I D C M a n u f a c t u r i n g I n s i g h t s : A f t e r m a r k e t a n d S e r v i c e S t r a t e g i e s
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1 Global Headquarters: 5 Speen Street Framingham, MA USA P F I DC MarketScape: Worldwide Warranty T r a n s action Management 2012 Vendor Asse ssment I D C M a n u f a c t u r i n g I n s i g h t s : A f t e r m a r k e t a n d S e r v i c e S t r a t e g i e s VENDOR ASSESSMENT Sheila Brennan Joe Barkai #MI I N T H I S E X C E R P T The content for this Excerpt was taken directly from the IDC MarketScape: "IDC MarketScape: Worldwide Warranty Transaction Management 2012 Vendor Assessment" by Sheila Brennan and Joe Barkai (Doc # MI235797). All or parts of the following sections are included in this excerpt: IDC Manufacturing Opinion, In This Study, Situation Overview, Future Outlook, Essential Guidance, Learn More, Related Research, and Synopsis. Also included are Figures 1 and 2. I D C M A N U F A C T U R I N G I N S I G H T S O P I N I O N IDC Manufacturing Insights' research shows that warranty organizations still have significant work to do to improve efficiency and be leveraged by the enterprise for product quality improvement and service differentiation in the marketplace. Yet for many, warranty remains a largely untapped resource, and each warranty transaction is another lost opportunity to increase customer satisfaction and loyalty. Warranty transaction management systems are at the epicenter of customer interactions in the service world and are being called upon to do more than simply process claims. Many original equipment manufacturers (OEMs) today seek software packages with advanced functionality to replace disparate and cumbersome legacy systems and antiquated manual processes. However, as more warranty software vendors enter into the market, OEMs and brand owners face increased difficulty in sorting through the differing flavors of warranty software offerings. This IDC MarketScape report examines the capabilities and strategies of the key vendors of warranty transaction management software to provide essential guidance to product companies seeking to improve warranty management capabilities. Key findings include: All warranty management software providers evaluated in this report offer the fundamental warranty transaction functionality, business rules engine, and ancillary capabilities required by manufacturers today to process claims, execute material returns, July 2012, IDC Manufacturing Insights #MI235797e IDC Manufacturing Insights: Aftermarket and Service Strategies: Vendor Assessment
2 and recover costs from suppliers. However, differences in functionality and approaches do exist, especially when it comes to specific industry practices, so buyers need to develop a detailed evaluation plan to determine which, if any, of these are relevant. Some may find these critical, whereas others could find that essentially any of the vendors can meet their needs. The strategic fit of a vendor with an organization, and the alignment of the vendor's product road map with the organization's current and future warranty management and IT road map, should be paramount in vendor selection. To reduce implementation risks and cost, and to maximize business value from a warranty management application, manufacturers must ensure that fundamental warranty process structures and collaboration between functional entities within and outside of the enterprise are in place. I N T H I S S T U D Y This IDC Manufacturing Insights study uses the IDC MarketScape software vendor assessment model to provide a quantitative and qualitative assessment of the capabilities and strategies of the key vendors of warranty software. The assessment is based on buyer and vendor surveys, analysts' assessment, and research of industry best practices. This study comprises four key sections. The first is a definition and description of the characteristics that IDC Manufacturing Insights analysts have determined to be most critical in selecting a warranty analytics software package and influence vendors' long-term and short-term market position. The second part is the aggregation and visual representation of the evaluation into a single bubble chart format. This display concisely exhibits the observed and quantified scores of the software providers reviewed. The document continues with profiles and a brief assessment of each of the vendors and concludes with IDC Manufacturing Insights' essential guidance for warranty analytics software buyers and vendors. #MI235797e 2012 IDC Manufacturing Insights
3 M e t h o d o l o g y The IDC MarketScape is an IDC research methodology designed to identify the factors most conducive to deliver customer value in a given market and assess vendors participating in the market against those factors. This relative assessment provides buyers and vendors with a consistent and objective view of key market participants relative to market trends and needs and to other market participants. The general evaluation methodology and process is as follows (see the Learn More section later in this document for a detailed description of the evaluation criteria methodology): Market assessment using industry knowledge and ongoing research, combined with user interviews, buyer surveys, and the input of a review board of IDC experts Development of specific evaluation metrics to identify the ability of a vendor to meet short- and long-term market needs Compilation of vendor and product data: Detailed product and company information provided by vendor Product demonstration and briefing on capabilities and road map IDC and public data resources Customer interviews Quantitative and qualitative assessment of each vendor against the evaluation criteria Review of scores and assessment with each vendor prior to publication to ensure factual accuracy S I T U A T I O N O V E R V I E W I n t r o d u c t i o n As manufacturing growth in key sectors has been stunted by the uncertain economy, companies are faced by an urgent need to reduce costs, improve quality, and retain customers. Yet product complexity continues to increase to meet the ever-growing demands of globally connected and increasingly educated consumers, and warranty claims and costs continue to plague many companies. Furthermore, IDC Manufacturing Insights' research shows that: 2012 IDC Manufacturing Insights #MI235797e Page 1
