Computer Services Limited (CSL)

Computer Services Limited (CSL) was set up inthe 1980s to provide a low-cost repair service forthe customers of one of the large computer man-~rers. It was one of the first third-party orindependent maintainers to compete directlywith the service function ri9Jr:lal eqa-o-ment manufacturer (OEM).

Because CSL had lower overheads, it was able tocompete effectively on price. It drew its workfor9ifrom ex-employees of the OEM's' service functionand was able to find more than sufficient businessfrom customers in the London area. At this stage,product life-cycles were relatively long and CSLwas"'ableto grow and sustain this business withouta significant increase in complexity. It realised fairlyquicKly that it would be able to provide a similarrepair and maintenance service for other makes ofcomputer. However, this did mean the implementa-tion of more sophisticated control systems tomanage a growing workforce of service engineersand to ensure the purchase and provision of sparesfor a wider range of computer products.

Case Exercise

The OEM realised that it was losing a significantamount of profitable business. Original equip-ment margins were being squeezed and theaftersales market represented an importantsource of long-term revenue as well as an oppor-tunity to build customer loyalty. The OEMresponded to the threat of the independent ~ain-tainers by setting up its own service division~sometimes repairing competitors' products atTOwercost. CSL was being forced to compete on'more than price.

At the same time, customers were asking for a'one-stop shop' where CSL would undertake tomaintain all equipment in a given area of the cus-tomers' business. This might include computers,peripherals, and other office equipment such asphotocopiers. CSL did not have in-house expert-ise for all this equipment and so developedalliances with service organisations, who pro-vided the equipment maintenance while CSLmanaged the customer relationship.

As computer equipment became more reliable,therevenue from repair and maintenance activities(sometimes called break/fix) fell, although cus-tomers still required CSL to provide this service aspart of the total package delivered. On the hard-wareside, CSL is called upon to provide a rapidresponseto its business customers to ensure highservice levels. As CSL has grown, its customerbasehas extended from the London area alone toprovidecover across the UK. At the same time, itscustomer base contains a number of nationalorganisations that expect consistent service stan-dardsacross a number of locations in the UK.

Tosustain this growth, CSL's operations havechanged in several aspects, including:

• Service engineers now deal with a muchbroader range of equipment.

• CSL offers standard service-level agreements(SLAs) to major accounts, offering consistentresponse to all customer sites across the UK.

• CSL has invested heavily in control systemsand IT to co-ordinate service engineers fromits central contact centre in North London.

• To improve response and increase the effi-ciency of its service engineers, CSL hasestablished help desks with tight targets tosolve an increasing percentage of customerproblems without the need for a site visit.

• Some CSL engineers have developed expert-ise to advise users on basic softwareproblems, though as yet this is not included inthe standard service offer. CSL is generatingsome revenue from this source, although it isunclear as to its profitability.

CSL needs to consider both the risks and bene-fits as it continues to grow and extend itsportfolio of services. There is a danger that CSLwill stray beyond its current operational compe-tence, but because the changes have beenincremental it may be that CSL is incurring morecost than is sensible because it has been some-what reactive to its customer demands. Inparticular, CSL must consider how to deal withthe increasing complexity of service provision.

CSL is also facing competition from larger organ-isations providing outsourced IT services tomajor companies. Despite diversification, CSLcontinues to face both lower volumes of busi-ness from each customer and erosion of itsmargins. Until recently this has been offset by theacquisition of new customers, but this rate ofgrowth is also slowing.

It has been suggested that CSL enter the IT solu-tions market. This would be attractive to some ofCSL's major accounts, who are hoping to investin significant IT solutions in areas such as enter-prise resource planning (ERP) and customerrelationship management (CRM).

Questions

In order to identify the issues for CSL:

1 Compare and contrast the operational chal-lenges CSL would face in delivering ITsolutions as opposed to its traditional business.

2 How would you recommend ·that CSL developthe required operational capabilities to deliverIT solutions?