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IDC: Warranty transaction management tools mature but underused

PTC and SAP are the top warranty transaction management software vendors, according to a new IDC Manufacturing Insights report.

Warranty transaction management software has matured to the point where six vendors are offering comprehensive tools -- but too few manufacturers are taking advantage of them, said IDC Manufacturing Insights in a new report that names Parametric Technology Corp. (PTC) and SAP as market leaders.

"I was surprised at how similar all of the vendors were in some of their basic functionality," said report co-author Sheila Brennan, a program manager at the Framingham, Mass.-based research company. But with those basic functions evolving to include sophisticated technologies such as warranty analytics and customizable business rules, five of the six vendors achieved high ratings, according to Brennan. "When we looked across all of them, they were all very capable," she said.

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For more than a year, IDC has been banging the drum for improved warranty management with a series of reports, starting with a look at warranty management best practices and a maturity model in early 2011, followed by a MarketScape ranking of warranty analytics software vendors last spring. Brennan said the subject of the new report, warranty transaction management software, is the foundation technology because it’s where warranties are executed and relevant data is collected.

Nonetheless, the researchers found many warranty departments are undervalued by their companies. "We hear that they struggle with getting other parts of their organization to utilize their information," Brennan said. "We hear they have trouble getting budget. It's the stepchild, but it's really the best-in-class organizations that harness it."

Automating warranty management best practices

According to the report, warranty transaction management software has evolved beyond simple claims processing to include functions such as:

  • Warranty contract and policy definitions for capturing and managing "customer entitlement;"
  • Web-based product registration and claim entry;
  • Campaign management, including recalls;
  • Claim tracking and escalation;
  • Return material authorization (RMA) for receiving products from customers and tracking parts;
  • Cost recovery from suppliers of returned parts; and
  • Warranty analytics for "early warning" detection.

Large companies can process thousands of claims a day and need an automated system for tracking parts and associated data, according to Brennan. A reliable product-return mechanism is also important in quality assurance. "The system tracks that [RMA] number all through the process," she said.

The analytics tools in warranty transaction management software also allow manufacturers to analyze returns over time and identify problem parts, Brennan said. But among the approximately 20 manufacturers of various sizes that IDC contacted for in-depth interviews, only half had warranty analytics tools in use. "There are definitely still companies doing this on spreadsheets, but you can't really do it well," she said.

Using warranty transaction management software instead of spreadsheets also improves the customer experience by allowing faster, more accurate claims processing. It also makes it easier to decide whether to extend goodwill to retain customers, Brennan said.

"That's very difficult when you're digging through spreadsheets." In practice, more efficient processing of warranty claims is allowing companies not so much to reduce "head count" in warranty departments as to redirect staff to these more sophisticated roles, she said.

In the highest stages of warranty management maturity, manufacturers make warranty data available across departments, use it to redesign products, and apply advanced analytics for proactive decision making, according to the report. It recommends adopting warranty transaction management software in the early to middle stages of maturity, along with managed warranty processes.

To reduce risk and cost and get the most value from warranty transaction management software, manufacturers should make sure they have fundamental warranty processes in place and collaboration among "functional" entities, both inside and outside the company, the report stated.

Rating warranty transaction management software vendors

IDC looked at the alignment of each vendor's strategy with expected customer needs over the next three to five years. It also looked at how well the vendors' capabilities match customers' technical and business requirements. It plots the rankings on a two-axis MarketScape diagram that also depicts market shares.

PTC has the "leaders" segment all to itself, its second-place market share slightly exceeded by that of SAP, a "major player," ranked comparably to Tavant Technologies and Pegasystems, with Oracle just making the cut. Servigistics pulls up the rear as the sole "contender," with a market share like Oracle's that is a small fraction of the top four. Brennan declined to reveal the specifics behind each vendor's rank.

Despite their similarities, the vendors differ in important ways, typically in the type of ERP integration they offer and their emphasis on particular industry sectors, according to Brennan. "For example, a company that is offering warranty management as part of their CRM package is going to have much tighter integration as part of their CRM package, obviously, than those that use APIs [application programming interfaces]," she said.

Brennan said buyers can narrow the field of similar candidates by looking at which ones emphasize the features they need the most, such as strong support for field service that is well integrated with the warranty management functions. They should also look for solid use cases in their industry. "You really want a partner you can go the long haul with," she said.

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