January 23, 2008
sponsored by PCMI
ISSN 1550-9214         

NEW Acquires ServiceBench:

One is a leading service plan administrator and call center operator. The other is a major network hub for warranty professionals. Together they can set the standard for warranty claims processing, customer care, extended warranty administration, service dispatch, and end-of-life recycling.

Late last week, N.E.W. Customer Service Companies Inc. changed the shape of the competitive landscape with its acquisition of ServiceBench Inc., a small but essential player in the warranty claims processing industry.

Both companies are longtime sponsors of Warranty Week, of course, so perhaps most readers will not be surprised to hear that we think this is a very big deal for the warranty industry. But over the course of the past few years the major issue of formats and standards and interoperability has continued to dog numerous trading partners in the warranty chain -- except those that use ServiceBench. We think they've set a standard, and anyone who controls that standard is the gatekeeper of the industry.

The idea of ServiceBench as a hub -- a translator in the middle of the network that connects repair organizations to manufacturers -- is already a reality in the major appliance industry, where companies such as Whirlpool and Electrolux have appointed ServiceBench to the position of the de facto standard for the scheduling of service appointments and the submission of warranty claims. With this acquisition, that standard now has a chance to spread even further into the consumer electronics industry and to the retail channel, which are where NEW holds sway with clients such as Best Buy and Wal-Mart.

The Internet of Warranty Work

It's somewhat similar to what happened decades ago with electronic data interchange and electronic mail standards. Believe it or not, once upon a time everybody had proprietary standards with nifty acronyms that did everything except interoperate with each other. The movement of a simple text-only message from one computer to another was a major achievement. Then along came the Internet, and suddenly anyone who could connect to the network could connect to each other. Compatibility and interoperability came to be expected.

Ironically, NEW has been using the ServiceBench network for several years. Even more ironically, some of NEW's prime competitors also use the network, and are likely to continue doing so. First, they really don't have a choice unless they build their own ServiceBench-like network, and second, ServiceBench is already very experienced with the protocols and issues that arise when multiple competitors use the same network.

Tony Nader

Tony Nader, the chief executive officer of NEW, said this acquisition fits right into a strategic plan the company is calling its Service 360 platform. "About a year ago, we set out to produce an overall comprehensive service strategy for NEW whereby we could provide all of the post-sales service, from end to end, from the time a customer buys a product, all the way through the manufacturer's warranty period, through the extended warranty period, up to and including the end of life of the product," he told Warranty Week.

An essential part of that strategy, announced on January 5 during the run-up to the Consumer Electronics Show in Las Vegas, was the ability, according to the press kit, to give customer care representatives "a fully integrated view of servicer schedules, allowing them to schedule most in-home service calls during the first call. Through the Command Center, Service 360 then provides NEW�s Service Management Team with real-time updates of service events�scheduling, rescheduling, dispatching, parts procurement, service resolution and more�covering every aspect of the customer service process."

Make vs. Buy a ServiceBench

That sounds a lot like what ServiceBench does. So for NEW, having decided that this capability should be a centerpiece of its new platform, the question boiled down to make vs. buy? Obviously it chose the latter.

"I guess we really started talking six months ago," Nader said, about a possible acquisition. "We started doing business with ServiceBench back in 2003. We've had a tremendous amount of respect for them over the years. We obviously watched their progress over the years, and we saw them develop, and we continued to be impressed by their innovation. And with ServiceBench's innovations, they fit squarely into our overall Service 360 strategy," he said.

At the same time that NEW was putting together its end-to-end solution, some of ServiceBench's manufacturing customers were asking the company to delve deeper into service plan sales and administration. One result was the July announcement of an extended warranty solution detailed in a Warranty Week article last summer. OEMs such as Goodman Manufacturing Co. L.P. were asking ServiceBench to help them not only with the dispatch of repair personnel, but also with pricing and compliance with various state laws that govern the sale of service plans and extended warranties.

John Estrada, chief operating officer and a co-founder of ServiceBench, said it was a kind of help-you-do-it-yourself strategy that would help manufacturers get into the extended warranty business without the help of a third party administrator.

John Estrada

"We provided them a software solution to help them manage extended warranties themselves," Estrada said. "But then they came back to us and asked for help with compliance, or to help them administer the programs themselves. We weren't able to do that. But now, we have the ability," thanks to NEW.

