Cisco recently published details of its 14% rise in profits from services sales. We see this as part of the general trend for companies to move from selling products to providing services. Companies such as Dell and Xerox have diversified into services, following in the footsteps of IBM which has successfully grown its consulting and IT services business while pulling out of the PC market.
Service companies now account for 75% of the economic activity in developed economies and the number of firms providing services is growing rapidly. The reason? Companies are less interested in owning the product. They want the outcome from using it and that translates to a product, backed by services. Our work with firms as diverse as BAE Systems and IBM shows that companies face common challenges as they take on new responsibilities:- defining what customers value, delivering it and managing the information and risks.
Professor Andy Neely is Director of Cambridge Service Alliance at the University of Cambridge, and a world authority on performance management and complex services.