Specialist
Former VP at Thyssenkrupp AG
Agenda
- Coronavirus impact on servicing requirements, and potential for renegotiation on contracts in coming cycle
- Growth of big four elevator servicing base vs independent servicers, and potential acquisitions
- Levels of predictive maintenance roll-outs and potential timelines
Questions
1.
Could you discuss contributions to revenue from basic servicing contracts, basic repair contracts, combined servicing and repair contracts and uptime contracts, as well as from elevator-as-a-service arrangements such as Otis One?
2.
Could you estimate the proportion of revenue from additional repair work done over and above existing contracts?
3.
What margin would you expect on a basic contract vs the spares and repairs part of the basic contract?
4.
Do you think there’s an ongoing shift towards full maintenance contracts?
5.
Could you outline how frequently elevators need service checks and part replacements? What are the major driving factors behind these things, including load weight, usage and legal requirements?
6.
How might the incidence of service checks change, if the coronavirus could potentially increase the frequency of elevator usage while decreasing the loads carried each time, particularly in commercial settings? How could the incidence of part replacements and repair work trend over the major lockdown period and afterwards?
7.
Could the coronavirus cause delays to additional repairs on top of basic oil-and-grease contracts? Are those required by law?
8.
Could lower usage and therefore less need for repairs put pricing pressure on the repair part of uptime contracts?
9.
Hospitality and airports make up slightly under 10% of Otis’ contracts. Do you think that’s a good benchmark for most of the major players? Could there be more significant pricing pressure in these areas due to financial distress?
10.
Do you think commercial customers are generally less price-sensitive than residential customers? I believe the latter are assumed to be more defensive.
11.
Could you estimate the servicing growth rate for the big four vs the ISPs [independent service providers]? What determines the difference?
12.
How would you describe the quality of big four servicing compared to work from the ISPs?
13.
Could you estimate the average churn of an ISP and a big four player?
14.
Why do you think customers perceive the big four as complacent?
15.
In a previous Interview [see Thyssenkrupp Elevator – Competition by Building Height – 18 December 2019], a specialist mentioned that there’s no ISP competition in high-rise. Do you think this is true globally?
16.
What pricing pressure and churn do you expect in low-rise residential from ISPs?
17.
Would you say mid-rise commercial, eg office space, is less price-sensitive?
18.
You mentioned that hotels and leisure are usually less price-sensitive. Would you expect that to still be the case given the coronavirus impact? What price increases might occur in mid-rise hospitality?
19.
Otis is getting carved out of UTC [United Technologies Corp], and it seems the company will become more market share growth-focused and competitive on pricing. Do you predict a new wave of pricing competition coming out of this, additional to the Schindler pricing competition?
20.
Otis has forecast a mid- to high-single-digit organic growth decline in service for FY20. Do you think this largely results from the planned pricing competition? Are there other factors at play?
21.
Could you comment on the split between the union and non-union elevator market? What are the pros and cons of working in each?
22.
Do you expect ISPs to take share in the unionised markets more quickly?
23.
In which regions are ISPs growing the most quickly or outpacing the OEMs’ growth most significantly?
24.
Which of the big four would you say is the best at acquiring and integrating ISPs?
25.
Would the big four acquiring the ISPs to eliminate the threat they pose increase their costs of growth over time? How significant is the cost of growth in install base for the big four through the acquisition strategy?
26.
Do you predict ISP valuations increasing over time and this cost of growth increasing?
27.
How has the price per unit increased over the last five years? How might it trend in the next five?
28.
Could you outline the levels of digital elevator rollout? We’ve got region-, application- and height-specific, and then you have full global rollout.
29.
I believe Otis’ Chief Digital Officer, Neil Green, claimed in a Wall Street Journal article that the company could capture another two million elevators out of the 14 million global install base with its Otis One solution. Do you think this is realistic? Why would a customer want to shift to the Otis One platform?
30.
You mentioned that there’s potential to roll out some form of digital elevator within a small subset of units on a much shorter timeline. Could you elaborate on that comment? Why would this be so difficult to scale up?
31.
Could the ISPs develop digital systems at a quicker pace than the big four, given that they have smaller bases? Would the diversity of elevator types still be too great?
32.
How would you compare the big four’s technology partnerships? There’s the 2015 Thyssenkrupp-Microsoft partnership, the 2016 Otis-AT&T and Kone-IBM Watson partnerships and the 2019 Schindler-Telefónica partnership. How do you think about the importance of having one of the big technology names? IBM Watson and Microsoft seem more attractive than AT&T and Telefónica.
