Seizing opportunities in an economic Upswing
By: Claudia J. Betzner

The 2004 SIA—AFSMI Executive Sumit for Services Leaders will be the largest group of C-level executives in the Service Industry ever assembled. SIA proudly announces Dr. W. Michael Cox will be the headline speaker on March 29 at the SIA – AFSMI Executive Summit to be held at the Mirage Hotel in Las Vegas, Nevada. Dr. Cox will address this year’s theme “Seizing Opportunities in an Economic Upswing.” W. Michael Cox is author of the widely acclaimed book Myths of Rich and Poor: Why We're Better Off Than We Think, which was nominated for a Pulitzer Prize.  He is Senior Vice President and Chief Economist at the Federal Reserve Bank of Dallas and Professor of Economics at Southern Methodist University.  Dr. Cox is widely published in the nation's business press and in leading academic journals.  In his eighteen years at the Fed, he has contributed to a number of public policy issues, and his research is frequently designated as important required
reading for Congress.

The media rely on Dr. Cox's ability to make plain sense out of difficult economic issues. He is a frequent guest on national radio, television and Internet programs, including ABC's John Stossel program, CNN, Fox News, Voice of America and National Public Radio.  He authors the acclaimed series of annual reports on rising American living standards and the new economy.  These reports receive extensive attention from leading publications, including The Wall Street Journal, The New York Times,USA Today, Los Angeles Times, Forbes, Fortune and Business Week, reaching an audience of over 200 million.  He is a regular contributing columnist for Investor's Business Daily.

Find out how to increase your wealth in an economic upswing.

In addition, we have two or three other noted authors that will speak and some will sign their books on Monday evening. Noted published speakers with books out include: Dr. James Alexander, Don Blumberg, Dr. Bill Bleuel, Steve Downton and Al Hahn. What a list of experts. The entire agenda is listed on the inside of this newsletter. This year is a little different because we hold the SIA annual meeting of members and guests on Sunday afternoon at which time we will discuss some important legal activity and actions by your Board of Directors. We will end the day with a Town Hall Meeting where the Board will be available to answer questions and you will get the opportunity to discuss many Service Industry actions. This meeting is usually during the breakout sessions but this year we are holding it so both groups will be together to discuss the Open Access Proceedings and other issues.

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New Sponsor & New Members

 

New Members The past 12 months Rollouts, Inc. LMS Service NetEagle Consulting MedEquip Biomedical Parco Wireless Siemens Business Srvs. Great Eastern Technology First Source, Inc. BIOCORDIS FRANCE CSI Computer Specialists, Inc. DecisionOne Corporation First Financial Computer Services, Inc. Ryzex Repair, Inc. Skill Medical Technology Technology in Medicine New this period: Halifax Corporation Chuck McNew, CEO John Scott, V.P. Alexandria, VA 703 658 2400 Getronics Robert Trottier, V. P. Tewksbury, MA 978 858 7287 POSDATA William McCubbins, Pres. Gerry Knight, V.P. Gig Harbor, WA 553 853 2350

SIA Proudly announces it’s newest Bronze Sponsor….

POSDATA
POSDATA, founded in 1973, is a nationally based service provider and value-added integrator for Bar Code Scanning devices, Printers, Portable Data Collection Terminals, Payment Transaction Equipment and other Retail Point of Sale Peripherals. POSDATA has three strategically located facilities located in Washington, Southern California and Kentucky to allow us to respond to customer needs quickly and economically.

POSDATA delivers a comprehensive set of service offerings that include all components of a product life cycle. POSDATA’s offerings include Staging, Deployment, Advanced Logistics, Disposal and Depot Repair services as well as, equipment procurement, custom warranty management offerings, pool/asset management, pick, pack and ship programs and key injection services for point of sale payment transaction terminals. These varied offerings enable us to serve the needs of Retail, Distribution, Manufacturing and Financial markets.

