Tuesday, August 26, 2008

ERP and the service delivery model

Previously I wrote about business rules and the effect they are having on service delivery and our ever increasing need to find new solutions to complex customer problems.  There are companies that have figured out how to capitalize on this problem and moved the risk or share the risk of doing so with other providers. 

First are moves by companies like IBM from simply a manufacturer of business machines (systems) to one of a service provider, taking on a hardware agnostic air.  Make no mistake IBM is still a huge provider of hardware, but IBM has been hugely successful with their Global Services (IBM-GS) business.  At many companies IBM takes on the entire support of a customers environment and out sourcing the delivery back to the original service providers for a reduced rate, having never stepped foot on the customer data center floor.  There are many reasons for this shift, but growing complexity in the data center, and the desire to simplify and focus on their core business appear to be strong driving factors. 

So why would the original service providers accept these new terms?  They can not afford to walk away from the deal even at reduced rates, as more and more providers have branched out into multi-vendor support.  Other companies are looking at the success of IBM-GS and putting together Multi-Vendor Support (MVS) strategies in an attempt to replicated their success and hopefully carve off a slice of this revenue stream.   All the while, afraid of additional margin erosion, scrabbling to to ensure the assets they are subcontracting for are counted (by serial number) and on the contract.

There is another reason for the increased competition and pressure on previously high margin business.  IBM, Sun Microsystems, Inc., Hewlett Packard, and others once made unique and complex systems that required very specialized support.  But as customers migrate away from proprietary processors and operating systems, toward commodity hardware such as Intel x86 processors and variants of Linux, they open up to a broader range of engineers and products they can turn to.  Increased competition drives down margins.

What are companies doing to solve this new reality?  Burying their heads in the sand I am afraid.  Rather than seeking a new paradigm and change the old model, they are clinging to what they know.  Scrabbling around looks for more assets to put on maintenance contracts, to increase their capture rates and raise new revenue.  The exact opposite of what their customers are demanding.

Which brings us full circle to the concern over asset management and a service model build on accurate accounting of those assets and the cost associated with determining those assets and the ongoing management of that information.  If you assume this is the only viable model for the delivery of service then you must start with a system or database that you can use to collect the assets, track them, associate them with contracts, sell contracts, etc.  Every aspect of the life cycle of a serviceable asset from manufacturing of it, sell, resell, maintenance, its exit into the after market or grey market and finally its ultimate destruction or recycle.  

Enterprise Resource Planning (ERP) to the rescue.  But does it have a place in modern support service delivery.  I suggest the answer is yes, it has to, but not as its being used today for field service delivery.

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