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Thu 27 Sep 2018 12:42 PM

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Opinion: The servitisation model - a golden opportunity for GCC manufacturers to stand tall

Dubai offers an example in microcosm of what the Gulf manufacturing sector is experiencing, writes Keith Fenner, Dynamics 365 Business group director, Microsoft Middle East & Africa

Opinion: The servitisation model - a golden opportunity for GCC manufacturers to stand tall
The industrial sector is now Dubai’s third largest, and the government forecasts around $190 million to be spent on R&D by manufacturing companies as the sector expands to a value of nearly $16 billion by 2030, creating more than 27,000 specialised jobs.

GCC-based manufacturing companies face a tumult of challenges – rising costs from VAT, escalating customer expectations and transient workforces form a meagre sample. And yet the regional sector receives positive forecasts from market analysts.

Naturally, manufacturers are asking themselves, “How do I seize the opportunities while ensuring I don’t get buried under the challenges?”

The emerging answer is a fresh approach to revenue-generation, made possible by advances in technology: that of selling services rather than products – servitisation.

Dubai offers an example in microcosm of what the Gulf manufacturing sector is experiencing. The industrial sector is now Dubai’s third largest, and the government forecasts around $190 million to be spent on R&D by manufacturing companies as the sector expands to a value of nearly $16 billion by 2030, creating more than 27,000 specialised jobs.

Revolutions are made for visionaries

That change is coming – in fact it is taking place right now. As a result, regional manufacturers are turning to digital transformation to engage customers, empower employees or optimise operations.

They are inspired by the notion that as costs rise, doing more with less will be the difference between survival and extinction. But digital transformation not only offers the opportunity to do things better, faster, or cheaper. It presents an opportunity for stark differentiation, through reinvention of the entire business model.

And that is where servitisation comes in. The Fourth Industrial Revolution is no different to its predecessors, in that it is disrupting a paradigm to make way for a new one. In the case of 4IR, the lines between physical and digital are blurring and, just as before, those who smell the revolution in the air will reap rewards.

Those attuned few will note that servitisation is an obvious consequence of 4IR. Devices can now be connected together at significantly lower costs, as part of an Internet-of-Things ecosystem. Decreases in the costs of cloud data storage and advances in artificial intelligence mean access to extremely powerful analytics. So, manufacturers can gather and store data more cheaply, and act on it more effectively.

It is also important to notice that manufacturers’ customers have shifted preferences and expectations towards the purchase of a capability rather than an asset – thereby mitigating cost of ownership. And so, manufacturers find themselves in a market where the servitisation model is not only operationally viable, but also very much in demand.

Predictive service and the cross-sale

The model is built around an IoT-based connected-field service solution that provides manufacturers and their customers with automatic, remote, and guided support options. Sensors in installed equipment at a customer’s site notify the manufacturer’s service-centre staff of problems before they occur, enabling predictive maintenance.

Technicians can be despatched with the right tools and spare parts, negating the need for return trips, and customers experience less downtime. It is not hard to envisage the level of cost reduction and the increase in customer goodwill in such a setup.

In addition, cloud-based communication platforms allow collaboration on more complex issues between field technicians and office-based specialists. This also helps to negate the need for multiple site visits, delivering a further reduction in costs.

Servitisation not only decreases costs; it directly increases revenue. Options on how to sell, and profit from, a standalone product are limited. But when a business sells value-added services with that product, not only does the margin on each unit increase, but the sales team also has the opportunity to cross sell a range of services, including analytics and consultation.

Connecting the dots…

But to work effectively, a servitisation model needs to be built on a technology solution that connects all the aspects of business seamlessly – the customer site to the service centre; the field technician to the office-based trouble-shooter. Devices, data, customers and employees need to form a coherent and cohesive entity. In addition, your internal business must connect sales to marketing to logistics to field-service. Every internal organ must be aware of all others.

To accomplish this, consider a solution that combines ERP and CRM into a single platform that integrates field data with that of the back office. Technicians, service agents and the sales force gain complete visibility across customer assets and work history. Service reps can then resolve cases quickly, give clear advice, and provide customers with rich diagnostics.


Keith Fenner, Dynamics 365 Business group director, Microsoft Middle East & Africa

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