"We were looking at providing the software platform to let you do Service 360. Now, we can help people really do the whole thing," he noted, by enlisting the aid of NEW. "Now we can provide them with a level of service that we just weren't capable of doing before."

An Affair to Remember

So in a way, while NEW was looking for a ServiceBench-like capability, ServiceBench was looking for a NEW-like capability. And they'd already been doing business with each other for four years. It's like one of those romantic comedies that people like Meg Ryan and Billy Crystal always seem to star in.

"Over the years, we've been trying to provide people with more and more capabilities, and a more complete solution, in terms of trying to help them with their entire service operation," Estrada added. "But we at heart are a software company. So we were providing them a software solution to allow them to run their business better. But they were coming to us and asking for more -- things that we just weren't capable of doing. They needed help building a service network, with answering the phone, providing a call center.

"We're good at providing the software solutions that help make all those things run better. Now, with the combined company, we have the resources not only to provide the software solutions to make things run optimally, but the infrastructure to do a whole lot more. If you need call center support, we can do that. If you need extended warranty programs, clearly we can do that," he said.

Kevin Porter, NEW's senior vice president of strategy and business development, said ServiceBench will now function as a wholly-owned subsidiary of NEW. Porter said rather than dwell on job titles or who reports to who, he and Estrada are more focused on making sure there are no problems with customers.

"We have some shared clients, where this combination gives us some wonderful opportunities to add differential value there," he said. "We realize that John is the heart and soul if not the face of the company as well, and certainly we look to him to continue to lead the innovation and thought process that develops."

Consolidating Locations?

So with the respective northern Virginia headquarters of NEW and ServiceBench separated by only a 20-minute car drive, are there any thoughts of consolidating them? "At this point I don't think our space issues on both sides of the equation lend themselves to an easy physical integration," Porter said. "And since we want to continue to run it as 'ServiceBench, an NEW Company,' it doesn't make sense to integrate right now."

Nader noted that NEW has already filled up two buildings in Sterling VA, so there is no room to spare. "For now, we'll just run it business as usual," he said.

International expansion is a priority, Porter said. He noted that ServiceBench already accepts and manages claims internationally for clients such as Whirlpool, through a European headquarters located in Eindhoven, Netherlands. And NEW has begun its global spread with the formal opening of a NEW China office in Shanghai.

"We think that by leveraging both of our presences, we're going to get value on both sides of this equation," Porter said. "We are exploring other countries as well."

Recycling Electronics

One offering that could help speed the NEW/ServiceBench expansion effort in Europe is an environmentally-friendly effort they're calling the ecoNEW service. This is the end-of-life segment of the Service 360 platform, which will allow customers to bring their discarded electronics back to a NEW-partnered retailer for a store credit.

In the U.S., recycling old electronics is the right thing to do, but in Europe, it's the law, or it will be as the European Union's Waste Electrical and Electronic Equipment Directive and the Restriction of Hazardous Substances Directive are enforced. Some products sold in EU markets already carry a small tax that is designed to finance the eventual recycling of the unit years from now.

"There is a real need in the marketplace to give consumers ways to safely and responsibly dispose of consumer electronics," Nader stated in a Jan. 6 press release. "Given our involvement in the service plan industry, it was a natural fit to bring a solution to market that would safely reduce e-waste and open up channels for parts."

Another aspect of the end-to-end capability recently launched by NEW is the Customer Care Portal, which gives the ultimate buyers of service contracts a self-help Web site where they can file a claim, schedule service, or track claim status, all on a Web site that has the look and feel of the retailer's or manufacturer's own. It's also designed to be a destination for those in search of product manuals, warranty information, or just some tips and tricks to use while operating or setting up their purchases.

Several years ago, in a series of articles profiling the major players in the extended warranty industry, Warranty Week noted somewhat humorously that for NEW, customer service was its middle name and warranty was its middle initial. We're still waiting for the royalty check for the coining of that phrase, but it's more true now than it was in 2004. For while extended warranties have always been about break/fix and claims processing, what NEW is now doing for clients such as DirecTV frequently has nothing to do with product defects or repairs. Many times, all the customer needs is a little advice.

Vertical Integration

With Service 360, the Web portals, and now the acquisition of ServiceBench, NEW is filling in the spaces between the capabilities it already had -- to answer the phone 24/7 in the client's name, to help a client price and sell its service plans to consumers, and to process all the paperwork. There are still missing pieces such as insurance underwriting and actual repair facilities, but NEW has now become perhaps the most vertically integrated player in the warranty industry.

