Servigistics Acquires ProfitScience, Debuts Suites

Service parts management specialist adds price optimization capabilities, rolls out expanded solutions lineup

Service parts management specialist adds price optimization capabilities, rolls out expanded solutions lineup

Atlanta  June 21, 2004  Service parts management specialist Servigistics has acquired a provider of pricing optimization solutions for service parts even as the company offers up an expanded line of solution capabilities in newly released suites.

Atlanta-based Servigistics announced that it has acquired ProfitScience, a provider of pricing optimization solutions for service parts, in a move that the provider says will add ProfitScience's substantial client base of automotive and high tech companies to Servigistics' own customer base in the high tech, automotive and aerospace industries.

"ProfitScience's pricing optimization solutions and deep pricing expertise will provide a unique, high-value extension to Servigistics' broad service parts management platform," Servigistics said in a statement on the acquisition.

Gary Brooks, executive vice president, marketing and alliances at Servigistics, noted that while price optimization has historically used in retail sectors such as apparel and grocery, as well as in the airline industry, pricing service parts offers a very different set of challenges because of demand elasticity and the sheer volume of service parts. One Servigistics customer, for example, is tracking more than 1 millions SKUs.

"Applying some type of pricing methodology [to service parts] based on market characteristics is a difficult task, so most companies use a cost-plus model," Brooks explained. "But they are really missing some significant revenue and profitability opportunities by pricing that way."

ProfitScience has applied various technology, including gaming technology, to optimizing pricing in the service parts area over the past decade, accumulating some 30 clients, about 90 of which are in the automotive industry, Brooks said. "They've delivered pretty significant value, improving gross profit margins by 16 percent and revenue by 10 percent."

The combination of the two companies will augment Servigistics' customers ability to ensure that they get the right part to the right place at the right time, and, with the ProfitScience functionality, at the right price, too, Brooks said.

Dwight Klappich, senior analyst with technology research firm META Group, offered a positive assessment of the Servigistics-ProfitScience deal, noting that making the right pricing decisions can have more impact on overall profitability than cost cutting alone, even in service parts.

"While other industries like airlines and grocery have adopted pricing optimization technologies, service part organizations are only now seeing the opportunity for better pricing strategies," Klappich said. "Servigistics has a proven track record in service parts management, and with the acquisition of ProfitScience, it will extend its reach by enabling companies to set optimal prices for service parts."

Bill Huyler, ProfitScience president and CEO, will remain with the company as president of Servigistics Pricing Services.

Meanwhile, Servigistics has also taken the wraps of an expanded solution set, rolling out three service parts managements suites  including Servigistics Profitability, Visibility and Planning  that, the provider said, have been designed to enable companies to transform their global service chains and improve customer satisfaction and profitability while delivering value to key stake holders in the extended, global service chain.

The new suites will run on Servigistics' Service Parts Management Platform to leverage its Web-based, multi-language and multi-currency capabilities, the provider said. The suites can be implemented separately to solve specific service challenges, or as a whole to provide a more comprehensive service parts solution, according to Servigistics.

Profitability Suite, which includes the pricing functionality from ProfitScience, is intended to help companies increase revenue and maximize profitability of global service operations through the evaluation of competitive prices and optimization of service parts and support contract pricing. This suite combines market research content with pricing optimization software and pricing expertise from ProfitScience.

The Planning Suite, Servigistics' traditional offering, is intended to help companies operate lean service chains and realize gains in customer service, operational cost and inventory investment. This suite provides functionality for forecasting, planning and optimization of companies' global service parts network. This includes strategic, tactical and operational decisions through all phases of the product lifecycle, Servigistics said.

The Visibility Suite provides event monitoring and analysis capabilities with the goal of delivering a real-time view of the service chain. By allowing the identification an analysis of unexpected service events as they occur, said Servigistics, Visibility Suite enables faster response times and more effective service chain collaboration. The suite also provides analysis of key performance indicators at all levels of the service chain, according to the solution provider.

With the new suites, Servigistics is growing out of its traditional niche, where its primary audience has been in the fulfillment and logistics function. The Profitability Suite, for example, is targeted at sales and marketing organizations, while Visibility expands Servigistics' reach into the engineering function.

"We are trying to extend the value equation to more of the stakeholders involved in the global service network," Brook said.

Tim Minahan, senior vice president of value chain research and strategy at technology consultancy Aberdeen Group, noted that with the economy rebounding, manufacturers are again focusing on how to grow top line revenues. "Efficient service parts management is a key lever to drive customer loyalty, enhance profitability and provide a competitive advantage in the marketplace," Minahan said. "With the acquisition of ProfitScience and the announcement of new product suites, Servigistics has compiled a platform to help companies intelligently design and manage lean, effective and profitable service operations.

For more information on solutions for the service and support chain, see the articles "In the Field and All Grown Up," the Net Best Thing column in the June/July 2002 issue of iSource Business, and "Time to Prove It," the Net Best Thing column in the April/May 2003 issue of iSource Business.