Capital Spending Cuts: The New Disruptor To The Service Lifecycle

Capital Spending Cuts: The New Disruptor To The Service Lifecycle

Will economic changes from COVID-19 create more demand for service providers and warranty departments that process those service claims? We look at the many recent changes to the economy, and what that likely means for service organizations and businesses that address the varied parts of the service lifecycle. 

The sudden shift in the economy from COVID-19 had a ripple effect on businesses globally. Changes in consumer purchasing led to a pivot in BtoB spending. That has diminished revenues in the short term, while future revenues remain uncertain. In response to these cash flow concerns, many businesses have pushed the pause button on capital expenditures (CAPEX), delaying big asset purchases until at least next year.

As a recent report from McKinsey explains, companies “have announced capital-expenditure cuts ranging from 10 to 80 percent.” What does this CAPEX slowdown by corporations ranging from Fedex to Disney mean for equipment manufacturers/OEMs, service providers, and warranty managers who handle service claims?

There are many unknowns in the long-term, but In the short term, expect a disruption to all levels of the service chain. 

For Service Providers, Uncertainty Ahead . . . Resiliency Required

For many OEMs, the CAPEX reduction trend points to fewer sales and lowered revenues. For the service and warranty arms of these businesses (and the third party service providers) that work to repair, maintain, or manage warranty claims issues associated with the equipment, however, it likely means more work (and more claims).  Why?

  • Older equipment that would have been replaced or upgraded as part of CAPEX spending is now staying in service longer
  • Service organizations will need to extend the life of the equipment, and this could require more maintenance or repairs
  • Older equipment is likely to come near the end of its warranty cycle 
  • The acceleration of digital transformations, while positive, is changing how service organizations operate, especially a move from reactive to proactive. In the short-term, this can shift workloads

Since the pandemic, “manufacturers and service organizations that had already invested in digital transformation have been more resilient,” said Aly Pinder Jr., Research Director, Service Innovation and Connected Products, IDC. The ongoing challenge for all service and warranty managers is “to reduce or eliminate manual touchpoints and shift to digital at a time of remote work,” said Pinder during a recent Aquant webinar Warranty + AI: The Next Frontier in Service Transformation. Digital-first approaches are the key to building necessary agility and future-proofing support and warranty management operations at scale, as we’ll explain next.

The New Normal: How AI Helps Service Teams & Warranty Managers

Today’s CAPEX slowdown will likely lead to more service issues as users extend the life of existing equipment. Smart service, fueled by AI and predictive capabilities, will be critical to resolving a higher volume of potentially more complex service issues on aging equipment. 

  • AI will help service teams drive better customer experiences, whether they happen remotely or on-site. Letting AI carry some of the service load will also liberate human service providers to do what they do best — manage the most complex issues.
  • At a time of social distancing and remote everything, the servicing of aging equipment,  AI tools will become increasingly important for proactively identifying equipment problems and providing timely service that’s precise, increasingly remote (or augmented, blending tech + human), and cost-efficient for all involved.
  • AI can also help service teams access and distribute tribal knowledge, helping to erase the skills gap. That translates into top service pros and less inexperienced service technicians being able to perform the same high level of service because of equal access to service insights. 


Warranty Claims As An Extension Of The Service Lifecycle

“Warranty is no longer viewed as an afterthought for organizations,” said Pinder, “but is increasingly seen as an important, strategic differentiator.” Will capital equipment manufacturers see higher warranty claims at a time when cash-strapped customers have decided to defer the purchase/replacement of existing equipment? The best answer is “probably yes.”

That answer begs another question: How can warranty managers better manage the claims process in a scenario of increasing claims? Again, data and AI provide smart solutions. For warranty managers, AI can help categorize risks related to claims, cutting down on manual investigation and liberating managers to focus more resources on their high risk claims, while leaving low risk claims for automated solutions.

How AI Brings the Digital Transformation to Warranty, Helping to Mitigate Disruption

AI can take historical data and previously hidden data from multiple sources related to equipment and turn it into actionable insights for both service and warranty management. Aquant’s AI-driven Intelligent Warranty Audit categorizes and prioritizes this disparate data, helping warranty managers quickly process or reject high-risk claims. 

The automated insights help lessen the burden for a workforce with a heavy workload. In addition, the insights regarding claims can be shared with the entire business to help drive better experiences across all functions, from product development and innovation to sales, service, and marketing. As Pinder explained during the webinar: “AI isn’t just a cool new thing, but it’s now a tool for making your entire business more resilient.”

To learn more about how warranty is the next key piece driving service goals forward, listen to the on-demand webinar: Warranty + AI: The Next Frontier in Service Transformation