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Industrial Transformation

Industry is not earning enough from services

More and more industrial companies in Germany are offering services to go along with their products, such as maintenance work. But a third of these firms are not managing to make them profitable.

01 Feb. 2019
Industry is not earning enough from services (Photo: ZEW oder Fraunhofer ISI)

According to a study by the Fraunhofer Institute for Systems and Innovation Research (ISI), around a third of all industrial businesses throughout Germany offer successful services with other partners alongside their production, such as maintenance contracts and sharing models. According to Dr. Christian Lerch from Fraunhofer ISI , however, there is a continually growing group of businesses – about 30% currently – that have not generated any revenue from their service packages. Some companies have therefore withdrawn those services in whole or in part. One possible reason could be a high dependency on customers, which leads to services being demanded for free alongside the product itself. Researchers describe the trend as “worrying”. The challenge is to strengthen value creation and productivity, in particular for business support services.

This change is already in full swing in the automobile industry, as the industry compass Automotive 2019 of the consultancy company Sopra Steria reveals. According to this, manufacturers and suppliers are investing “massively in services to one side of the core business of vehicle construction”. The majority are working on the switch to becoming universal mobility managers, including fully networked Industry 4.0 production and modern sales strategies.