Posted April 7, 2020

Exclusive: Technology to take the lead in field service for the decade ahead

Transformational technologies are creating entire new revenue models that give field service organizations longevity, better customer relationships and greater profits.

By Sarah Nicastro, Field Service Evangelist, IFS

Field service has evolved enormously in recent years and with customer expectations rising and technology advancing, the industry will continue to grow exponentially.

Twenty years ago, when field service was in its infancy, the most common services focused on break-fix repair. Now the industry is heading towards long-term, contractual arrangements—more satisfying for the customer and more lucrative for the service provider!

Transformational technologies are creating opportunities for entire new revenue models that give field service organizations longevity as well as better customer relationships—all while generating more value. In particular I see four trends that will influence the industry in the coming years. Here’s how organizations will need to adapt to them.

Prediction one – Selling outcome-based services becomes even more attractive

For decades, product-centric businesses have been transitioning towards servitizing what they sell. First it was the addition of a warranty and the availability of after-market parts. Servitization then progressed to reactive field service or depot repair. Data suggests that as early as 2018, almost two-thirds of manufacturers were already pursuing some form of aftermarket revenue. But manufacturers are now adopting more advanced forms of aftermarket service, with 16 percent of respondents offering maintenance contracts with specific service-level agreements (SLAs).

Expect annual maintenance contracts to become more widespread across the industry as more companies move towards new service-based models. These contracts are not only attractive to field service organizations because they provide predictable revenue and demand, but also because of the high margins they deliver.

It is notable that customers today not only demand a better service experience, but a holistic outcome, too. They expect to be left feeling positive as well as have their specific issue remedied. Technology will play a key role in implementing the change in how manufacturing businesses operate. I predict that while 16 percent of manufacturers were involved in service contracting in 2018, that number will reach 25 to 30 percent in 2020.

The right metrics minimize risks

Sarah Nicastro, Field Service Evangelist, IFSIn 2018, only four percent of manufacturers were fully servitized, but a move towards servitization has the potential to deliver value-added revenue on top of product sales. In some cases, where it is attractive to the consumer, a product may be completely servitized, and the end user pays for metered usage or other metric captured in real time.

Servitization is a good way to buy a product for customers who want to shift the risk back onto vendors. But for vendors, actually realizing a profit on these contracts poses some significant management and enterprise software problems. To mitigate the risk of organizations selling a service agreement that could lose them money, executives will need to make sure they have adequate what-if-scenario planning capabilities to enable them to deliver quotes that are competitive with minimal risk.

The right data becomes a strategic tool

Companies can turn their data into a strategic tool that facilitates service sales while improving the customer experience. For this shift to be successful, some foundational technologies must be put in place. Outcomes-based service operations rely on the foundation of a service management platform, ERP, predictive maintenance and IoT in particular. With these tools in place, I forecast an increasing emphasis on complete servitization, and that in 2020 we will see the percentage of manufacturers selling products by subscription or metered use will surpass 10 percent.

Prediction two – Committing to digital transformation might provide short-term pain but long-term gain

The term “digital transformation” is used as a buzzword by some to sell any number of technologies, but it is not a single technology which can be bought. Fundamentally it is a different way of looking at, and doing, business. If service organizations want to transform properly, they need to make a complex journey—true digital transformation involves a departure from siloed operations, legacy tools and outdated business processes.

Transformational technologies that have already been implemented within the industry usually exist at the periphery of operations. Companies for example track field a technician’s location through IoT and use AI to schedule appointments as well as manage inventories. Service organizations will continue to use AI and IoT for point solutions, but over the next few years the industry will progress with the introduction of AI into the heart of operations in the front office and administrative processes.

Today, we are at a point where disruptive technologies are embedded at the tip of the spear of forward-thinking service organizations. These organizations are using IoT sensors to capture condition-based maintenance information, or AI algorithms to adjust the field service schedule in real time based on constantly changing conditions.

In 2020 and beyond, we will see more companies adopt these disruptive technologies in customer and service-facing settings. But I believe we will also see enterprise software vendors move further towards AI-driven automation of the front office in areas like service finance, inventory management, what-if scenario planning and customer interaction. And those who adopt AI as part of a commercial-off-the-shelf solution will win the race against those who take a go-it-alone approach.

Prediction three – Leveraging data from IoT

With more and more organizations saying they have some degree of remote connectivity for their assets, their drivers, and their parts, IoT has truly become mainstream. The large amounts of data that are collected through IoT sensors should now be used to develop and apply analytics capabilities across the organization.

The biggest area of implementation interest across all industries is in predictive and prescriptive maintenance. Here connected assets are the just start of the story rather than the destination and customers are starting to realize that the old adage of “garbage in, garbage out” applies if data collection and hoarding becomes an end in itself. A good example is multinational telecom company Telefonica, a provider of smart technology to collect data from assets (such as vending machines). The data is then fed into their existing analytics for decision support. Going forward, businesses will need to focus less attention on how to collect additional data and more on making valuable use of the data they are already collecting.

Prediction four – Striking the right balance between humans and technology

As advanced AI becomes more widely adopted among service organizations, companies will seek an equilibrium between the efficiencies of AI and contact with humans that customers and other stakeholders crave. Greater AI use not only reduces costs but also enables organizations to make better use of resources in sectors facing labor shortages. AI will do a better job meeting certain deliverables and should automate many repetitive tasks, freeing up staff for more customer facing work.

AI-driven schedule optimization, for instance, enables a single dispatcher to support a larger number of field service technicians, allowing them to manage by exception, perhaps spending more time with customers when they need a human touchpoint.

In the worst case, some research indicates that 48 percent of jobs are predicted to be lost to artificial intelligence and robotics. But more importance should be placed upon the potential of a hybrid work arrangement between people and AI. As Deloitte has rightly pointed out, in a digital world emotional connections will become more important for establishing connections with customers. Our job now is to use AI to engineer seamless, satisfying automated processes into our businesses without engineering the human contact out.

Locking in on technology now ensures success tomorrow

In some industries, there have been high-profile examples of companies who failed to adapt to technology and changing business models. In the coming year, technology will become a key game changer for industry. For field service organizations to reap the rewards of new technologies they will need to commit to full digital transformation. Embracing AI and IoT, as well as capitalizing on the analytics they provide, will help organizations streamline their time-consuming operations so their workforce has more time to concentrate on providing the human expertise and personal touch.