4 Warranty cost variability is exorbitant within industries and even within individual companies when viewed over time. The overall industry's ability to drive warranty improvement is limited for lack of adequate methods and tools. The use of benchmarking to assess performance and implement continuous improvement is minimal. The application of IT tools to manage warranty transactions, perform warranty and quality analysis, and improve financial management is highly inconsistent. IDC Manufacturing Insights has established the Warranty Capability Maturity Model (WCMM) (see Methods and Practices: Warranty Capabilities Maturity Model, IDC Manufacturing Insights #MI227896, May 2011) to assist manufacturers in self-assessment and continuous improvement and to help them make certain foundational processes are in place that will ensure investments in processes or tools will generate the maximum benefit (see Figure 1). This IDC MarketScape focuses on the market for warranty transaction management applications, which, according to Figure 1, should be adopted in the early to middle stages of maturity along with managed processes. Page 2 #MI235797e 2012 IDC Manufacturing Insights
5 F I G U R E 1 W a r r a n t y M a n a g e m e n t C a p a b i l i t y M a t u r i t y M o d e l Source: IDC Manufacturing Insights, 2012 Warranty Transaction Management Applications Warranty transaction management applications have evolved beyond simply processing warranty claims. IDC Manufacturing Insights asserts that minimal basic functionality in today's out-of-the-box system should include integrated functionality for: Warranty and extended warranty contract and policy definition, whereby customer entitlement is captured and managed Web-based product registration (remote or internal) Campaign management, for example, product recall and service campaign definition and tracking Web-based warranty claim entry Dynamic warranty rules creation and management by business users (versus company's IT or contract or vendor's services) for warranty policy management and claims processing (pre IDC Manufacturing Insights #MI235797e Page 3
6 authorization, entitlement verification, suspect claims identification, adjudication, etc.) Warranty claim tracking and escalation path assignment Return material authorization (RMA) for receiving customer product and tracking parts return Support for efficient supplier cost recovery Warranty analytics to provide early warning detection capabilities of quality failures and suspect claim analysis and to improve warranty reserves forecasting. Analysis of warranty analytic capabilities can be found in IDC MarketScape: Worldwide Warranty Analytics 2012 Vendor Assessment, IDC Manufacturing Insights #MI233833, March 2012). Out-of-the-box functionality that speeds time to value, such as industry and role-specific report templates, or predefined business rules that can be activated or deactivated, is desirable. But these capabilities must be combined with system flexibility. Business users must have the ability to customize workflows and reports through user-friendly interfaces without IT involvement after the system has been implemented, in order to keep pace with the changing business environment. As cloud-based delivery and mobile applications are becoming mainstream, warranty management software buyers expect these to be available as needed. For product organizations that need to provide field repair, a tight integration between warranty management and field service is highly desirable. Page 4 #MI235797e 2012 IDC Manufacturing Insights
7 F U T U R E O U T L O O K For many manufacturers, warranty remains an underutilized resource for cost savings, improved cash flow, increased quality, and enhanced customer satisfaction. Warranty management will become an increasingly important capability of product companies. But increased market pressure will lead to growing investments in warranty software to more efficiently capture and manage transactions, better leverage information in the enterprise for improvements, and take advantage of each customer interaction. Manufacturers will look for software providers with not only basic features and functions but industry experience and detailed strategic road maps that align with their own. Buyers will want to ensure that enterprise systems are tightly integrated with the warranty system to exploit warranty analytic capabilities and ensure closed-loop connection to quality. For companies that provide warranty repair of installed assets and manage field service operations, integration with field service planning and execution systems will also become more pressing. Manufacturers will place more focus on functionality that provides visibility into customer satisfaction with warranty programs and service experience. System flexibility to fully understand and document customer goodwill opportunities and their impact will be needed. As more manufacturers adopt mobile technologies and software-as-aservice (SaaS) models to improve access and lower the burden on IT budgets, they will prefer vendors that exploit these effectively. I D C M a r k e t S c a p e W a r r a n t y T r a n s a c t i o n M a n a g e m e n t M a r k e t V e n d o r A s s e s s m e n t The IDC MarketScape vendor assessment for warranty transaction management represents IDC Manufacturing Insights' evaluation of the vendors that are able to meet current market needs and are likely to gain market share over the next few years, as denoted in Figure 2. Position in the upper right of the grid indicates that vendors are well positioned to meet market needs. IDC Manufacturing Insights divided potential key strategy measures for success into two primary categories: capabilities and strategy. The most critical criteria for positioning on the y-axis and the x-axis are as follows: 2012 IDC Manufacturing Insights #MI235797e Page 5
