With operations being so suddenly impacted the financial implications of the pandemic on our sector were profound and wide-reaching. As we assess the damage done to our sector, it was apparent that the issues we faced were echoed across almost every sector and the challenges faced in terms of economic impact would be felt for a long time...
One of the illuminating aspects of the Think Tank focussing on this side of the conversation was how varying service contract types offered better protection to financial risks, while others offered greater exposure.
As Alec Pinto, Regional Service Manager DACH & High Growth Markets, Leica Biosystems explained, “The other side of it, the other side of the impact of the pandemic that we saw, was the impact on revenues.
"Generally, it is a mixed bag with income," Pinto added. "If you have revenues that are tied into fixed services, i.e. where there is something that you do and then invoice for, rather than a contract, you start to see that drop off a cliff.
“However, contract revenues tend to stay stable. So, anyone who’s got 70 or 80% contract coverage rate listings, this didn’t hit or hit the bottom or the top line at all.”
For those sectors that had moved more fully into a cost-per-outcome basis, the impact of everything essentially being turned off for a matter of months, so no outputs being active to generate revenue could be a major issue in coming months as that type of revenue deficit hits home.
"The print industry is based around annuity payments link to machine usage. You can imagine the impact the pandemic and the subsequent lock-downs will have has on the print industry’s revenues..."
- Ged Cranny, Konica Minolta.
As Ged Cranny, Konica Minolta explained.
“The demand for field service incidents dropped by 87% in three days. Some companies around this table have got contracts that pay by the visit / pay annual maintenance fees. The print industry is based around annuity payments link to machine usage. You can imagine the impact the pandemic and the subsequent lock-downs will have has on the print industry’s revenues.
"Payments are collected normally in arrears three months after the event, so for the print industry , the true impact will be revealed sometime from July onwards. That is when we will start understanding how Covid 19 has impacted revenues / profit in this period, and the magnitude of the issue will be fully apparent.”
The financial impact of the pandemic was not helped by the inconsistency and uncertainty that came from differing governmental positions held at different times across different sovereign nations. While it is tempting and even common for the pandemic to be politicised, there really cannot be much blame handed out, as Tony Chapman, General Manager, Customer Services, Siemens commented earlier in the session the "the biggest challenge was the fact that this was a once in a lifetime event and not something we’ve ever planned for."
"As revenues dropped and markets dropped, we saw several companies start to suffer. Vendors had to adapt and keep delivery and business practices practical and pragmatic..."
- Rajat Kakar, IBM.
Simply, governments worldwide were reacting as best as they could to an unprecedented situation. However, this did of course put huge pressure on industry and it meant that it was only the most agile that were able to continuously adapt.
As IBM's Rajat Kakar commented, “Delivering on certain contracts did become difficult - there were several reasons, e.g. due to lack of people or governmental policy that went into effect. As revenues dropped and markets dropped, we saw several companies start to suffer. Vendors had to adapt and keep delivery and business practices practical and pragmatic ”
All members of the Field Service Think Tanks are speaking from their own personal opinions which are not necessarily reflective of the organisations they work for.
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