Service Industry Outlook – Research Report

2024 Service Industry Outlook Research Report

Service Strategies surveyed and interviewed service executives from more than 35 leading technology companies to understand how remote work, artificial intelligence, and changing market conditions are shaping customer service and support. The research examines business outlook, investment plans, service revenue, operating priorities, and the workforce strategies organizations are using to grow their services businesses.

Who Participated

Half of respondents were managers, while 27% were directors, 18% were senior executives, and 5% were vice presidents. Their responsibilities spanned customer support (77%), customer service (50%), field service (36%), customer success (36%), and professional services (32%).

The study represented organizations of varied sizes. Forty-six percent reported annual corporate revenue below $100 million, 23% between $100 million and $499 million, 9% between $500 million and $1 billion, and 9% above $1 billion. Thirteen percent did not know their annual revenue. Most respondents, 82%, worked in service organizations with fewer than 500 employees; 9% had 500 to 1,000 service employees and 9% had more than 1,000.

The companies support a broad mix of offerings, led by cloud software and services (77%), enterprise software (68%), enterprise hardware (46%), and medical devices (27%). Seventy-seven percent operate globally, while 23% operate regionally. More than half of the organizations, 54%, run service as a cost center and 46% as a profit center. Of those operating as cost centers, 17% planned to transition to a profit-center model within 12 months.

Business and Service Revenue Outlook

Respondents described a generally stable to positive economic outlook for the next 12 months. Fifty-five percent expected no change, 27% expected conditions to improve, 9% expected significant improvement, and 9% expected a decline.

Operating budgets followed a similar pattern: 50% expected no change, 36% expected an increase, 5% anticipated a significant increase, and 9% forecast a reduction.

The outlook for maintenance and support revenue was stronger. Sixty-eight percent expected service revenue to improve over the next year, while 32% expected it to remain stable. None of the respondents expected revenue to decline. Over the preceding 12 months, 41% said service revenue as a share of company revenue had increased, 50% said it had remained the same, and 9% said it had decreased.

Profitability results were also encouraging. Half of respondents reported that service-business profitability increased during the previous year, 36% reported no change, and 14% reported a decrease. Respondents attributed improvement to reduced travel, remote work, greater efficiency, virtual technologies, and updated pricing for cloud and value-added services.

Where Organizations Are Investing

Organizations are prioritizing investments that strengthen both the customer experience and operational capability. The leading areas for increased investment over the next 12 months were:

• Staff training: 48%
• Compensation levels: 43%
• Service quality: 43%
• Service technology: 43%
• Staffing levels: 33%
• Management training: 33%

Most organizations expected several other areas to remain steady. Sixty-two percent anticipated no change in management-training investment, 62% anticipated no change in travel authorization, and 76% expected remote-office budgets to remain unchanged.

Service offers are continuing to evolve as well. Fifty-five percent bundle support into a subscription fee, 20% sell packaged value-added services, 15% price support as a percentage of the license fee, and 10% provide it free with the product purchase. Forty-five percent planned to introduce new value-added services within the next 12 months.

Top Service Initiatives

The highest-priority initiatives concentrate on efficiency, customer experience, and the skills needed to deliver both. At the first-priority level, organizations focused on enhancing efficiency through process standardization and optimization, improving the customer experience, and upgrading staff technical and soft skills.

Second-priority initiatives included maintaining and growing revenue, optimizing customer success for retention and growth, and modernizing infrastructure to improve efficiency and customer experience. Third-priority initiatives included creating new service offerings, managing costs efficiently, and exploring AI opportunities to streamline service delivery.

When asked what will most influence success in the coming year, respondents ranked these factors in order:

• Optimize existing processes
• Improve product quality to reduce demand
• Increase the technical expertise of staff
• Increase staff soft skills
• Create or expand the customer success team
• Implement knowledge management initiatives
• Increase the skills of the service management team
• Implement new online services
• Move more work to low-cost regions
• Outsource more to third-party providers

The results reinforce the view that services are a critical differentiator. Organizations are investing in transformation, tools that better enable service delivery, and subscription and SaaS business opportunities. Global expansion is also driving a greater need for standardization and process efficiency. Some respondents described a "white glove" approach for strategic accounts, enabling customers to define the service levels that best fit their needs.

Customer Success, AI, and the Changing Workforce

Scaling customer success is a key concern. Organizations are developing high-, mid-, and low-touch scenarios based on annual contract value and account strategy so they can support more customers without losing the personal attention strategic accounts require.

AI is an important emerging area rather than a near-term replacement for service teams. Exploring AI opportunities ranked among third-priority service initiatives, with organizations looking for ways to use AI to streamline service delivery. Respondents noted that as organizations shift work left and add AI, service teams must be agile, adaptable, and resilient. The study did not identify plans to reduce headcount because of AI, but it did indicate that roles and jobs will evolve as these technologies are adopted.

Remote Work Remains the Norm

Remote and hybrid work are embedded in how service organizations operate. Thirty-two percent of respondents reported that their staff work from home 100% of the time, and 36% said staff work remotely between 50% and 99% of the time. Twenty-seven percent said staff work from home 49% of the time or less.

Hybrid work, combining work from home and time in the office, was the most common policy at 54%. Fourteen percent reported mandatory work from home, 14% optional work from home, 14% optional in-office work, and 4% mandatory in-office work. When respondents identified reasons for returning to the office, communication led at 32%, followed by productivity and team morale at 21% each, and accountability at 10%.

Looking Ahead

The 2024 outlook points to a service industry focused on profitable growth, operational discipline, and customer experience. Organizations expect service revenue to grow or remain stable while they invest in people, service quality, and enabling technology. Success will depend on optimizing processes, strengthening technical and soft skills, expanding customer success capabilities, and thoughtfully applying AI and remote-work practices to meet changing customer expectations.