"Yes we are an extended service plan provider," Nader said. "However, the customer care has always been a common theme throughout everything we've done. And we think this partnership of ours really helps extend customer care in both philosophy and practice."

"We had described for ourselves," Porter said, "an opportunity in the marketplace to support the consumer experience from metaphorically the moment you walk out the front door of the store, all the way through to how you take care of that product when you want to dispose of it appropriately. And then we married up to that the functionality and progress that ServiceBench had been making, and felt that it gave us functionality to fulfill a good portion of that value chain."

Another opportunity is for ServiceBench to take NEW deeper into the emerging market where manufacturers sell their own service plans, and for NEW to take ServiceBench deeper into the more traditional retail service plan environment. In fact, it's probable that a brand and a retailer may be selling service plans in competition with each other, and they'll both be NEW and ServiceBench clients.

Nader said NEW and ServiceBench plan to continue to stay out of automotive and home warranties for now, though over the longer term they are looking at ways they might package comprehensive service plans for both home electronics and major appliances. "As things become more connected, it becomes much easier to sell a whole appliance plan or a whole electronics plan -- a whole home plan from that perspective."

Legacies in Electronics and Appliances

They each would bring their legacies and histories into such an offering. Founded by Fred Schaufeld as the National Electronics Warranty Corporation at the end of 1983, NEW started out as an extended warranty plan administrator for mass merchants who were then moving heavily into home audio and consumer electronics.

Estrada, meanwhile, traces the roots of ServiceBench back to late 1995, when he Rob Baily, and Louis Rose co-founded Sideout Technologies Inc. and developed electronic catalog software for clients such as Michelin. Eventually that effort expanded to include warranty claims processing, and by mid-2000 they had renamed themselves ServiceBench Inc.

Their claims processing network went live in the fall of 2000, with the first customers being Frigidaire for laundry, food, heating, cleaning and cooking appliances, and Shindaiwa Inc. for its line of chain saws, trimmers, edgers, blowers, and sprayers. A year later, ServiceBench signed Whirlpool, and began to focus not only on warranty claims management, but also dispatch for the independent service networks of its clients.

"Our major start really was in appliances, with Electrolux and Whirlpool in particular," Estrada said. "But lately we've had a pretty major push into consumer electronics, computers, and HVAC. We've probably added four or five major consumer electronics manufacturers, as well as major retailers, so I think there's good positive overlap there."

NEW has also now diversified into numerous additional industries, Nader noted. "We're not just a CE-focused company," he said. "When you look at our client list, you'll see that we do business with #2 and #4 on the appliance list. And when you look at the ServiceBench client list, you'll note that they have a number of very large clients that are outside of the appliance area."

Nader added that there's nothing that limits the ServiceBench to just a few industries. "We see their platform as one that is easily carried over into all different classes of trade. So you can certainly expect that we're going to look for ways to try to bring those systems and technologies together," he said.

Estrada said that in the few days since this acquisition was announced, he's gotten a "very positive reaction" from ServiceBench clients. He said he thinks it gives the 110-person ServiceBench "a deeper foundation," from a financial stability perspective, not to mention the ability to sell a broader set of services. And that's a story he's looking forward to telling clients, either when he and Porter drop in on them, or when they come to northern Virginia to visit the dual headquarters in Sterling and Fairfax.

What Will Competitors Do?

Some of those clients, however, are going to be arch-rivals of NEW -- third party administrators in the electronics and appliance industries that also found value in routing their warranty paperwork and service dispatch capabilities through ServiceBench. What will their reaction be to the change of ownership?

Porter said he and Estrada have already discussed this, and will continue to meet over the next few weeks to make sure these customer visits also go well. But, as he noted, ServiceBench contracts already have confidentialities embedded into them. "Obviously we'll respect those," Porter said, as ServiceBench has always respected the separation between the brands of Frigidaire/Electrolux and Whirlpool/Maytag, while continuing to serve them both.

In an industry where failure rates and attachment rates are such valuable and confidential pieces of data, it's difficult to imagine NEW's arch-rivals continuing to rely on ServiceBench. Then again, who competes with ServiceBench, and who can they switch to? However, Porter suggested that some competitors may actually welcome the opportunity to focus on the underwriting and insurance aspects of the business, leaving NEW and ServiceBench to focus on the administrative and communications aspects.

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