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The golden age of support contracts is over – XaaS means your customers want shared risk, agility and variable cost models, which makes outsourcing essential.

It’s the wee hours of the morning in a large supermarket. The doors are closed, the shoppers gone, and a  team of engineers is undertaking POS repairs. Each one will be paid well, but not by the supermarket. Or by the IT company that provides the POS software and hardware.

Welcome to the new world of field services outsourcing. Switched-on IT companies are offering their customers on-demand field services, but no longer from their own large teams of engineers; smart companies are outsourcing simpler, low-margin installation and maintenance tasks to field services experts. One such company is Sydney-based BEST Technology Services.

BEST offers shared IT services, with their people on site for their customers, and use Field Service Lightning for automation and packaging. That programmatic approach has made their work more efficient, with productivity gains translating into better service.

Salesforce COO and SVP Service Cloud John Hernandez recently caught up with BEST Technology Services CEO John McVicker to talk about the move to XaaS (the idea of anything as a service), the benefits and challenges for service providers, and how the industry can tackle the latter head-on to make the most of the former.

John Hernandez: Traditionally, the service marketplace has been dominated by telephone calls. When somebody needed service, they would pick up the phone and call the company that they do business with to discuss that. But now we’ve seen a rise in digital channels – when you look at all of those digital channels in aggregate, they are used in a greater volume than traditional telephone calls.

That's a big market dynamic affecting companies and how they do business with their customers. Now, when you take that change down specifically into the shared IT services that BEST supports, we see that same dynamic – you have to have shared resources to perform customer service and the tech services that the customer requires. How is BEST managing this?

John McVicker: Yes, historically in that space, it would be you had the same IT person that performed the same job day after day, and that's become much more agile and fluid – customers just need a subject matter expert on product or problem X, and need them right now regardless of who they are or where they come from.

As you start navigating that more complex, on-demand world, technology needs to help manage and administer that. We’re leveraging technology that helps us deliver support anywhere, efficiently – it means we’re able to be much more adaptive to the market dynamics.

JH: You’re seeing the death of the support contract. Why do you think this is the case, and will it continue?

JM: Before XaaS, outsourcing was difficult. Support agreements with guaranteed chunks of margin billed in advance were commonplace, as were correspondingly large workforces. Since XaaS gathered momentum, more and more organisations are accessing services on a subscription or per transaction basis, and profits from hardware and software have headed south. Consumers want assurances that their investment will add value to their bottom line and are actively seeking out providers who offer new models, scale and no downtime. Very simply, this is why the golden age of contracts is dead.

Such disruption has created a push for efficiency as vendors and integrators move with this change and transition to the XaaS environment. We’re witnessing a shift to shared risk models where support is charged per device per month, to mirror the XaaS trend, or to an on-demand basis with no predictable volume or revenue. It’s increasingly clear that any enterprise without such a variable cost model will eventually die.

Labour costs are putting pressure on business, but field services, unlike support and other business processing functions, can’t be sent offshore. As a consequence, IT companies are intently focusing on lowering the cost of delivery while wages increase. One of the upsides is that predictive alerts enable remote fixes, so installation and maintenance can be deployed to lower skilled, less costly roles with no reduction in customer service.

Shifting lower level tasks to outsourced field services engineers frees up highly skilled resources for more productive and engaging tasks in the margin-rich layer of design and consulting.

As the concept of a shared economy propagates into different industries, it can help businesses offer their customers an effective, variable-cost service.

JH: Managing this change isn’t simple – companies face a ‘business as usual’ approach and complacency, and larger businesses are particularly immovable, running the risk that rather than innovate and get ahead themselves, they will be disrupted by smaller, more agile players. How might a company overcome these challenges?

JM: I think one way is listening to customers and how they want to interact. Understanding your audience and your customer base is going to set the tone of how aggressively you need to move or how much of a balance you can to have through that move.

The second is understanding the assets you have at play – either your people, the technology you use, or processes that you have established today – versus the end state that you're looking for, and understanding how you can put a phased approach on all three of those things.

You're going to have to change your processes to align with new technology and the opportunity that it presents itself. Then of course, you need to map that back into what your customer base is looking for, how fast you go or not, based on that input.

But if businesses are to thrive in this new way of doing things, my advice is to concentrate on the efficiency of process by removing non-value generating activities from the field service supply chain. Outsource these low-value tasks, and retain and deploy high-level resources to margin-rich tasks that create real value for the business.

This is the approach we have taken, and which technology has made far more efficient.

Download the State of Service report to discover how service leaders globally are responding to heightened customer demands.

John Hernandez is COO of Salesforce’s Service Cloud. He tweets at @johnher2010 and you can read more from him on the Salesforce blog.

John McVicker is MD of BEST Technology Services. One of the largest technology services companies in Australia, BEST resolves more than 250,000 technology field service requests every year. He tweets at @johnlmcvicker.