IFS is an ERP software vendor who has steadily amassed a significant customer base — mostly manufacturers. The company has had some ownership and leadership changes in recent years and, as a consequence, there have been some adjustments in the firm’s:
- Capital structure,
- Sales/go to market strategy,
- Product line, and,
- Target markets.
Today’s IFS is all about its four main product sub-suites (ERP, Enterprise Asset Management, Enterprise Service Management and Customer Experience Management) and its five, mostly asset-intensive, vertical markets — Aerospace and Defense, Energy Utilities and Resources, Construction and Engineering, Manufacturing, Service Industries, and, Telecommunications. More specifically, the company wants to focus on asset-intensive industries as these provide IFS the opportunity to sell its full suite to most customers in those verticals.
The firm has culled some products it sees as ‘non-core’ so that all firm resources (including sales and marketing) are laser-focused on the remaining solutions. Interestingly, the firm has recently made an acquisition of a mid-market asset management solution that will not be fully integrated into the core IFS solution set. Instead, it will be sold and supported separately — see this story on the Ultimo acquisition. Other acquisitions may find their capabilities used or reused in many of the 5 vertical sub-suites.
This strategy refinement is one aspect of the firm’s direction. From what I gathered, IFS will:
- Continue to deepen its functionality in its key vertical solutions.
- Integrate advanced technologies (eg, machine learning) into its vertical solutions wherever practical/relevant.
- Will not try to lead its sales efforts with a cross-industry horizontal product (eg, IFS HRMS) but focus instead on verticals that can out-deliver for its prospects.
IFS is also doubling down on its customer success efforts. The discussions at the show focused on educating customers in the sales cycle as to what new process outcomes are possible and what best practices can be enabled within their industry solutions. Thankfully, the customer success conversations weren’t focused exclusively on fast implementation timeframes and generic installation templates.
Moment of Service
The anchor theme of the show AND of IFS’ strategy though is a concept called ‘Moment of Service’ (MOS). Darren Roos, CEO of IFS, even penned a book of the same name with help and commentary from numerous IFS and non-IFS personnel. I read the book this morning and noticed that diginomica’s Phil Wainewright, Jon Reed and Dennis Howlett were featured many times in the manuscript. Fellow analyst Ray Wang and others popped up in the pages, too.
The book may be a fast read. But if you want to understand what IFS’s strategy, messaging, etc, will be for the foreseeable future, it is all in the book. I know this for two or more reasons. The book seems like a recitation of the pitch that Roos must have used when he was vying for the CEO gig a few years back. It lays out changes that manufacturers and other asset intensive firms face when it comes to anticipating (not just reacting) to asset and customer needs. I also tried, many, many times at the show to get Roos and other executives to share with me insights into future technical innovations or directions the company will pursue beyond the moment of service theme. I got little more and I pushed hard. Everything always came back to the narrative in the book.
The book describes how firms are, increasingly, looking to create life-long relationships with customers and not one-off transactions. These lengthy relationships are underpinned with new capabilities the seller can bring to bear to better anticipate a customer’s evolving/emerging wants and needs and delivering them at an ideal moment — for example, repairing an auto BEFORE it strands a motorist in some remote locale.
I get it. This is part of the servitization of products story we’ve been hearing in recent years. Think of IFS as enabling its customers with tools to optimize the entirety of a product’s lifecycle. Every time a manufacturer or other firm can anticipate future customer needs and deliver these in a rapid, just-in-time window, then the customer, in theory, should experience a positive moment of service. In some situations, I call them moments of delight (and there’s a big difference in these terms, too).
Servitization also changes the economics of a manufacturer. These companies can go from selling a physical product to selling an outcome as a service. For example, a company might sell an elevator for a one-time fee and also offer to maintain and upgrade it for an annual service fee. Alternatively, it could sell floor transportation as a service for an annual fee. There are lots of ways to price these deals but basically you see manufacturers wanting to shift from one-time product sales to having long-term service revenues.
Another advantage of this is that manufacturers might upgrade or outright replace some products when they reach end-of-life. The customer gets an ‘evergreen’ solution without a new, big capital outlay and the vendor can get customers off of obsolete and hard-to-support product lines.
Not everything about servitization is seen as positive or win-win by customers, though. Some of this is due to the human condition and some of it is due to overreaching, greedy and/or unempathetic sellers.
First of all, not every customer wants a service in lieu of a product.Some people just want to buy a product and deal with maintenance issues when, and if, they come up. If the product is not a critical item, or, if the customer has adequate back/reserve capacity, then immediacy is not a big buyer value.
Likewise, there are people who’d prefer to fix/repair the products they own. I do. During the pandemic, I repaired our dryer (twice), our microwave oven, my neighbor’s car (twice), my grill, etc. I have the tools, the skills and knowledge. And, frankly, I hate any service that requires a $75-150 service call just to see what’s wrong and then another charge to come out and fix it. This issue is important and some equipment owners have had to sue manufacturers under a ‘right to repair’ claim. One recent case involves John Deere customers.