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2004 Executive Summit for Services Leaders

Mirage, Las Vegas, March 28—30, 2004

Golf—The annual Golf Tournament between SIA and AFSMI will be Sunday, March 28 at Stallion Mountain Country Club on the Citation Course which is about 15 minutes from the Mirage Hotel. Format will be shotgun at 8:30 A.M. This year it is much closer and is in a valley so the weather should be much nicer. The price for participation is $199 pp and includes your breakfast, green fees, your cart, practice balls and transportation to and from the Mirage. Awards will be presented to the First Place team, Second Place team, longest drive and closest to pin. Presentation will be made at the welcome reception on Sunday evening.

Grand Finale—This popular event which always ends the conference will be held from 6:30 P.M. until 9:30 P.M. at Ah-Sin, which is the newest restaurant at Paris Hotel over looking the Fountains of Bellagio. The event includes bar service for three hours, passed hors d’oeuvres, appetizers, choice of entrees and dessert for $85pp.

Breakouts—The breakouts will be on Tuesday afternoon with Dr. Ridgway and Jim Graham heading up the Medical Breakout. The Medical session will include updates on HIPPA, an overview of the Medical service industry and a special discussion about a possible inter-Association coalition group to address Competition & “Choices” issues and the open access advocacy position of SIA.This will be a lively debate and if you are in Medical Service one of the most important discussions you will have this year.

The other breakout will be primarily an IT discussion led by Randy Parks. Information which will lead off the discussion will be The Gartner Groups statistics and excerpts from their report on Market Trends. This discussion last year generated a lot of action within SIA and was the energy behind the Open Access Task Force being formed.

Both of these promise to be very informative and are roundtable discussions, not presentations. The outcome of the sessions will be important to your segment of the service industry for 2004.

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Letter from the President…..John Walker

Dear SIA Members

I thought this might be a great time to address what The Service Industry Association is as we again meet in Las Vegas for our annual conference. I realize this information is available on the front page of our web site, but for those who may not have visited recently I thought I would start off by presenting both our Mission and Vision.

Vision - The Service Industry Association is a non-profit association of enterprises involved in the support of high-technology products in the marketplace, represented by their top level executives, whose role is to promote the best possible range of alternatives & choices of services for those products, and support of the customers who use them.

Mission - To enhance the high-tech industry by promoting an open environment of interdependence & co-operation between manufacturers, independent servicers and users by providing value-adding solutions for customers.

It has now been a year since our conference of 2003. Our theme during last year’s conference was “Challenges and Opportunities in the Service Industry”. In line with this theme and our Vision and Mission this conference was an inaugural event. It was the first joint conference of the Service Industry Association and AFSM’s Executive Forum and brought a wider diversity of industry leaders together. During this conference, more so than in any prior year, I believe each attendee was afforded a greater opportunity to “Know their Competitors and Partners” as well as to forge new alliances, create new partnerships, and learn from each other. In addition it brought together manufacturers, independent servicers and users in an open environment. This year we are again offering a joint conference with AFSM, which will offer even more opportunities than last year to network, partner, and learn. This year’s theme is “Seizing Opportunities in an Economic Upswing” and is being keynoted by Dr. W. Michael Cox Senior Vice President and Chief Economist at the Federal Reserve in Dallas.

I am also pleased that our Open Access Task Force has been very active during this past year and during our annual meeting will be providing information regarding what they have accomplished, as well as what they have planned for next.

During last years meeting I announced the start of an annual Service Award program. This effort, though it has taken longer than planned to get up and running, is now in place and ready for full implementation. Walt Gasparovic of The Gasparovic Group is on the agenda for the conference and will provide additional detail behind this effort and how you will, as a member of SIA, be able to participate.

I believe all of the above activities as well as our entire conference support both our Vision and Mission, and I look forward to seeing each of you at this year’s event.

John Walker
Board President
Service Industry Association

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Open Access Task Force Update
by Randy Parks, Director IT Services, TFE Technology Holdings LLC

In our last update it was announced that the SIA had formed the Open Access Committee to help promote a fair and open competitive marketplace for high technology service providers. We also announced that procedures had been developed and published to allow SIA members to report situations in which they encounter restrictions or barriers to an open service marketplace. Since that time, our committee has had discussions with two member companies who reported what they believed to be unfair or restrictive practices.

