Building New Revenue Streams Through
Improved Service Contract Management

By Scott Herron, CEO, MaintenanceNet, Inc.

Beyond providing substantial repeatable revenue streams, maintenance service contracts also play an integral role in connecting technology 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. Yet, whether sold directly or through an indirect sales channel, maintenance services are seldom adequately addressed by today’s technology manufacturers. There are several reasons why, including outdated business processes as well as incomplete or unavailable service contract data.

Archaic business processes impact service contract management more than any other factor today. In fact, many of the world’s largest manufacturing organizations, as well as their partners throughout the supply chain, still rely upon an assortment of ineffective tools – some as basic as Excel spreadsheets. These tools, which were not built from the ground up for service contract management, fail to take into account the various data sources required to appropriately track service lifecycles. Without knowing which customers have purchased service contracts, when those contracts are up for renewal and which customers possess uncovered assets (products not protected by service agreements), manufacturers don’t have a proper handle on the service needs that exist within their customer bases. As a result, they are leaving substantial service dollars on the table.

The data manufacturers need, however, is not easy to obtain. It exists not only within the walls of their own organizations, but within partners’ organizations as well. In addition, it resides in disparate sales out systems; in point of sales (POS) systems; in Oracle, SAP and Salesforce.com ERP and CRM platforms: in legacy and custom-coded solutions; and even Excel spreadsheets. Most companies do not have the resources or expertise to properly aggregate data from multiple sources, not to mention from distributors and value-added resellers (VARs). Or, they don’t have the business intelligence to accurately track their service attach rates, renewal rates; and most importantly, registration rates.

Other manufacturers are simply in the dark about the state of their service sales businesses. For example, it’s commonplace for vendors to measure service sales based on service revenue alone, without taking into account service renewal rates, attach rates, and other data that reveal complete visibility into product sales and the service contracts associated with those products. In other words, a company may have $10 million in maintenance service revenues, but that $10 million may only represent 50% of the actionable opportunity available.

Implementing an Effective Service Contract Management Program
Today’s organizations rely upon literally thousands of technology products to keep their operations running smoothly. In addition, with technology purchases becoming more commoditized, staying on top of service contract lifecycles is more complex than ever before. Since contract expirations can take place on any given day, and coverage options can change as time passes, it takes more than a simple spreadsheet to get the job done.

Fortunately, new technology platforms designed specifically for service contract management are emerging to support manufacturers and their channel partners as well as end user organizations. These platforms embrace Software as a Service (SaaS) paradigms and not only provide centralized, on-demand access, but also represent an opportunity for a leveraged investment that extends across the entire industry. They are based upon four key characteristics that are necessary for successful service contract management: a dynamic data environment, ubiquitous availability, multi-party access and performance measurement capabilities. If your solution contains each of these characteristics, described in detail below, then your organization is well on its way to enjoying substantial increases in service revenues, not to mention improved customer relations.

• Dynamic Data Environment
Most existing service contract solutions rely upon only one primary source of data. This source, commonly known as the “Entitlement System,” is the data structure for all contracts that have been sold and registered. On average, however, only 60 percent of service contracts sold get registered with the manufacturer. In addition, those contracts that are registered often contain data that is inaccurate. When a service product is not properly registered, it is not entered into the manufacturer’s entitlement system, and therefore, no record of the contract exists. As a result, the manufacturer or VAR cannot effectively provide service, much less track expiration notifications. This results in lost service renewal opportunities as well as the risk of non-coverage for the end user.

Clearly, relying upon registration data alone does not lead to an effective service management program. If manufacturers are basing their renewal sales for expiring maintenance contracts on their entitlement systems, then they are at best accessing only a portion of the total renewal opportunity.

To further complicate the situation, all data becomes stale or in-actionable over time. Unfortunately, most service contract management solutions are referred to as “static” because the customers and channel partners have no simple way to update information. As a result, updates commonly known in the business as “Moves, Adds and Changes” (MACs) are often left out of the system.

The most effective new systems address these challenges by featuring dynamic data environments that make updates easier to implement while offering built-in mechanisms for leveraging multiple data sources across the supply chain. The key to the success of these systems is comprehensive data exchange, meaning that data must be pulled from multiple channel partner systems in order to uncover the total service sales opportunity that exists for the manufacturer. This process involves extensive data mining and aggregation as specialists work to create a single system of record. As data integrity is achieved, the intelligence can be primed for whatever the manufacturer needs to do, whether it is improving registration rates, creating a service renewal program, or identifying unattached assets.

As time goes on, maintaining data integrity is extremely important to the continued success of a service contract management system. Simple-to-use portal interfaces can facilitate and automate updates to the system, and also allow multi-party interaction for managing each asset, service contract and registration as a transactional, dynamic property. By ensuring that data integrity remains in tact throughout contract lifecycles, these service contract management systems are giving manufacturers all of the up-to-date intelligence they need to keep pace with the ongoing requirements of their customer bases.

• Ubiquitous System
To serve as an effective tool, a service contract management system must also be ubiquitous: it must be easily accessible and available, serving as a single source of intelligence for the entire supply and demand chain. Portal-based systems offer the ideal platform for ubiquity. They are accessible anywhere and anytime, allowing contract management on an as-needed basis. Further, because portals are hosted solutions, complete with implementation services and ongoing support, activation requires only minimal IT engagement and resources. Once populated with high-quality data that reveals upcoming contract expirations, unattached assets, product registrations and other important factors, these portals become extremely powerful, providing sales organizations and channel partners with a steady stream of actionable opportunities.

• Supply Chain Access
Multi-party access is key to the success of a service contract management system. Access rights and privileges in a portal-based system can be granted at varying levels and with a range of capabilities tailored to each party. End customers, for example, can take advantage of a portal to balance their own internal systems against those of their suppliers to guard against inaccuracies or misinterpretations of service entitlements. Beyond arming all parties across the supply and demand chain with insight into their entire array of maintenance contracts, portal systems also can be configured to provide proactive email notifications in advance of expiring services, or to deliver notice of other factors affecting service agreements. They can even be built to incorporate market development funds into the platform, so that VARs can clearly understand the potential value of their service sales efforts.

• Performance Measurement
For the most effective service contract management, manufacturers must be able to gauge their success with customers and with channel partners alike at a detailed level. SaaS platforms allow manufacturers to use built-in analytics to measure the effectiveness of their multi-tiered value chain on everything from incentive programs, to renewal rates and attach rates, to specific VAR registration rates. This new visibility can help manufacturers and their channel partners engage with a clear understanding of partner performance and the revenue impact their participation (or lack thereof) has on the service revenue for an organization.

Conclusion
As awareness of the importance of maintenance contract management has increased, manufacturers are already taking steps toward improvement by embracing emerging new technologies and business processes. In fact, several leading Fortune 10 technology companies, as well as the world’s leading technology distributors, have already implemented comprehensive, data integrity-driven service contract management initiatives that reveal the total service sales opportunity available to them. By making business intelligence available across the supply and demand chain, these companies have solidified relationships with their customers and partners, while literally doubling their renewal opportunities and achieving other measures of service sales success that they never before thought were possible.

About the Author
Scott Herron is CEO and co-founder of MaintenanceNet, Inc. (www.maintenancenet.com), a leading provider of maintenance contract management services.