Some products don’t need this level of care/service.This weekend, I repaired a 25+ year-old brush cutter on our ranch. The part I used cost $4.97 plus tax. It’s the first repair it has needed in over 10 years. Frankly, something this simple doesn’t need a servitization agreement. Be honest readers, how many of you have tried to buy something low-cost and idiot-proof (e.g., a stapler) and the retailer tried to get you to buy a service contract for it and the contract cost more than the product. That’s a bad idea.
Some things will never qualify for the servitization experience. When I was repairing things at the ranch, I used some perfectly good tools that are 25-60 years old. They work well to this day as they were designed to last. Obviously, none of these had any sensors, IoT devices, comm tech, etc, on them. Sure, if you buy flimsy, delicate or overly complicated products, you might want the peace of mind that comes with a service contract. But if you buy straightforward, well-made items, is a service agreement even necessary?
No one addresses the service issues of products that are in service but were made by vendors who no longer exist We’ve got lots of farm and computer equipment, some of it fairly recent, that was made by firms that failed, were acquired by companies that no longer provide spare parts or support, etc. Servicing these products is an art-form as it requires great product knowledge, a willingness to use secondhand parts, and/or the capability to rebuild the failing item with components that can be made or re-purposed from something else. Servitization is not relevant if the manufacturer ceases to exist.
Some vendors make you re-buy the perpetual product you already purchased.This is a favorite of software vendors. A customer that has been paying an annual maintenance fee for a decade or more should be entitled to receive a more current version of the product. But, if the new versions of the product are only available ‘as-a-service’, then the customer must buy the product all over again to get it on current version.
Not every product or aspect of a product should be offered as-a-service. When you look at the thousands of parts that go into an automobile, should all of these come with smart technology embedded within the product and require an annual service agreement to boot? I actually had a conversation with a manufacturer of extruded foam products who was wondering if they needed to make the padded dash board lining ‘smart’. I said no. In a car, you have window seals, glove box hinges, valve stem caps, etc, that are just products — not services. Glove box opening-as-a-service? The manufacturer should design these components to last a lifetime. If they make these things so cheaply and poorly that asset management and monitoring is required, then customers will hate the products in short order. The servitization should go to high-wear, consumable items, or items that very expensive to repair. Given how many manufacturing customers IFS has, a number of these are likely making subcomponents and other parts that should be long-lived. Do they need all of IFS’ service management solutions? I’m not sure they all do.
Some manufacturers push the concept to absurd levels and irritate customers. Automobile maker BMW is requiring customers to purchase a subscription if they want to activate the seat warmers that are in their car. Car makers offer other subscriptions, too (eg, satellite radio). Personally, I wonder how much less my car would have cost if it didn’t come equipped with a bunch of hardware that I don’t want/need.
Some manufacturers capture way too much data and trigger ‘creep factor’ reactions from potential buyers. Some of the data collection requirements are absolutely unnecessary and constitute an invasion of privacy. What few firms will admit is that their ‘anonymized’ data can be easily retraced to a specific customer via triangulation with 1-2 external data bases. So, if you’re offering these services, you have to have bullet-proof protections of a person’s data, as the person and asset are intrinsically tied.
Finally, you have to decide whose data this really is. Does the data coming off of your building, coolers, engines, tractors, etc, belong to you, the customer, or the manufacturer? If the customer bought the device, they’ll think it belongs to them. If they are leasing the product, as-a-service, they may think it belongs to the service provider. But feelings will get hurt if this gets discussed AFTER a contract is signed.
What I’m trying to point out in this section is that not everything that can be manufactured can or should have a service component attached to it.That realization could actually limit IFS’s maximum potential sales revenues if a prospect only wants, for example, core manufacturing or financials.
The human factor
I’ve talked with numerous firms over the last several years regarding Industry 4.0, Servitization, IIoT and other related topics. Some of those conversations were prep for a book I did on digital transformation.
One aspect of Roos’s Moment of Service book that could have used more discussion involved the human factor. A lot of the use cases we heard at the show involved scenarios like predicting imminent machine failures and getting people, tools and parts scheduled to perform the needed repairs prior to breakdown — otherwise known as preventative maintenance/asset management/service management using sensor data, ML, scheduling, procurement and other tech. There were examples involving refrigeration, jet engines, paint and more.
While these are great stories, the key beneficiary of the technology is either the immediate user of the software or their customer. But, if it’s the customer, the solution may not be helping as much as it could be and may be missing a number of opportunities to make certain end-customer experiences more ‘delightful’.
