Larry G. Wash President, Global Services Ingersoll Rand – Climate Solutions April 27, 2010

1. Leveraging the Strength of Your Company’s Product Heritage to Build a World-Class Services Business Larry G. Wash President, Global Services Ingersoll Rand – Climate Solutions April 27, 2010

2. Does This Sound Like Your Company?

3. The End Game is Services Services opportunity Brand strength affords you audience with customers and creates leverage Your brand reputation: Trust, Reliability, Knowledge “What took you so long?” PermissionConsideration “Of course, I will listen to a broader value proposition or proposal” $1 of product sold = $4 in services + $4 in enhancements, upgrades + adds over an average of 20 years Yield may be larger per annum over a shorter period for technology-based products

4. Benefits of Services to OEM

5. Here’s How:

6. Step #1: Create a Competency Roadmap • These are the key competencies required to build and sustain a successful services business • Because: Services should support and enhance OEM brand and deliver a sustainable value and reinforce expectations for overall brand experience Offerings + Policies Brand + Communications Sales + Delivery Leadership Brand + messages effectively tether service to sale of products + equipment Well-defined, well-scoped product, parts and service offerings Effective sales tools and skills, compensation plan Strong service leadership to build a strong service culture Well-defined, well-communicated product policies – warranties, extended warranties, Effective service delivery system, execution, back-office Effective and consistent internal communications

7. Step #1: Create a Competency Roadmap • Use a model for identifying and evaluating core competencies, and for continually evaluation and measuring performance and making improvements • Identify Key Performance Indicators and service performancemetrics • Example: customer communications; timely, accurate, effective • Use a dashboard to invite comparisons and measure progress • Example: Customer 3-year account plans, asset management plans with contingency plans, technology migration path with schedules

8. Maturity Path is Part of the Roadmap • Identifies core strengths to build upon • Identifies areas of attention or developmental focus • Measures period-to-period progress – individual elements and overall • Elements include: • CRM and customer satisfaction • Execution • Selling and delivery skill sets; training needs • Profitability and service business performance metrics • Processes, tools, resources • Leadership • People development • Organizational structure

9. Example: Services Maturity Path

10. Example: About the Services Maturity Path • Services “Maturity Path” categorically identifies critical services business components • Helps internal stakeholders self-assess ability to create and deliver value and meet key service business metrics • Service agreement base growth examples: • On-time service agreement renewal as percentage • Meaningful customer satisfaction indices • Service agreement pull-through • Labor utilization and overtime tracking • Working capital management

11. Level 3 Results indicate service business is evolving Migrating from commodity-based services to high value offers Designing and adopting a solutions oriented go-to-market approach Implementing performance-based services in lieu of task-based Level 1 Understanding basic elements Standards Importance of service agreements Product-to-Service “Linkage” Pull-through Example: Current State Assessment in Services Maturity Path Level 2 • Fundamental requirements in place to sell and execute the business • The essence of creating value • Supplementing commodity level service offers with value-based, add on options • Automating to deliver productivity • Remote services • Measuring best metrics Level 4 • Results meeting financial & non-financial objectives; organization in place & executing • Global expansion • Highly leveraged offers • Customer satisfaction-driven • Best-in-class results

12. Step #2: Create Compelling Offerings Understanding customer challenges and develop services offers that address them and help achieve their objectives • Effectively budget operating costs in an era of persistent concerns of energy volatility and recovering economy • Discover how to justify capital improvements and modernization when funding is difficult to get • “Make do” with limited operating dollars and staff as capital projects are deferred • Shift focus from expanding and upgrading to “mission critical” organizational needs • Understand business options and decision-making process

13. Step #2: Create Compelling Offerings Help our customers meet organizational objectives: • Analyze current situation from A to Z • How do they currently operate their facilities • What are their top operational priorities? • How do they define a ‘critical’ incident? • Determine how assets can be operated more efficiently, economically and reliably • How and where are they currently using energy? • What are their operational objectives over the next 3-5 years? • Help identify and frame risks: Operational risk analysis • Review decision-making and select best options

14. Step #2: Create Compelling Offerings The compelling services offer: • Meets customer objectives or addresses and issue and creates / delivers value to customers and company • Easily economically justified; has favorable economic impact on customer business • Born from innovative thinking and follows well-disciplined developmental process • Fosters good communications; effectively communicates OEM knowledge to the customer • Differentiated from conventional alternatives; not easily commoditized • Focuses on “outcomes” and “performance” vs. “tasks” and “calendars” • Provides potential solution to one or more concern • Focuses on an identified need – not a need that does not exist • Does not deliver on prescribed tasks at scheduled intervals • Not simply implied – measured in performance metrics • Not selling labor to work on something that may / may not solve a problem – fees based upon ability to solve a problem

