcontractor reimbursement rates, original order authorization, part reimbursements, and returns managed when appropriate.”

Warranties and Reverse Logistics

Among respondents selling and installing security and fire protection systems, 42 percent faced software gaps when it came to warranty repair work – saying their software supported this type of work “not very well” or that it “was an impediment.” Almost half, 48 percent, said their software performed “not very well” or was an impediment when it came to handling reverse logistics – the return of parts or materials from the field.

Service contract administration becomes even more challenging when the terms and requirements of a contract are specific to each customer and subject to negotiation. Across all respondents, 30 percent of those who indicated their software did not adequately prepare them for digital service contract administration were offering customer-specific contracts. These results suggest that a strong digital strategy can enable a company to adapt to new market and customer demands while profitably delivering aftermarket services.

Clear communication – beginning with the task of defining processes and ensuring the correct business process is followed, perhaps with configured workflow – is difficult without effective enterprise reverse logistics and repair software.

Going Forward: Artificial Intelligence and 3D Printing

While companies today work on aftermarket customer satisfaction and revenue, more progressive technology is coming. The study found that 25 percent of respondents predicted they will have IoT sensors that track component-level performance of products at customer sites in the field within the next five years, and that those components will be able to automatically dispatch a technician when needed.

Looking 10 years into the future, 44 percent of respondents said they expect to have artificial intelligence in place for predictive maintenance and diagnostics. Perhaps more surprisingly, almost 33 percent said they expect to have 3D printers on technician vehicles to manufacture new parts on-site when needed, expediting the repair and logistics process.

Another 30 percent predicted that technicians will wear augmented reality glasses to give them on-site instructions on repair and service processes.

Charles Rathmann is Senior Marketing Communications Analyst for software provider IFS, a company that develops enterprise software for service-focused operations, as well as manufacturers and distributors. Learn more at www.ifsworld.com.