Service Consolidation

Depending on the complexity of projects it may be optimal to consolidate the various service providers under the umbrella of a single service contract.

 

This provides a far more manageable project for the customer who may otherwise be dealing with a multitude of different services and contractors.

 

Sam Klaidman, Founder and Principal Advisor, Middlesex Consulting explained, “Moving forward we are going to see more of that general contract, the subcontract mentality, because the world is getting more and more specialised. Even today, every business is a software company, and I think it’s great analogy.

 

“So I think that’s that general contractor model is going to be more generic. The general contractor will work with their customer, to figure out how the services that the customer needs are ordered and paid for, it may well be through the OEM and the OEM uses a third party service, or the service representative, may well be an ex-employee of the end user. And you have to say yes, because the customer almost always is right. But this has to be balanced.”

 

In agreement was Terence Horsman, COO, ORCA Service technologies, “One thing that really came to mind for me, when talking about one throat to choke is my background in facilities management, we’ve been talking about the concept of total facilities management for a few years now, where, instead of having an in house facility management team, people go out to companies like CBRE or other facility management firms and say, you’re my throat to choke, you know, you consolidate the service, you got to the service vendors, It up to you to manage how you’re going to do it. But this is the price of which we want the service delivered. And these are the SLAs that I’m looking after.

 

“I see almost a spectrum on the one end, you’ve got OEM, Servitization, really vertical integration all the way. So thinking about Rolls Royce highly complex assets, very high value, very specialist knowledge, this is very difficult for any, service organisation to dive into, there’s a high barrier to entry.

 

“On the other end of the complex OEM servitization model is consolidation. The complexity of the service is lower, there is not a lot of uniformity in the asset portfolio, there’s a diversity in OEM and in the ecosystem so it’s not very monopolistic. That turns into a very interesting proposition for the customer to say, I don’t want to warranty services of 15 different companies, I want one throat to choke, this give me this one aggregated service partner.

 

“And I think in those cases, service organisations can really start to evaluate, how do I deliver that value back to the OEM? Is there data integrations that we can deliver? If components are failing can we take that back to the design team for example.”

 

API’s have been known to the industry for a while. Supply chain partners are already switched on to it, it’s easy to integrate. But it still requires either a software developer or some form of intermediary service, some EDI.”

 

Shaun West, Professor of Product-Service System Innovation, Lucerne University of Applied Sciences and Arts, further added, “One thing I wanted to pick up with the motor repair business, we used to work for both Siemens and ABB. And we would compete against both of them. If we were working for them as a contracted service business, we would use their parts and their written instructions. And if we compete against them, we could undercut them because we knew how to do the job cheaper and make our own parts.

 

“So it’s a very complicated environment that we’re in, the system integrator often seen as a potential service partner, in terms of system integrating. If I look at an aeroplane. Rolls Royce supply the engines. But then there’s an airframe. And that needs to be looked after as well. I don’t think Rolls Royce really are the guys to look after the airframe itself. I still need the airframe and the engines to work together. Otherwise, I haven’t really got an aeroplane. And I think that links to some of the road contracts that I’ve seen in the UK, where you have a general contractor that is able to put it together in terms of a long-term contract and understands what crafts and skills they need to actually do that.”

 

As projects and contract become more complex and the ecosystem of service providers grow it may be prudent to bring various contracts under a single umbrella making delivery more manageable. A single point of contact through service consolidation has its obvious advantages and is well worth considering under the right circumstances.

 


All members of the Field Service Think Tanks are speaking from their own personal opinions which are not necessarily reflective of the organisations they work for. 

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