15. TM Step #2: Create Compelling Offerings Example: Trane offer set for building customer confidence

16. Step #2: Create Compelling Offerings Example: Trane opportunity • Customers asked for additional “options” built in to our service offers • Willing to “risk share” • To manage budget requirements vs. reducing scope • Our offer: Service agreement liability caps and co-payments • Created contract fee control by sharing repair liability risks • Customer “A” accepts an incident repair “co-payment” of $250, and reduces their annual service agreement costs by 2-5%

17. Step #2: Create Compelling Offerings The economic justification • Customers make economically justifiable decisions • Services costs should be offset by identifiable “costavoidance” in other operating areas • Preventing efficiency deterioration • Preventing premature deterioration of critical components and equipment life • Avoiding high levels of unplanned failures and downtime • Preventing production losses or interruptions • If this is not the case, users of products should “run-to-fail” and then replace

18. Step #2: Create Compelling Offerings Example: Total cost avoidance • Total simple annual avoided cost can be achieved with a full service agreement for a 500-ton chiller at a large commercial bank building • What is simple annual net economic benefit of a full service agreement, if it costs $10,250/year? • Calculated avoided capital cost = $4,200/year • Calculated avoided energy cost = $3,500/year • Calculated avoided repair & downtime cost = $3,750/year • Total Simple Annual Cost Avoidance: $11,450 • Total Simple Annual Net Economic Benefit: $1,200/year

19. Step #3: Build Services Leadership Make talent management a proactive process • Make Talent Review discussions a regular practice • Calibrate leadership competencies and capabilities • Define appropriate development plans and roles • Conduct Organizational Leadership Review annually • Succession planning • Leverage strengths; develop gaps • Build the feeder pool for leadership through: • Coaching and mentoring key talent • Career goals and interests • Creating progressive career paths • Providing Regular and ongoing feedback

20. Step #4: Driving Culture Change Build on successes of product-centric business but recognize that service is different business model • Installed base is a #1 asset for growing a healthy services business • An industrial OEM: For every dollar of first-cost system or equipment sales, projected life-cycle revenue should ratio at about 8:1 • At same time, healthy installed market share means little without a strong service business to bolster it • End game is achieved when fully capitalizing on the market for service and parts revenues • World-class OEM service companies generate >50% of revenues from service • “First cost” of many categories of OEM equipment and systems generally is  5% of the total life-cycle cost of ownership • Critical to readily estimate cost of ownership for customers, frame the economics and assist with a cost-effective model for decision making (which option?: repair, upgrade, replace, consolidate)

21. Step #4: Driving Culture Change Excelling in service is a way of doing business • Leaders must believe that service is essential to long-term success • Fully committed • Should not compromise service objectives for short-term windfalls • Maintain strong customer focus/brand experience • Organizational structure is critical • Investing in people who can sell and execute, and deliver value consistently no matter where you do business • Innovation is integral to sustained service growth • Innovate to create value and address issues • Always develop solutions to clearly identified customer needs and NOT internal pressures to apply proprietary technologies and methods!

22. Step #4: Driving Culture Change • Attract and retain services talent – sales and operations • Strategic sourcing including employee referrals • Multiple interview processes • Service councils: stay close to the ground / engage employees • Build a visual service identity • Be visible and demonstrate your personal commitment through regular communications • Significant internal communications – including listening • Consistent channels in place to get to every employee • Communicate long-term strategy, goals and progress against • Recognize successes and the people that have driven them • Create a sense of community Excelling in service is a way of doing business (cont.)

23. Step #4: Driving Culture Change • Built services brand – featuring people rather than product • Created identity for service technicians • Focused on Trane service technician as individuals responsible for: • Delivery of ongoing service • Being primary touch-point for customers • Initiate shift in thinking about Trane beyond solely an equipment manufacturer to “building services” provider • Multi-faceted branding campaign – posters, newsletters, standards Ex: Service branding – Faces of Trane

24. Bottom Line: Leveraging OEM Product Position for Value-Based Services Growth Key business success factors: • Seat at the executive table • Depth of bench • Cultural change and transformation • Dedicated services P&L • Differentiated offers enable growth and margin expansion • Standard processes and tools • People development Investing in services offer: • Recession resistance • Recurring revenue • Resilience to market fluctuations • Manageable working capital investment • OEM advantages • Unique advantage • Product enhancements • Technology migration

25. Bottom Line: Leveraging OEM Product Position for Value-Based Services Growth Match customers’ issues with offers • Understand impact of economic pressures • Improve ability to deliver value • Share and communicate knowledge and educate • Become more creative and innovative • Discover savings and synergies • To help customers make investments • In support of their mission • Over the long term • Regardless of current economic constraints

26. Addressing Your Questions?

27. Thank you Larry G. Wash President, Global Services Ingersoll Rand Climate Solutions (Hussmann, Thermo King and Trane) 732-652-6963; lwash@trane.com