The aftermarket matters in business and industrial environments. When organizations invest in equipment, they need those assets to work reliably and productively. They don’t want downtime, especially unscheduled downtime. They hate unexpected costs for expensive spare parts or complex repairs. And that need for reliability, availability, and predictability becomes even more acute in times of economic uncertainty.
Demand for the components, spare parts, tools, and skills to keep industrial assets running smoothly has created a diverse ecosystem of service providers. They include the aftermarket service and support functions of equipment OEMs, in-house maintenance and reliability organizations, independent providers of industrial services and spare parts, and providers of digital services such as condition monitoring. As we’ve written elsewhere, a focus on services has generated significant value for players in the sector, and leaders are seeking to improve growth and profitability with advanced digital technologies.
Recent McKinsey research suggests that many of those efforts may be falling short. We surveyed 250 senior executives with responsibility for the procurement of aftermarket services at North American and European companies in six industry sectors.1 Seventy percent of that group tell us they have seen no improvement in performance from their service providers in the last ten years, with around a fifth feeling less satisfied today than a decade ago.
More worrying for incumbent service providers, our survey suggests that customer frustration with this lack of progress is now turning to action. Eighty percent of respondents say they are planning to make significant changes to service purchases in the next two years. In practice, that means either switching to a different provider or bringing outsourced service activities in-house (Exhibit 1).
What customers really want
Why are service providers failing to delight their customers? We asked survey respondents to tell us what matters to them when buying or renewing service contracts, and we followed up on our initial survey findings with in-depth one-to-one interviews with senior executives.
The headline findings from this effort won’t surprise anyone. Quality, cost, and speed—in that order—emerged as the top three buying factors across every industry and region in our sample. Our analysis, however, also revealed that customers are changing how they think about services in some important ways.
In quality, for example, reliable parts and first-time-right maintenance interventions are no longer enough. Customers also expect service providers to really understand their operations and their pain points. “We want suppliers that have expertise in the process and can quickly identify what needs to be done,” the head of asset management at an industrial player told us. “We want people to talk the same technical language we do.”
Customers are increasingly worried about their service providers’ performance in quality drivers, ranking as their top three concerns low-quality talent in the field force, poor spare parts availability, and slow turnaround times for repairs. And those problems look set to get worse. Securing sufficient technical talent is becoming increasingly difficult, with many skilled technicians approaching retirement age. Demand for field technicians continues to grow at the same rate or faster than the wider economy2 while unemployment rates in some regions are close to historical lows. Meanwhile, supply chains continue to face disruption, with ongoing geopolitical tension making parts procurement less predictable and more costly.
Customers are also clear about the costs that matter to them. Amid prolonged and ongoing market volatility and economic uncertainty, industrial companies are nervous about making investments in capital assets. More than 70 percent of the executives in our dataset say their organizations are planning to extend the lifetime of their assets rather than renewing or replacing them. And just under half are planning to invest more in existing equipment to support that shift.
In this environment, companies aim to minimize the lifetime total cost of ownership (TCO) of their assets and are willing to enter multiyear partnerships with service providers that can support that goal. Eighty percent of respondents say they are willing to pay higher prices to providers for services that reduce the TCO of assets over time.
Most customers also prioritize stability, preferring fixed-fee arrangements to volatile and unpredictable service costs. “The best of the best would be consistency in cost of doing business; that is my aspiration,” the manager of flight operations at a major airline told us. That thought is echoed by the vice president of supply chain at a consumer goods company: “We value predictability over short-term savings, and partner with vendors who provide a cost glide path over the years so we can make long-term agreements over parts consumption.”
Finally, our research shows that 43 percent of companies expect their providers to innovate and take advantage of advances in technology, data, and AI to improve service speed, offering faster, more effective, and more innovative solutions. “A best-in-class supplier should have the ability to accurately predict maintenance needs [such as consumables and spare parts] based on historical knowledge over a ten-year time frame,” says the same consumer goods supply chain leader.
Many current offerings in this space, appear to be missing the mark. Less than 30 percent of executives say they are currently using suppliers’ digital offerings, with unclear value propositions and a failure to address the operational pain points that matter most cited as the primary reasons for this low uptake. A director of fleet services in the aerospace sector sums up the issue succinctly: “Some providers are doing more airplane analytics, but we are busy and what we need from them is actionable insights.”
All this presents a clear opportunity for providers, especially those that can offer effective partnerships, responsive and proactive support, quantifiable TCO improvements, and flexible commercial models that fit the varied needs of their customers.
How to win in industrial services
Our findings might make difficult reading for service providers, painting a picture of stagnant or falling satisfaction and an increasing willingness on the part of customers to abandon their existing service partnerships in pursuit of greater value. Yet this environment also presents significant opportunities for providers to invest in the closer, longer-term, more innovative, and more collaborative relationships that industrial customers seek.
Customers consistently expect their aftermarket service providers to excel in three critical areas: quality, cost, and speed. While innovation is welcomed, adoption follows only when there’s a clear and direct link to business value. To meet evolving customer expectations and remain competitive, service providers likely need to fundamentally rethink their service strategy—starting from the customer and working backwards. This involves answering five key questions.
1. What strategies will maximize the value we deliver to our customers?
Customers expect their providers to deeply understand their operations and become true strategic partners. This requires the thoughtful combination of customer and equipment data with insights gathered through onsite interaction. By building operational intimacy, providers can better align their services with the customer’s financial objectives and identify new ways to unlock value.
2. Which service offerings will position us as a critical partner in our customers’ success?
Leading companies co-create services with their customers. By involving customers early—during prototyping and piloting phases—providers can ensure that services are not only relevant but also perceived as directly contributing to value creation.
3. What is the optimal blend of people and technology in our service model?
The traditional model of experimenting with technology through pilots and proofs of concept is no longer sufficient—especially when providers are facing the imminent retirement of nearly 50 percent of their field force. To remain viable, service delivery strategies must become remote-first by design, offering self-service troubleshooting and parts procurement, remote monitoring and support, and providing value-adding digital offerings to their customers (Exhibit 2).
4. How can we lead in delivering life cycle value through smarter asset management?
Customers are looking for service providers that can help them extend the working life of their assets while maintaining or even improving performance over time. They are willing to pay more for those benefits, provided the TCO sums add up.
Providers can help their customers optimize TCO in multiple ways, including managed spare parts offerings, equipment optimization services, refurbishments and upgrades, and extended support for older equipment. On the cost side of the equation, these offerings need to be monetized in a way that makes costs predictable for customers across the asset life cycle. That can involve equipment-as-a-service (EaaS) models, subscriptions, or comprehensive service agreements.
5. How can agentic AI help providers deliver services that are faster, more cost effective, and higher quality?
New agentic AI capabilities have the potential to transform services. For example, by improving providers’ remote and self-service capabilities, agentic AI could let customers resolve issues easily on their own, minimizing downtime and cost. In addition, as field force talent becomes more scarce, agentic AI capabilities can enable providers to maintain capacity and augment the capabilities of their people.
For providers that master the transition to customer-focused and TCO-focused offerings, the reward will be a bigger share of a larger services pie, with customers increasing services spend and preferring longer, closer relationships with a smaller, more select group of vendors.