8 Position on the y-axis reflects the vendor's current capabilities and how aligned it is to customer needs. Under this category, IDC Manufacturing Insights analysts look at how well a vendor is building/delivering capabilities that enable it to meet customer technical and business needs. Position on the x-axis or strategy axis indicates how well the vendor's future strategy aligns with what customers will require in three to five years. The strategy category focuses on high-level strategic decisions and underlying assumptions about offerings, customer segments, businesses, and go-to-market plans for the future, in this case defined as the next three to five years. Figure 2 shows each vendor's position in the vendor assessment chart. Its market share is indicated by the size of the bubble, and a (+), (-), or (=) icon indicates whether the vendor is growing faster than, slower than, or at the same pace of the overall market growth, respectively. Market size and growth rates are estimated and are relative to the vendors included in this analysis. Thus a (-) does not mean a lack of growth but rather merely that a particular vendor's growth is below the average growth of the other vendors under evaluation. Page 6 #MI235797e 2012 IDC Manufacturing Insights
9 F I G U R E 2 I D C M a r k e t S c a p e : W a r r a n t y T r a n s a c t i o n M a n a g e m e n t M a r k e t V e n d o r A s s e s s m e n t Source: IDC Manufacturing Insights, 2012 Vendor Summary Analysis The sections that follow provide more information and detail the key observations made regarding one vendor's offering, capabilities, and strategy that led to their position in Figure 2. PTC PTC, founded in 1985, is headquartered in Needham, Massachusetts, and is best known for its parametric solid modeling and PLM software. More recently, PTC has been focused on expanding its capabilities to include service life-cycle management (SLM), and in late 2011, it acquired 4C Solutions (4CS), which had been active in the warranty industry for 15 years with its iwarranty application. PTC most 2012 IDC Manufacturing Insights #MI235797e Page 7
10 recently attained annual revenue exceeding $1 billion, and although the revenue from warranty systems accounts for a fraction of that, PTC is one of the largest and most tenured players in this market, with its 4CS bench strength. PTC's iwarranty implementations span across multiple industries, including automotive, farm, construction, industrial machinery, A&D, high tech, consumer products, and retail. Based on its scores in this IDC MarketScape, PTC is the only warranty software vendor positioned in the Leaders category. Through a series of modules, PTC's iwarranty offering contains all basic functionality, that is, product registration, claims adjudication, parts return, and supplier recovery. PTC's iwarranty application offers a rich portfolio of out-of-the-box reports and templates, augmented by system flexibility to allow business users to customize the software for their business. iwarranty offers a large number of predefined business rules that can be activated (or deactivated) for managing business process flow, transactions, and thresholds for claims validation. Business users can additionally define their own rules. PTC also offers an integrated warranty analytics module, and within the SLM umbrella, it offers service parts and technical information management. Integrations with virtually all CRM and ERP systems are fully supported. iwarranty is available as privately hosted Web-delivered software, or it can be deployed on-premise. PTC offers flexible contract terms for companies that wish to move between delivery models. Relative to other vendors in the group, PTC has extensive and tenured experience in warranty and in integrating its application with systems of record, that is, ERP and CRM for entitlement verification. It also has strong product functionality, market and customer momentum, and sales and distribution capabilities. PTC's opportunities lie in enhancing the firm's global sales and marketing strategy to maintain its market momentum and bolster its position by adding capabilities to the service life cycle portfolio, such as integrated field service management. PTC's complete warranty product offering and modular approach appeals to buyers, but the firm's pricing may need to be more competitive given the emergence of more vendors vying for the same budget especially those with warranty offerings integrated into their ERP system. PTC received excellent marks from its customers, including former 4CS customers. Guidance The PTC iwarranty application is highly capable and is a good choice for an organization looking for an out-of-the-box, complete warranty solution with flexibility for customization but where ERP/CRM Page 8 #MI235797e 2012 IDC Manufacturing Insights
11 integration through standard APIs is adequate and field service management is not immediately needed. As PTC fully integrates the former 4CS software under the Windchill umbrella and continues to evolve the SLM portfolio, PTC customers in certain segments, especially in complex engineered products, could further benefit from operating under a single unified framework. E S S E N T I A L G U I D A N C E A c t i o n s t o C o n s i d e r With worldwide warranty claims of U.S.