February 20178 The U.S.-based Technology Services Industry Association (TSIA) recently released its major global research report, `The State of Field Services 2016'. The report highlights the significant trends that have emerged over the last 12 months, which will ultimately affect us all:1. Commoditization of feature functionality - Customers are less willing to pay a premium price for technical capabilities.2. Acceleration of new consumption models - Customers continue to explore new mod-els for purchasing technology capabilities. Technology-as-a-service (TaaS), including product-as-a-service and managed service of-ferings, continue to see double-digit revenue growth, while traditional hardware and soft-ware license revenues contract or remain flat.The Way Forward for Field Services ProvidersBy John McVicker, Founder & MD, Best Technology ServicesIN MY VIEW3. Financial models are shifting - The revenue mix of technology providers continues to shift. There is less revenue and margin from selling technology as an asset, and more revenue from services and subscriptions.4. New offer types - The tried-and-true service portfolios are losing their appeal with customers. Traditional support/maintenance, education, and professional services offerings are designed to implement technology and keep it running.5. New organizational capabilities - Finally, all of the above trends are forcing technology companies to establish new organizational capabilities. The impact of these trends, measured from 3Q 2014 to 3Q 2015, has seen product revenues go through the floor for many of the well-established tech companies tracked by the TSIA Technology Services 50 Index (T&S50). Particularly worrying was the effect on the 19 hardware companies included in that group. The report notes that:"The contraction of product revenues was stunning. Quarterly product revenue for this hardware subset was down a net of $7.9 billion, with 74 percent of the companies losing ground year-over-year. Service revenues for hardware companies fared nearly as badly as product revenues, falling a net of $4.5 billion for the period."So, more than $12 billion of revenue for those 19 hardware companies simply vanished during Q3 2015 alone. And why? Because traditional service portfolios such as support, maintenance and professional services have always relied heavily on new product orders to generate demand, which is why they're referred to as `product-attached' services. But, if product is down, services go down too. Bearing these worrying figures in mind, it's clear that organizations need to profitably grow revenue. Using the revenue data collected, the TSIA report went on to plot where every field organization in the study sat in terms of what the TSIA defined as four differing states:State 1: Legacy product-attached offers are suffering low growth rates due to the significant drop in product revenue.State 2: Legacy offerings have commoditized, and new, profitable offers that adhere to the new consumption models have not been put in play.State 3: New offers have been put in play leading to growth, but they are less profitable than historic levels.State 4: Differentiated legacy offers and new outcome-based offers, resulting in profitable revenue growth. John McVicker
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