For a lot of technology companies, 2009 is feeling a lot like 2001. Acquiring customers is increasingly difficult and all areas of the business are looking to cut costs and streamline operations.
So how can technology businesses continue to drive revenues as customers cancel projects and postpone investments?
At Convergys, we recently co-authored a white paper with the Service and Support Professionals Association (SSPA) examining this very subject.
It found that 80% of SSPA members have been asked to amend their 2009 budgets due to the slowdown. But with years of process refinement many believe that now there is little left to cut.
According to PricewaterhouseCoopers, 74 per cent of CFOs admitted their companies often cut what is easy to measure rather than what is most necessary.
The source of vendor’s revenues today looks very different from a decade ago, where product and licence sales made up the bulk of revenues. Today it is service and support that is vital to revenue growth.
Figures from the SSPA show software firms’ services revenues rising from 33 per cent in 1999 to 57 per cent in 2008. Similarly hardware firms’ services revenues are also up from 22 per cent to 37 per cent.
In 2001, customer support’s main purpose was to fix problems – an important role but not one that expands customer use of products or services.
However, in 2009 support is focused on finding ways for customers to consume products more quickly but ensuring they understand all the features, integration options etc. This provides customers with greater value from their products and also faster product consumption, meaning a shorter time until repurchase.
But with the continued pressure from the board to maintain a lean balance sheet, executives are understandably reluctant to invest in their service functions and will instead concentrate on keep costs as low as possible across all areas of the business. Although, it is this investment that will be the key factor in surviving the difficult economic climate.
One cost effective way to continue to deliver quality service is to develop strategic relationships with outsourcing partners.
Although once associated with low quality and low costs, service providers are now considered by many as a source of strategic, long-term relationships that deliver ROI, flexibility and value added consultancy.
These providers are experts in support and can bring experience and expertise to a business, providing there’s a shared business goal and agreed results.
Working with strategic partners can do more than cut costs – it can also help to drive revenues. In order to achieve this partners should be involved at all stages of customer contact including revenue generation so that they can deliver insight into customers’ needs, which in turn will help marketing of new offerings and will also identify important opportunities to up-sell.
To get the most from strategic partnerships, the SSPA recommends that businesses rethink their processes in order to create a shared goal. Below are some tips for getting the most out of your partner relationships:
- Low price delivers low quality: If you choose partners based on cost then you are likely to see few long-term benefits and little increase in customer profitability. Customers are increasingly demanding quality service and through the use of social-networking, discussion forums and online reviews, have a wide-reaching voice for their discontent
- Get involved with your service operations: According to SSPA members, businesses need to be involved in the outsourced operations. This includes frequent visits to the service locations and ensuring partner employees are involved in company culture, in order to feel like part of the team
- Communicate with partners: Interacting with the service provider employees through company announcements, events and presentations will ensure they are working towards a common business goal and feel motivated towards making the company a success
- Plan with service providers: Involving partners in the strategic planning phase enables them to share their expertise, best-practice and industry trends which will all benefit the business
While it might seem difficult to cut costs from what is already considered to be a lean balance sheet, engaging with outsourcing partners, allows technology companies to manage costs and increase revenue at the same time as delivering superior customer experiences.
Now more than ever, they need to focus on providing outstanding service – the area most likely to drive revenue for technology companies in this challenging economic climate.
Birgit Neumann, VP Operations at Convergys