The Role of Service Innovation in the High Tech Sector

1. HIGH TECH SERVICES The Role of Service Innovation In the Economy’s Most Famous Product Sector J.B. Wood President and CEO Service & Support Professionals Association (SSPA) Technology Professional Services Association (TPSA)

2. The Two Largest Industry Associations in Tech Services …for customer support …for professional services

3. SSPA and TPSA Support Major Tech Companies Across The Broad Technology Market • Networking • Computing • And Desktop • HW • Storage • Infrastructure • Software • Client server applications • Desktop SW • Enterprise (>$1bn • in revenues) • Office • Products • HW • SW • Office Products • Medical Technology • SME (<$1bn in • revenues) • HW Consumer Technology Products Internet SW • Home office and • Consumer 3

4. A Line-Up of Over 200 Member Companies 4

5. The World is Becoming One Big Service System Top Ten Nations by Labor Force Size (about 50% of world labor in just 10 nations) A = Agriculture, G = Goods, S = Services 2004 2004 United States (A) Agriculture: Value from harvesting nature (G) Goods: Value from making products (S) Services: Value from enhancing the capabilities of things (customizing, distributing, etc.) and interactions between things >50% (S) services, >33% (S) services

6. The State of the Technology Services IndustryServices revenuesare growing acrossthe software industry . . . . . . and have become the critical component in IT sector growth

7. The State of the Technology Services IndustryServices revenuesare growing acrossthe hardware industry . . . . . . and have become the critical component in IT sector growth

8. Technology Services Universe:Q4 1996

9. The TPS Universe:Q4 2006

10. The Key Shifts As The High Tech Market Has Matured More Service Revenue Call Center Service Margins Professional Service Margins

11. Service Companies 30% 35% 40% 45% 50% 55% 60% 65% The Service 50Gross Margin Analysis PS in a Product Company 30% 35% 40% 45% 50% 55% 60% 65% Hardware Companies 30% 35% 40% 45% 50% 55% 60% 65% The Service 50 30% 35% 40% 45% 50% 55% 60% 65% All Product Companies 30% 35% 40% 45% 50% 55% 60% 65% Software Companies 30% 35% 40% 45% 50% 55% 60% 65% Support in a Software Co. 30% 35% 40% 45% 50% 55% 60% 65%

12. Call Center Service INNOVATION: Technology, KM and Globalization HAPPY CFO Call Center Service Gross Margins Professional Services Professional Services MODEST INNOVATION: Still Labor Intensive SAD CFO 1996 2006

13. For Customer Service Execs: “Are we running out of margin improvement opportunities? If no, then what is next? If yes, then help me prove it to my CFO.” For Professional Services Execs: “There has to be more than just process and service system improvement. Where is the capture and re-use of IP? Where is the scale? Where is the technology? Does more services have to mean more people? The Big Questions

14. Valuation Capabilities Product Centric Product+ Analysts Staff The Three Pulling Forces On the Chief Services Exec Revenue Mix Customers Business Strategy Solution Centric

15. THE MANAGEMENT IMPERITIVE:Tech Companies Must Find Ways of Delivering More and Better Services To Customers But Avoid the Margin Drag of More People Service Innovation Is Key!

16. Four Generations of Computing Over 40 Years… Product as Service Web PC & Client Server Mainframes 2000 1980 1960

17. And Technology Services Have Not Had To Significantly Change Their Role… Professional Services Support and Maintenance Services Product as Service Web PC & Client Server Mainframes 2000 1980 1960

18. Prediction: By 2015 Services Will Look Nothing Like What We Know Today TODAY ? Professional Services Nine Years of Radical Change ? Support Services ? ??? Product as Service ? Web 2010 2015 2005 2000

19. What Will Drive This Change? Service Innovation Will Accelerate TODAY ? Offshore Service Providers Take More Market Share Lines Between Product And Service Blur Street Will Begin To Ask About Services Margin Drag Professional Services ? Customers Demand More Value For Service Money Consumer and Enterprise Computing Converge Confusing Service Supply Chain Product Development Methodology Will Be Applied to Services Development Services Commoditization Will Accelerate ? Service Margins Will Temporarily Drop As Price Pressure Overtakes The Ability to Reduce Costs Complexity Strangles Users and the Ability To Support Them Service Will Shift From People Based To Asset Based Support Services ? ??? 2015 2005

20. Five Key Areas For Service Research and Innovation in High Tech

21. #1 - The Capture, Management and Re-use of Knowledge Most Frequently Used Web Resources Percent of Visitors To Support Website That Find The Answers They Are Looking For: 46% Percent of Support Cases Deflected From The Phone to Web Based Self Service 29.7% #1 #2 Source: 2006 SSPA Industry Benchmark Survey

22. #2 – Servicing The Growing Complexity of Customer Systems • 46% - Percent of staff that receives formal training on products from other companies • 31% - Percent of customer problems requiring expertise on other company’s technology products • 15% - Percent of customer problems requiring contact and collaboration with another company who shares the common customer (more than doubled from 2003) • 4X – Cost of cases requiring multivendor cooperation Source: 2006 SSPA Industry Benchmark Survey

23. #3 - Building Supportability Into Technology Products Please indicate the percent allocation of NEW incidents by type of customer issue 1 in 4 cases related to product defects or limitations

24. #4 - Mountains of Data How can we turn mountains of transaction data into usable management information for services management, the sales force and product development teams?

25. #5 - The Service Supply Chain ? The Product Maker The Consultant The Reseller or Integrator The Independent Service Provider

26. Projected US Service Employment Growth, 2004 - 2014 US Bureau of Labor Statistics. http://www.bls.gov/opub/ooq/2005/winter/art03.pdf

27. What Does This Mean To You? • Services will be THE word of the next decade in high tech: • Consumer services • Automation of professional services • New models for customer support • Software-as-a-Service • Tech companies are searching for talent in both business and engineering disciplines who can add value to the discussion. • You: Right place, right time.

28. …for customer support …for professional services Thank You and Questions

29. Five Key Areas For Service Innovation in High Tech • The Capture, Management and Re-use of Knowledge is progressing slowly. Where are the breakthroughs? • In electronic self help? • In professional services/consulting IP capture? • The Growing Complexity of the Customer’s Systems is increasing cost-to-serve and negatively effecting customer satisfaction. How can we apply innovative approaches to tracking the customer environment, the cause of problems and to facilitate cooperative service provision among different companies with common customers? • What are future approaches to Building Supportability Into Technology Products? • Predict environments conducive to problems • Sense developing problems • Take Pre-emptive actions (automated and non) • Collect information for service providers • Service organizations know more about the use of products and changing customers environments than any other part of the company. How can we Turn Mountains of Data Into Usable Management Information for services management, the sales force and product development teams? • The Services Supply Chain is becoming increasingly complex. Innovation around the “service system” business model that can help companies partner effectively will help both the quality of customer solutions and the bottom line.