Servitisation strategies and sourcing decisions for product services: an exploratory study

Abstract

Through servitisation, companies manufacturing and selling durable goods enrich their offer with services supporting the product, the customers or even the customers’ business processes. This paper points out four different strategic approaches to servitisation, defined according to the financial objective of the service offer (cost control vs. profit/revenue generation) and to the customer interaction perspective (transaction-based vs. relationship-based). Moreover, this paper focuses on the sourcing decisions undertaken by servitised companies for the delivery of product-related services. Little research, indeed, exists relating sourcing decisions with the servitisation strategy. Four case studies from the automotive, elevator and appliance industries allow to analyse this link. Based on the case findings, a preliminary framework is proposed. According to the framework, a transactional approach in which services are seen as a ‘necessary evil’ leads to outsourcing, and to open market negotiation with product service suppliers. Instead, when the strategic relevance of the service offer increases, in order to craft long-term customer relationships or to increase profit, the need for integration with external suppliers increases, ceteris paribus. At a given point, the manufacturer would in source the service provision to maximise the financial and/or strategic benefits from product services.

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