In addition to this “re-active” mode of operation, it was decided that the SIA should be more pro-active on this issue and contact players in our industry to determine their position what we defined as the basic foundations of open service and support. We are pleased to report that the first correspondence was sent to over a dozen IT and medical OEM’s this past month and it is our intention to publish their responses to this communication so that their position on open service can become public knowledge for consumers, competitors and the world in general.

The next phase of action for the committee will be to create a public awareness plan to promote what we are accomplishing here and the role our Association plays in promoting fair competition in the service industry. If you would like a copy of the definitions of open service the committee created or to see a sample of the correspondence please contact Claudia Betzner or Randy Parks (randy.parks@tfetech.com). The entire Committee’s work, it’s actions, definitions of what we believe constitute “Open Access” will be reviewed completely in the Sunday afternoon SIA annual meeting at the Mirage in Las Vegas on March 28, 2004.

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SIA Executive Roundtable By Jon Scott, Sr. V. P. Halifax

The topics of discussion included a discussion of service industry opportunities given an improving economy; a review and discussion of legal, legislative and fair practices issues faced by the industry; and virtues of collaboration between OEMs and independent service organizations. Note that this summary is not the opinion of the Service Industry Association, but is a summary of the topics, issues and concerns discussed by Roundtable participants.
Service Industry Opportunities in an Improved Economy
Jon Scott, senior vice president of sales and marketing for Halifax Corporation, chaired this topic discussing the following issues.

1. Background: What is the lay of the current economic land?

a. Stock market: DJIA 2003 high 9930.82 (12/04), low 7524.10, up 15% over the last 12 months, and 19% YTD; NASDAQ high 1968.80 (12/04), low of 1271.50, up 39% in the last 12 months and 47% YTD
b. US GDP latest quarter jumped 7.2%, forecasts show 2.8% for 2003 and 3.9% for 2004
c. US unemployment was 6.1% for September versus 5.7% one year ago
d. Worker productivity is way up, 7% in Q2 and 8.1% in Q3, but this rapid rate of productivity is going to start to slow. Increased productivity lifted profits, real wages and living standards -- Cisco revenue per employee has climbed 24% in 2003 alone
e. Consumer prices are forecasted to grow only 2.3% for all of 2003 and 1.4% for 2004 so inflation appears to be in check
f. The prime rate remains historically low and borrowing restrictions are easing
g. Overall employment in the overall “services sector” grew at its strongest pace in the past 3.5 years
h. Finally, the recovery is “no longer jobless” – productivity gains have topped out
i. Best of all, our psychological outlook has turned positive

2. What might happen now to services in an improving economy?

a. Will hardware sales begin to recover? Hardware sales are increasing: Cisco expects 10% in the calendar Q4, and is internally projecting 20% growth next year. What about software; Microsoft sales have flattened out?
b. Will earnings continue to climb for the technology sector? Cisco earned $3.6B in its most recent year; their stock is up 80%in past year to $23.
c. After working hard to restore margins and profitability will services companies be hesitant to take on the added costs of new workers? Will they outsource lower margin activities to others?
d. Will global service providers be forced to aggressively rethink their service delivery models and methodologies to survive? Gartner has predicted that aggregation will reach 50%.
e. Is field service complexity dropping so much that a swap specialist is all that’s needed for many repairs? Does this mean that technical support, call screening and remote diagnostics will pick up the slack? Are service management systems ready for this?
f. What impact will dropping technology prices have on service revenues? Laptops and sophisticated communications equipment has reportedly dropped 25% in Q3, year over year in Europe?
g. Fortune level customers are lifting up their heads and looking to outsource more and more of their IT services needs but continue to push for unreasonable pricing and/or concessions from their suppliers

