ServicePower’s (LON:SVR) business is a very simple one to understand, according to chief executive Mark Duffin.
“It gets the right labour to the right job at the right time, and it gets the parts there too,” he says.
“People complicate what we do. But quite frankly it isn’t that complicated.”
So for example, if you are an electronics company or retailer that provides a warranty for a product, ServicePower’s software will ensure that a technician is dispatched to fix it if it goes wrong (and makes sure he has the correct parts).
The consumers get a fast efficient service as the AIM-listed group plugs into a network of private tradespeople as well as the client company’s own network.
The retailer, or warranty provider, is able to reduce costs by outsourcing to SP, while the independent service provider enjoys a flow of potentially high-margin business.
It is a virtuous circle – or triangle at the very least.
Of course there is more to ServicePower than this skeleton outline I have given.
It has a field-management software platform that allocates and tracks the job from start to finish.
It also integrates parts distribution and is able to process third party claims.
It has “bolted on” analytics, which can aid fraud detection or be used to track parts.
And mobile and GPS applications make sure that contact with contractors is instantaneous.
There are competitors such as ClickSoftware and TOA Technologies that provide one of the component parts of the SP offering such as outsourced scheduling or claims processing.
But there’s no one entity that gives an integrated solution in one place and on one platform.
This is a huge tick in the box for SP as companies such as the major utilities and telcos look to outsource customer support functions that cost a great deal to run and generate zero revenues.
The business, which started life as a spin out from ICL some 14 years ago, is split 60-70 per cent in the US, with the remainder here in the UK and Europe.
Its ServiceScheduling clients include the truly blue-chip GE and Allstate in the US and Tesco here at home.
Meanwhile, the major electrical appliance makers such as Bosch, Pioneer and JVC are ServiceOperations clients.
A fantastic innovation that has the potential to really lift interest in the SP story is the company’s ServiceMarket platform, which CEO Duffin reckons could become the eBay for services.
It allows pre-approved service providers such as plumbers, builders and electricians (but not necessarily restricted to the traditional trades) to bid for work advertised on the site.
It will be launched at CrowdConf, a huge crowdsourcing event being held in San Francisco later this month.
For the uninitiated (and I count myself among your number) crowdsourcing is the next big internet wave.
At its very simplest the name describes the process of taking a job or service and outsourcing it electronically to the person willing to carry it out for the right price, and/or to deadline.
The concept so far as it applies to ServicePower was born from an acquisition made last year.
“We took a product not succeeding, enhanced it, put it in the cloud and we have now created a model proposition in the marketplace that nobody else is able to compete with,” says Duffin.
What marks ServiceMarket out from the sector’s pace setters such as Angie’s List, Craigslist and ServiceMagic, is the fact it is free at the point of use.
So you are not paying for what is effectively an electronic classified ad, or, if you are a business, having to stump up US$20 a time for a sales lead.
ServiceMarket will earn its money by taking a commission on the transaction.
“We are saying to the servicers you don’t have to pay, you can register for free and that’s going to irritate the hell out of all of these companies that are charging a fee,” says Duffin.
And don’t doubt that ServicePower can do this from a standing start. All the component parts are there to create this unique new platform, Duffin points out.
“By doing what we have done, by putting the ServicePower platform behind this, we have created a revenue-generating crowdsourcing platform off the bat,” he explains.
“We have got 100,000 technicians on our ServiceOperations platform and we can migrate them immediately to the ServiceMarket platform.”
There will also be the opportunity to rank and rate individuals and firms that will feed to separate site that could become the “Zagat or TripAdvisor of servicers”, Duffin reveals.
Forgetting the blue-sky opportunity provided by crowdsourcing,
ServicePower’s main challenge will be to maintain and grow the existing business, which in the six months to June 30 posted a pre-tax loss after a 16 per cent fall in sales.
The drop in revenues was the result of exiting two barely profitable lines of business. So the challenge will be replacing this with higher margin opportunities.
The recent £1.2 million scheduling contract extension with E.On pays testament to the quality of the service and its technology.
New business tends to be significant when it lands, though it is difficult to predict.
However Duffin adds: “We are undertaking a lot of proof-of- concept with a lot of businesses that haven’t taken this sort of service that are now wanting to.
“There are companies that have provided the service manually without the technology and we are being offered to provide solutions for that.”
The untold story here is the very robust balance sheet, which at the end of the first half held £4.1 million in cash.
ServicePower is cashflow positive so that figure ought to creep up towards £5 million by the financial year-end, analysts predict.
Not just a financial buffer, the funds will provide the group with the capacity to improve its technology offering, while there may be some wiggle room for acquisitions, Duffin reveals.
However, this possible move into new “new verticals” (business areas) doesn’t necessarily have to be transacted in cash.
“We have traditionally operated in consumer electronics, appliances, retail and insurance. But we are now moving into the utilities, telecoms and utilities markets,” Duffin says.
Minus the cash, the company’s enterprise value is just £7.3 million, or less than seven times historic profits.
“The real opportunity for us is that the business sits in a fragmented market and capitalising on that,” the CEO adds.