Managing Service Contract Lifecycles to Reap the Rewards of Increased Revenues
Experts suggest that up to 50% of IT assets are left unprotected by service agreements due to contract expirations, improper product registrations, or poor record keeping — leaving VARs to not only lose out on millions of dollars in potential revenues, but also to face the impact of strained or severed customer relationships. Fortunately, a new supply chain movement is addressing this challenge. Distributors are teaming up with technology vendors to create Web-based portals that provide VARs with easy access to data that alerts them when service contracts are up for renewal or if certain end user IT products are not currently protected by service agreements (leaving the door open for a potential sale).
How can you take part in this new movement? First, ask your distributors and technology vendors about the types of service contract initiatives they have in place. Because maintenance services are becoming increasingly important throughout the value chain, many technology vendors are challenging their distributors to work in concert with VARs to improve service contract management processes. They encourage solutions providers to get a better handle on expiring contracts and unattached assets (products sold without service agreements), as well as product and service registration. It comes down to managing service contract lifecycles, which in turn, leads to improved service revenues and better customer relationships. But managing service data is no easy task. That's because, to be effective, it requires a team effort involving the entire supply chain — and it is a process that begins with the VAR at the point of sale.
Most service contract management issues originate at the time a product is initially purchased. On average, only 60% of technology products sold with service get registered with the manufacturer. When proper registration does not take place, record of the service purchase is not appropriately entered into the manufacturer's entitlement system. This creates the possibility that no record of the contract actually exists, leading to major setbacks in the delivery of the service, as well as the tracking of expiration notifications. The result is lost service renewal opportunities and the risk of non-coverage for the end customer on critical assets. Even worse, lack of registration can lead to loss of that customer relationship due to their service dissatisfaction.
The primary reason for low service registration rates is poor data quality, the principal driving force behind new service contract management practices now emerging. Today's most advanced service contract management portals provide auto-registration functionality to streamline the registration process and eliminate manual intervention. This improves the quality of registration information and yields both increased customer satisfaction and improved revenue.
Beyond registration, it's important to point out that maintenance is not a one-time sale — it's an annuity and should be managed as such. If an organization has the right tools in place, it should be able to manage the life cycle of any maintenance agreement that has been sold and enable renewal of that contract at a future date. Channel partners (distributors and VARs) typically manage as much as 80% of a manufacturer's maintenance service contract renewals. Given the challenge of delivering a complex portfolio of products from multiple manufacturing partners to thousands of end customers, it's no wonder that maintenance revenue tends to slip as a priority. In fact, you may be losing as much as 50% of your potential maintenance revenue due to lapsed coverage caused by disconnected and inconsistent data.
If you don't have access to an existing service contract management portal, you should consider creating your own repository for managing your services business or, at the very least, your own systematic way of tracking service contracts. First, you must collect and organize disparate maintenance data from your internal systems and your suppliers, and present it in a useful way to your many end customers. Executing this well requires an experienced team focused on data conversion creating accessible data structures. A VAR's competitive advantage and maintenance business grows when customers receive accurate sell-through of the maintenance offerings associated with their technology purchases. To ensure accuracy, it is necessary to create and maintain data integrity in your service contract management system, while discovering and presenting actionable sales opportunities on an ongoing basis.
If your distributor or technology vendor has a service contract management offering in place, then it's up to you, as a VAR, to engage and take full advantage of what it has to offer. Most of these portals (such as MaintenanceNet's Reseller Services Portal [RSP] on Ingram Micro's partner Web site) have alerts that notify VARs if an end customer's maintenance contract is expiring. That customer can then be approached at the appropriate time with options for renewal. A recent analysis of our portal on Ingram's site shows that in a 120-day period, VARs were presented with more than $120 million in "exposed" opportunities across four key manufacturers' products. These "exposed" opportunities are related to assets that are uncovered by service or warranties, thereby giving the solutions providers an opportunity to either sell a service to their end customer or provide a technology refresh solution. Beyond that, the portal also presented VARs with nearly $95 million in service renewal opportunities in that same 120-day period for the same four manufacturers.
Once VARs have a handle on their service contract lifecycles, there is an abundance of ways that the business intelligence (BI) that they have worked so hard to gather can be used to further advantage. Beyond the complex task of managing service contract lifecycles, this BI can be used to implement and manage a wide range of VAR campaigns. These include incentives, spiffs and market development fund programs, and end user initiatives aimed at improving communications or selling certain types of product or services.
Clearly, there are revenues to be made in the service contract arena. For channel partners, every chance to effectively re-engage with an existing customer creates new opportunities to upsell, upgrade, or add on to their existing infrastructures. The best part is that the customer recognizes the value of the service purchase since it's in their best interest to protect their IT assets at all times. If properly managed, service contract sales can truly make a dramatic impact on your business.
To download the complete Whitepaper "Successful Strategies to Dramatically Increase Service Revenue" go to www.maintenancenet.com or call 1-866-699-7212.
About the author: Scott Herron co-founded MaintenanceNet, Inc. (www.maintenancenet.com), a provider of maintenance contract management services, in 2001. He brings 20 years of technology consulting and business management expertise to his position as president and CEO of the company. Prior to MaintenanceNet, Herron founded Networld Solutions, an IT consulting and software development firm. Herron's technology career began at Children's Hospital San Diego, where he worked as a network design engineer and managed various IT departments.