-based companies climbing to $24.7 billion in 2011, it is clear that warranty management is major opportunity for product manufacturers, and they should embed strategic capability to address it. Manufacturers should ensure they have the processes and skilled resources to manage the warranty organization as well as the IT infrastructure to support the volume, velocity, and intricacies associated with warranty claims. This will be not only critical to customers in terms of brand loyalty but instrumental to the organization for product quality and efficiency improvements. Furthermore, manufacturers need the tools to help improve supplier relationships, cost recovery, and integrated quality performance in these areas. Product companies will need to seek software vendor partners with experience in their industry and that have a product road map that aligns with their current and future warranty management and IT needs. For Manufacturers Determine need and assess capabilities: Define requirements. Use the Warranty Capability Maturity Model to assess your current state and identify areas for improvements that will benefit from improved warranty management software. Remember that software implementation must be accompanied by establishing the proper foundational processes and tools to fully benefit from a holistic warranty management solution. Prioritize. Identify implementation road map priorities at a high level, considering both core transactional functionality and longer-term functionality such as supplier recovery and analytics. Analyze benefits. Determine a methodology for assessing return on investment and create a model to justify the investment. In addition to the commonly used discounted cash 2012 IDC Manufacturing Insights #MI235797e Page 9
12 flow method, consider using other methods such as real options, if relevant. Create a short list for vendor selection: When comparing warranty application providers, it is essential to consider not only a vendor's current capabilities but also a vendor's future road map to ensure long-term alignment. It should be underscored that many factors are considered (refer to Tables 1 and 2) and attributed to the relative placement of each vendor application on the vendor assessment graphic (refer back to Figure 2). Therefore, vendor selection should entail detailed evaluation, reference checks and, if possible, a trial run. For Vendors Develop depth of experience in targeted industries and market segments. Ensure product road maps are detailed and customer-value driven. Share as much as possible, including detailed release plans, with customers. Focus on delivering a combination of out-of-the-box functionality and efficient customization tools to accelerate time to value. Help buyers understand how data will be migrated from current systems and what training will be required. Develop capabilities to extend the value of core functionality, for instance, use warranty information to assess product quality and usability issues. Support both on-premise and (private and public) cloud deployment models to meet future customer demands. This means offering commensurate licensing policies that reflect the delivery model and allow customers to scale up and down as needed. Publicize credible use cases and customer ROI. Develop ROI templates to help customers understand and quantify benefits. L E A R N M O R E R e l a t e d R e s e a r c h IDC MarketScape: Worldwide Warranty Analytics 2012 Vendor Assessment (IDC Manufacturing Insights #MI233833, March 2012) Page 10 #MI235797e 2012 IDC Manufacturing Insights
13 Real-World Challenges in Warranty Analytics (IDC Manufacturing Insights #MI230334, September 2011) Methods and Practices: Warranty Spend in U.S. Manufacturing, 2010 (IDC Manufacturing Insights #MI229203, June 2011) Methods and Practices: Warranty Capabilities Maturity Model (IDC Manufacturing Insights #MI227896, May 2011) Market Analysis Perspective: Worldwide Business Analytics Solutions 2010 The Emerging Mass Market for Business Intelligence, Analytics, and Data Warehousing (IDC #227397, March 2011) Methods and Practices: Warranty Spend in U.S. Manufacturing 2009 (IDC Manufacturing Insights #MI224909, September 2010) Chrysler Wages War on Warranty (IDC Manufacturing Insights #MI225075, September 2010) Camstar Acquires SigmaQuest, Giving Manufacturing Companies a Broader Set of Quality Management Capabilities (IDC Manufacturing Insights #MI224789, September 2010) Advanced Signature Analysis Closes the Quality Loop (IDC Manufacturing Insights #MI224787, September 2010) S y n o p s i s This IDC Manufacturing Insights report uses the IDC MarketScape vendor assessment model to provide a quantitative and qualitative assessment of the capabilities and strategies of key warranty transaction management software vendors. The assessment is based on vendor and user surveys, analysts' assessment, and extensive knowledge of industry best practices. "In today's business climate, where product quality and warranty coverage are key differentiators, brand owners and product manufacturers know they need effective warranty management," says Sheila Brennan, program manager of IDC Manufacturing Insights' Smart Services and Aftermarket Strategies research and advisory service. "They also need to fend off inefficiencies and reduce financial liability resulting from suboptimal warranty management. Organizations cannot rely on byzantine software developed in-house or on a myriad spreadsheets to manage warranty. They must invest in warranty management software tools that fit their business needs, that support customer expectations, and that can scale and adapt to business changes." 2012 IDC Manufacturing Insights #MI235797e Page 11
14 C o p y r i g h t N o t i c e Copyright 2012 IDC Manufacturing Insights. Reproduction without written permission is completely forbidden. External Publication of IDC Manufacturing Insights Information and Data: Any IDC Manufacturing Insights information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Manufacturing Insights Vice President. A draft of the proposed document should accompany any such request. IDC Manufacturing Insights reserves the right to deny approval of external usage for any reason. Page 12 #MI235797e 2012 IDC Manufacturing Insights
I D C M a n u f a c t u r i n g I n s i g h t s : A f t e r m a r k e t a n d S e r v i c e S t r a t e g i e s
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