For example, just because an automobile maker can monitor a number of critical systems (eg, drivetrain, braking, lights, etc.), the end-customer could still be less than satisfied if a non-monitored item (eg, a turn signal that won’t turn off) keeps malfunctioning or the customer can’t connect the vehicle to their home wi-fi signal to get needed repairs or software upgrades. If the servitization only deals with some product components and not others, is that going to make for happy customers? I don’t think so. I had a new car that wouldn’t connect with my cell phone. I took it back to the dealer a few times, spent all kinds of time with the cell phone manufacturer, bought new cables, etc. It was only when I found a brilliant tech on an internet site that offered up a clue. For those six weeks, I hated my new car and wanted to ditch it. That’s not a moment of service or delight as the diagnostics were incomplete, people were not helpful, etc. If I have to fix a vendor’s product or service shortcomings, it’s an epic failing in my book.
Human beings are the ultimate multi-variate solution to solve for. If a manufacturer did not anticipate and create technology to monitor a certain condition, no matter how rare it might occur, will those customers see these missed moments of service in a positive light? I doubt it.
Customers want few or no surprises. They really don’t want parts to wear out or fail. In fact, they’d probably prefer to buy many items without a service contract. They might like the low up-front cash outlay on an as-a-service arrangement but if they want to buy and hold the asset, an outright purchase may be their first preference. On the other hand, customers do want technology that identifies potential issues before they create expensive problems for them. This is where AI/ML, sensors and IIoT can really shine if they are part of a great asset management toolset.
What IFS should do now
Colleague Phil Wainewright and I had a couple of discussions at IFS Unleashed and we even tag-teamed an interview with Darren Roos — Phil will publish his write-up later today.
Phil suggested Roos acquire a revenue recognition accounting software tool to complement the IFS product line. His reasoning is that you can’t really call the IFS Service Management sub-suite a whole product if you can’t do the revenue reconciliation and ASC 606 accounting. That functionality helps accounting personnel identify what financial components of a deal should be treated as product or service revenue and which accounting periods these should be booked. I concur with Phil’s point and second his recommendation.
If Roos is thinking of new content or big ideas for next year’s Unleashed conference, my suggestion is that he talk about adding ‘Moments of Delight’ to his MOS story line.
For example, my flight out of Miami today had zero moments of delight. The crew couldn’t get anyone to push our plane off the gate, a passenger needed to deplane due to a medical emergency, rude passengers wouldn’t cede the aisle to let those of us with tight connections off the plane first. Worse, my glasses got lost in the disembarking kerfuffle and no matter how many direct messages I traded with the air carrier, all I got were worthless return messages that all said to the effect that they can’t/won’t help.
So, it doesn’t matter whether this airline has an engine power-as-a-service agreement with the jet engine manufacturer if the passengers didn’t experience a moment of delight. I sure as heck didn’t and the fact that no one from the airline cared or tried to help is really disappointing. And, that airline is not alone in this. If you’re getting nickel-and-dimed to death by an airline for bag fees, seat assignments, etc, then you know that no one is taking ‘moments of delight’ seriously. And when IFS sells to a prospect that doesn’t care about moments of delight, they might not care about Moments of Service either.
The moral of that flight anecdote is that IFS might really want to sharpen its long-term product direction and messaging so that its future ICP (ideal customer profile) includes companies that not only want to change their internal processes but also externally in the way they elate, delight and, dare I say it, love their customers. If you think that way, your servitization initiatives will avoid many of the issues above.
I really wanted to talk to more of IFS’ partners at the show but just didn’t get the opportunity to do so. If I did, I would have liked to know how the customer success changes and the MOS messaging was resonating with their clients/prospects. I did notice some partner firms were much more prominent at this year’s event, such as Baker Tilly Digital and PWC, while Accenture was not.
I’d like to see IFS flesh out the Moment of Service concept further. In particular, can IFS help its customers also create Moments of Delight and Moments of Resolution? The former describes the change in a customer’s perception of the product and its maker when a sticky solution is either avoided or its adverse effects minimized. For this, I’d love to see next year’s customer speakers at IFS Unleashed share with the crowd the before and after NPS (net promoter scores) their firm gets after implementing IFS’s solutions. As to the Moments of Resolution, this is a measure of how well service providers actually fixed or prevented a product issue. These are very different issues and each requires its own approach, technologies, etc.
What I’m suggesting is a more comprehensive set of metrics/measures that reflect the totality of a customer’s usage of a product/service. It’s admirable to address one or more aspects of the customer experience but shouldn’t the goal be fully inclusive? If it were, then I’d be experiencing something quite different when I fly. For example, if an airline knows a flight is delayed or that customers might miss connections, why doesn’t the carrier work on this matter while the person is stuck instead of waiting until the person finally arrives somewhere and gets off a plane? Wouldn’t the customer experience be better if they were greeted with options regarding future travel instead of a long line at a service counter? I’d like to fly that airline.
Until then, I’ll settle for improved moments of service but I’ll keep pining for something more…