3. What did the Roundtable participants have to say?

Roundtable participants mentioned that Gartner is estimating IT maintenance services will be flat for 2004 with some moderate growth in 2005. Gartner says that traditional hardware services should begin to see growth of 3-4% in 2005, however Roundtable participants seemed to agree that more traditional break/fix maintenance will remain flat. The feeling was that units under maintenance would rise but revenues would be flat which points to per unit prices dropping. It was mentioned that more companies seem to be exploring self-maintenance instead of outsourcing their break-fix activities. It was discussed that the professional services component of IT services will probably grow in the 9-10% range in 2004 and 2005. Others noted that Fortune corporations are more and more looking toward total outsourcing arrangements or managed services. It was also stated that Fortune level customers are holding off investing further in IT until they have a better feel about the ROI of their existing investments – an example given was cited of a large insurance recently taking this position. It was discussed that the more traditional IT break/fix side management was still very reactive and did little planning for the future. One participant called the business “hostile” because of the low margins and the pressures applied by the large customer. In fact a participant quoted Gartner as saying that if you don’t reduce your service delivery costs by 15-20% every year, you won’t be competitive. Finally there was a discussion of the increasing trend away from monthly maintenance revenues (MMR) to a per incident or event revenue model and the impacts that this will have on the industry. Some wondered whether this was the result of the recent tough economy and when the customer realizes that service levels will ultimately be reduced as a result of this that the customer will want to revert to the more traditional MMR model.

4. Summary

It was obvious that the economy is improving and the impacts on the IT services markets should be positive. The biggest issues brought up by Roundtable participants seem to surround the changes in the delivery models over past practices. Given the comment about lack of forward planning one has to wonder if service management personnel are running from change more than embracing change and shaping it to their advantage.

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Virtues of Collaboration between OEMs and ISOs
by Ray Zambuto

Ray Zambuto, President & CEO of Technology in Medicine chaired this topic.

Premise: The medical side of service, being more fragmented than IT, has opportunities to enlarge its slice of the pie by providing flexible work force to the OEMs in areas lacking density. Is this precluded by the predatory practices of the OEMs?

Preamble: At the World Congress in Biomedical Engineering last summer. Brian De Francesca, CEO of Asia Bio Systems, an ISO in the Far East, presented a vision of service fifteen years in the future. He sees a world where, among other things…

“By this time, the medical device industry will have followed the IT industry’s lead of 2 decades earlier and flattened from a Vertical to a Horizontal structure, thus allowing for more efficient development, production, distribution and post sales support. The historic model of OEMs attempting to globally support their technology has failed – miserably. The farther away a piece of equipment is from its point of origin – the more difficult (expensive) it is to support under the current model – this is compounded when the device is also located away from dense urban centers. Offloading the post sales support requirements to local distributors has been tried for years and simply does not work. By 2018, enlightened OEMS will only design and develop medical technology; other companies will manufacture and assemble the technology, while yet other companies will be called upon for distribution, leaving the post-sales support to more efficient global support networks (descendants of modern day ISOs). These independent support networks will manage all aspects of post sales support including installations, user training, planned maintenance, repairs, parts stocking and shipping”

Summary Discussion Points:

• In the IT area, when the OEM out-tasks or out-sources a product line for service, they usually do the whole line, and the ISO “becomes” the OEM. This concept of working for the OEM does not impact on Open Service conceptually, since the OEM still controls the work – one or more ISOs benefit by sharing the OEM’s slice of the pie.
• There is no one answer. Each situation must be mined on its own merits. Some OEM’s are more predatory than others. In dealing with the OEM, you must make the argument that your presence on their “team” gives them an advantage, either financial or in the marketplace.
• Working with the OEM does not lessen the danger that the OEM may change the rules “overnight” and you must be prepared for this possibility. (As an aside, legal collaboration amongst smaller companies in the same business to pool their strengths, in a “fair and equal” means, can be used to respond to situations where reengineering of chips or diagnostics is required to maintain servicing capability.)
• The predatory practices of some OEMs effects the ability of ISOs to compete or collaborate with them. In the medical area, this can affect the cost of care and the public good. A problem is that the sun does not shine on this as it would, say, if Ford Motor Co pulled computer chips out of cars that were not on service contracts or withheld diagnostics from independent mechanics – forcing consumers to be serviced only at Ford for everything. In healthcare, the owners – hospitals often have purchasing standards that require open access to parts, technical manuals, and training at the point of sale. SIA should investigate to see if this practice can be extended to other market segments.
• An Open Service definition, including the treatment of and differentiation of intellectual property between “essential facilities” and “diagnostics” needs to be developed by SIA and promulgated. This was taken as input to the existing open service committee.

