Background

To a large extent, service interactions determine how customers feel about a company and its products. When executed effectively, service operations help strengthen brand affinity, open the door for selling aftermarket products and encourage satisfied customers to promote the brand. But when service operations fail, they take down in their wake a multitude of opportunities for aftermarket sales, upselling and new customer wins. As manufacturers see their margins on product sales eroding, they look to their service organizations to tap new revenue streams - and the opportunities are immense:

• Service margins in certain industries can be as high as 30 to 40 percent, often surpassing margins for finished products.
• U.S. Department of Commerce figures suggest that consumers and businesses worldwide spend more than $1.5 trillion each year on spare parts, maintenance and repair services.

Asset-intensive industries are facing growing pressure to increase the value received from their capital investments in assets such as production lines, vehicle fleets, IT resources, and telecommunications and utilities grids.

• In facility management, discrete manufacturing, utilities and other capital-intensive industries, companies' maintenance costs - which can represent 20 to 40 percent of operating costsi - are estimated to have risen an average of 10 to 15 percent per year since 1979.
• As companies strive to meet tougher performance, production and regulatory requirements, estimates suggest that up to one-third of the nearly $1 trillion that companies spend annually for maintenance may actually be unnecessary.

Service and asset management thus represents one of the great frontiers for business growth and productivity enhancement. From original equipment manufacturers (OEM) and third-party service providers to asset owners and operators, companies across diverse industries are seeking greater value and performance from enterprise assets and service operations - or are adapting their business models to make after-sales services an integral line of business, creating a competitive differentiator that helps strengthen customer loyalty and drive sustainable growth.

© SAP AG 2007. All rights reserved.