With 9 out of 10 service and support organizations utilizing third-party service providers to deliver some or all their field service operations, the days of relying on direct field service engineers are gone. While outsourcing field service engineers has always been with us, the reasons for doing so are changing. The need to reduce costs is being supplanted by the need to support service revenue growth.
The Primary Reason to Outsource Field Service Functions
Based on data collected from the TSIA Field Services Benchmark, here are the primary reasons organizations outsource their field service labor, broken down by priority.
- Increase Geographic Coverage: The search for additional revenue leads to new markets where there is little or no existing customer density and a lack of local direct field service engineers. In order to meet SLA commitments, companies are utilizing third parties to increase their geographic coverage.
- Quickly Adjust to Fluctuating Workloads: Peaks in demand resulting from increased product placements, reliability issues, etc. can outpace the number of available workers in the short term. The ability to adjust with a variable workforce is important to maintain service levels.
- Increase Service Availability: Premium service offers now include off-hour and weekend support which put pressure on existing staffing levels.
- Reduce Labor Costs: Utilizing third parties as a method to reduce labor costs is still popular, especially for less complex, planned service events.
So, the effective use of partners in field service is now a critical capability for all equipment manufacturers. As organizations incorporate new partners into their service delivery operations, most assume that:
- Customer satisfaction and renewal rates will stay the same
- Costs will go down
- Management effort will be reduced
Unfortunately, none of the three assumptions are supported by data. All things being equal, organizations that outsource full field service operations have significantly lower NPS (Net Promoter Score) and renewal rates, the cost per outsourced incident is equivalent, and it takes a lot of effort!
Management and Support of Third-Party Field Service Providers
Successfully working with an outsourced field service provider requires effective contracts and ongoing management in order to ensure a seamless and satisfying relationship from both sides, as well as for the customer. To effectively implement and manage the outsourced delivery of field services, organizations need to focus on four major enablers:
Partner Strategy and Executive Commitment
An organization should have a documented strategy with goals, regular tracking, and reporting to management. In addition, senior management participation is crucial to the ongoing success of the relationship. Regular business reviews of the results, operational metrics and financial results of an outsourcer at an executive level are indicative of an engaged sponsor.
Contract Terms
The agreement with the outsourcer provides a strong framework for a positive relationship. In particular, it defines Service Level Agreements (SLAs) for customer activities and it ties the achievement of those targets to the payment terms.
Service Readiness
The organization provides the outsourcer in-depth knowledge of the product and service required to successfully service end-customers.
Ongoing Management
While a strong outsourcing agreement provides a framework for a positive relationship, it is the ongoing management that makes it work.
Learn More About Field Services Outsourcing at TSW
At our upcoming TSW conference, taking place in San Diego, May 4-6, I will utilize the Field Service Benchmark and our TSIA Operational Best Practice Criteria to provide insights on:
- Four basic field service outsourcing models
- Key performance metrics
- Operational best practices
There’s still time to register. I hope to see you there!