By Doug Sheridan, Managing Director and Founder, EnergyPoint Research If you listen to earnings calls of today's publicly traded oilfield equipment suppliers, it's easy to come away with the impression that the post-sale support function within certain original equipment manufacturing providers has little to do with ensuring customers have quality experiences with the products they purchase. Instead, the function seems more about collecting outsize incremental revenues designed to juice margins. A number of companies openly boast to investors (but we suspect not to customers) that the increasingly high-tech features embedded in many of today's products are good for business expressly because of the future maintenance income attached to the products. Much less common is the supplier that points to its low after-market revenues as evidence that its products are so mind-numbingly rugged and reliable. For most capital equipment these days, warranties typically run 18 months from delivery or 12 months from in-service date, whichever comes first. Beyond this abridged period, customers looking to control costs generally have the option to service mechanical equipment themselves or use a third party. Options are more limited, however, when it comes to more sophisticated and technologically oriented products, such as those incorporating proprietary microchips or engineered software. Some purchasers apply risk-adjusted or cost-of-ownership approaches to their vendor-selection processes in efforts to cope. Yet there's still a desire among many for longer-term and more robust warranties. And we smell competitive advantage for suppliers that might accommodate. Understandably, customers have never seen suppliers' obligations as ending once a product is purchased or delivered. Dissatisfaction arises when suppliers behave otherwise. One area that generates particular consternation is the availability, cost, and quality of replacement parts and refurbishments. In fact, the attribute currently rates lowest of the three we measure as part of our post-sale-support, customer-satisfaction index. Suppliers without standalone parts and service organizations, including dedicated inventory and personnel, seem particularly prone to disappoint. On the design side, problems arise when products have too many mission-critical components that, should these fail, can compromise the equipment's ability to perform its function. Buyers also tend to cast a skeptical eye toward high-tech equipment whose primary attribute is that it's "high-tech." Customers do acknowledge the promise of certain emerging technologies, however. For example, sensors that can alert operators and suppliers in real time of excessive wear and tear, or impending failure, of a part or entire piece of equipment seem particularly promising, especially for remote locations with longer delivery times. Something's askew if the objective of any function within any company is more about engendering customer dependency than customer satisfaction. The former seeks to effectively force customer retention by limiting buyers' future options; the latter seeks to earn customer loyalty over time through superior performance. As the industry moves toward a more advanced and networked oilfield, the need for adjustment to the standard model of aftermarket support seems increasingly apparent. Clearly, suppliers deserve to be paid for the value and capabilities they bring to the table. This is not in dispute. But customers also deserve good-faith assurances of the inherent quality of the products as originally purchased.
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