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How Field Service Can Support Partner Margins and Revenues

John McVicker

Considered one of the cost items that go into the Cost of Sale calculation in any - Field Service has never been considered a means to support partner margins, other than by doing as much work for as cheap a price as possible. It typically is a cost to be squeezed into any deal to enable the Partner to, at least, make a reasonable margin on any given opportunity.

And yet, Field Service can be deployed differently, in a way that more proactively and predictably supports partner margins and their revenue growth aspirations. Here we examine a few of the areas where Field Service can assist:


1. Resource capability without the cost of "bench."

Within most partner organisations, one of the highest fixed costs is the cost of staff needed to perform the various tasks that generate revenue and profitability. Those staff that are more delivery-aligned (rather than being the back-office staff that work in administrative functions or sales and account management aligned) are usually subject to utilisation metrics. These metrics determine the level of the profit their "body" will add to the bottom line.

But the cost of these resources can be prohibitive and significantly influence partner profitability if utilisation rates are not maintained! Or if that utilisation is not profitable, i.e. that resource needs to be effectively deployed on a customer site and charged out at a price that is above the cost of employing that resource.

Against the backdrop of cost control and resource utilisation, Field Service has an important part to play. Field Service has access to a significant "bench" of resources that can be made available to partners in an "on-demand" manner, meaning that the burden of maintaining those resources and making them available for work does not rest on the Partner's balance sheet - the risk is moved and resources made available to the Partner. Given the array of resources available through the right Field Services partner, they can be assured that an expensive engineer is not allocated to a mundane deployment and unprofitable and a suitably qualified and appropriate resource available to perform the right task for them. 


2. Fixed price, 1st visit resolution, service call outs

A source of the angst of many partner-client relationships is the time and cost associated with fixing problems when they occur – the uncertainty of cost and the uncertainty of how long a job might take becomes a source of unnecessary friction. Coupled with that, the problem can be a very unprofitable event for the Partner. Time spent scheduling, locating and engaging a resource to resolve the issue, confirming the appropriate scope of works, ensuring the engineer turns up and fixing the job in a timeframe (and cost) that doesn't surprise the client. 

All of this wasted time and energy to resolve an on-site client query becomes unprofitable for all concerned. Apart from the strain it places on the relationship between the parties, it can be a distraction to delivering absolute customer excellence and support partner profitability.

It makes sense to look at performing these tasks differently. With a fixed price, first visit resolution call outs, the uncertainty around pricing (and most importantly, partner profitability) and "will the problem be fixed?" all goes away! The job will be completed, the risk of completing that job moves to the Field Service organisation, and the job supports partner profitability as there are no unpredictable costs - for either the Partner or the client. There is also no uncertainty that the job will not be completed. The client has a price that locks in pricing. Easy to see how this supports partner profitability and is becoming the preferred approach for many partners.


3. Alignment to cloud or Managed Services commercials

As partners increasingly focus their attention on building out a Managed Services capability as the natural evolution of their business, there is a natural way in which Field Service can align to support profitability. For the Partner as they migrate customers and then when they support customers during the contract's life.

At the inception of the contract or when the client is having new equipment installed, a traditional field services model will perform the task and install the equipment, and after that will send a bill for the job that has been completed. And for a Managed Services partner, that might harm profitability in that month – a sizeable fixed-price cost against a monthly income, which will almost certainly erode profitability in that month.

A more modern approach that some Field Service organisations are taking is when the installation and ongoing maintenance of equipment are more closely aligned to the Managed Services or commercial cloud model. There are no upfront costs – the costs of installation and ongoing support & maintenance are rolled into the monthly billing cycle for the Partner. These costs can be charged on a per-site-per-month basis or even charged on a per-device-per-month basis to give the Partner even more granularity and the client more certainty of cover.

Making this change improves partner profitability – both at the outset of the contract and then ongoing after that - guarantees cover and support for equipment for the duration of the contract and locks in predictable customer excellence that will surely help keep the renewal of the contract at the end of the term.


4. Scale and Reach to support an out-of-region expansion

With the continual pressure to grow and expand the business, many Partners struggle to find a way to expand outside their home region without making a significant bet, which can adversely drag on profitability.

Having a Field Services partner onboard can significantly support that expansion whilst also providing Partners with predictable and controlled costs, without the need to hire staff and commit to charges in advance of revenues – essentially underwriting the expansion. Having a national capability, or at least Field Service capabilities in regions outside of the Partner's home location, enables the Partner to scale their operations. Doing so in the safe knowledge, they don't have to pre-invest in Field Service resources yet still have access to those resources to support new clients and still provide excellent service quality.

It isn't difficult to see how Field Service can support partner revenues, profitability and growth through sharing risk and acting in a partnership manner. And in a market where Partner margins are challenged and there is the inevitable pressure to continue growing, the right Field Service relationship can make all the difference.