Legal and Legislative Issues faced by the Service Industry

This topic was covered by Claudia Betzner, executive director of the Service Industry Association and Randy Parks, Director Commercial Services for TFE Technology Holdings. Claudia discussed a letter from the SIA’s corporate counsel regarding the recent US Copyright Office’s ruling stating that Static Control’s did not violate the Digital Millennium Copyright Act (DMCA) by creating microchips. A copy of the memo is below.

From Ron Katz, General Counsel, SIA

On October 28, 2003, the United States Copyright Office ruled in favor of Static Control, holding that Static Control did not violate the Digital Millennium Copyright Act (known as the DMCA) by creating microchips designed to circumvent Lexmark’s killer chip. The DMCA prohibits individuals and companies from creating mechanisms designed to circumvent technological programs that restrict access to copyrighted works. Lexmark had contended that its killer chip is covered under the DMCA because it restricted access to copyrighted components contained in its Prebate toner cartridges.

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Executive Summit for Services Leaders
Joint conference of SIA & AFSMI

Theme: “Seizing Opportunities in an Economic Upswing”

March 28, 2004 – Sunday

Topics
3:00 PM
· State of the Association
3:30 PM
· Industry Issues – Legal & Service
Two Panels – One Legal focused discussing the legal issues in the Service Industry such as the Lexmark Case and a case involving Anesthesia in the Medical field.

4:30 PM
· The second panel would be the Open Access Task Force, discussing the new procedures put in place in the Service Industry Association – what it is, the process, any action from it thus far
Panel Participants: Randy Parks, Chairman of the Committee, Bill Beaumont, Kent Vestal, Malcolm Ridgway and Jim Graham.
4:50 PM
· Walt Gasparovic Survey
5:10 PM
· The Annual Town Hall meeting of SIA Members. This is your opportunity to discuss open issues in the service industry

March 29, 2004 – Monday (Monday Session Strategic, Tuesday Execution)

March 30, 2004 – Tuesday

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Service Industry Association

518 San Andres Drive
Solana Beach, CA 92075

Phone: 619 221 9200
Fax:858 720 8201
Email: cbetzner@aol.com

The Network for High Technology Service Promoting Customer Choices
___________________
Www.
servicenetwork.
org

Sponsors< & Board

Sponsors

Masterplan
Malcolm Ridgway,Sr.V.P.
Bruce Cree, President
Maintech
Frank D’Alessio, Pres.
Carole Greene, Sr.V.P. Mktng & Sales
Northrop Grumman
Hugh Taylor, Pres. IT CIS
John Rinas, Exec. Dir. Serv Del
TFE Technology Holdings LLC
John Walker C.E.O. & Pres.
Acceletronics
Steve Schwarz, Pres. & CEO
The Thomas Group
Paul Thomas, Pres. & CEO
RadParts
Dimitro “Dee” Romanyzsyn, Pres.
Stephens International
Doug Stephens, Founder & Pres.
Barrister Global Services
Hank Semmelhack, Chairman
POSDATA
William McCubbins, President
Gerry Knight, V.P.
D.F.Blumberg Associates
Don Blumberg, President
CSI Computer Specialists, Inc.
Bill Pershin, President
EAD Systems
Dave DeGiorgi, President
Board of Directors:
President: John Walker, Pres.
TFE Technology Holdings LLC
Sec-Treas: Open
Gen’lCounsel:Ron Katz, Principal
Manatt, Phelps & Phillips LLP
Exec.Dir. Claudia J. Betzner

IT Service Group
EX V.P. Randy Parks, V.P Ops
TFE Technology Holdings LLC
Sec. Jon Scott, Sr. V.P.
Halifax Corporation (formerly MicroServ)
V.P. Benefits & S.I.G. Dave DeGiorgi, Pres. EAD Sys.
V.P. Membership
John Rinas, Ex. Dir. Serv. Del.
Northrop Grumman IT CIS

Medical Service Group
Exec.V.P. Dr. Malcolm Ridgway, Sr. V.P. Masterplan
V.P. Membership Steve Schwarz, President Acceletronics
V.P. Benefits & S.I.G: Open
Sec. Jim Graham, Pres. Kinetic Biomedical Corporation
V.P. Ray Zambuto, President CEO
Technology in Medicine
Advisor to Board: Paul Thomas, President & CEO
The Thomas Group