Tech companies miss out on €24bn of yearly service renewals



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27 September 2012 | 0

Technology-enabled companies are missing out on significant sums of money every year by focusing all their efforts on winning new customers and failing to look after their installed customer base.
Gartner estimates that the service renewal market is worth $250 billion (€194 billion), but about $30 billion (€24 billion) of this is lost every year according to ServiceSource, because companies are not putting sufficient investment in their renewals processes.

The company claims that, in the current economic climate, companies have a 60-70% chance of retaining a customer as opposed to a 5-20% chance of winning a new customer, and in some cases as recurring revenue streams offer higher margins and profitability than new product sales. However, many companies are also still relying on manual systems and processes, including spreadsheets, to manage this part of their business.
"Over the last 15-20 years, the focus of a lot of companies has been on new products, new purchases, new acquisitions; so they’ve spent a lot of money on sales people, CRM and advertising, and they haven’t put nearly the same investment into customer retention," said Martin Moran, EMEA general manager at ServiceSource.
"As a result, a lot of companies become exposed to competitive threat. Some technologies are becoming commoditised, and so by definition, the price of technology in some areas is dropping quite dramatically. Bigger, better, faster is becoming the norm, and the rise of the cloud has disintermediated a number of the traditional lines of revenue for companies."
Moran said companies are now starting to recognise the value of service revenue management, not just as a means of retaining customers but as a driver of top and bottom line growth.
ServiceSource has launched what it claims is the industry’s first cloud application that is solely focused on maximising recurring revenue. Renew OnDemand offers analytics, sales, operations, installed base and channel applications to help businesses improve customer retention and gain business insight.
"A lot of companies struggle with pretty poor data. In the world of renewals, you’re looking at data that comes from a sales or CRM system, from an audit management system, from an asset database, and so the information that’s needed to create a rich and fulfilled renewal process is resident in a whole load of systems," said Moran.

"A lot of companies just don’t have the wherewithal to bring that together in a cohesive, consolidated view of their customer base, and because of that they’re not reactive to the customer."
Moran said there are certain triggers that indicated whether or not a customer has a propensity to renew. By picking up on those triggers early, companies can proactively build programmes and approaches to manage the renewals process.
Renew OnDemand is built upon a secure and scalable cloud architecture designed to easily integrate with CRM, ERP and other critical business application, according to ServiceSouce.
Adobe Global Services is one of the first companies to use Renew OnDemand. Vice president and general manager Lambert Walsh said that by "unlocking the potential" of its recurring revenue, Adobe has increased revenue and funded important research and development.




IDG News Service

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