Article

Gotta serve somebody

Have wrench, will travel. At one time, that was all that was necessary to make a living in the retail ATM service business. That's changing, however, with both ISOs and manufacturers applying increased pressure on service technicians to obtain certification and to keep an inventory of spare parts on hand.

March 19, 2002

Have wrench, will travel.

At one time, that was all that was necessary to make a living in the retail ATM service business.

That's changing, however, with both ISOs and manufacturers applying increased pressure on service technicians to obtain certification - proof that the tech has attended formal training classes - and to keep an inventory of spare parts on hand.

Service providers don't object to these requests on principle; they generally agree that both certification and parts inventories are effective ways to serve end users. But they say it's difficult to provide these features under the terms of most service agreements, which call for them to provide service on a time/parts basis.

Promises, promises

"The ISOs want machines installed within 24 hours, they want us to keep parts on hand, and they want to pay certain rates - but they want to pay on an as-needed basis," said Eric Muller, vice president of business development for Fibervision, a Port Charlotte, Fla.-based company that contracts with about 200 techs to provide nationwide service. "It's hard for us to predict where we're going to need the certified techs and the parts if we're paid that way."

"There's no guarantee that ISOs are going to give you the business," agreed Len Burns, president of Menomonee Falls, Wis.-based ATM TechServ. "You might end up sitting there with $3,000 or $4,000 worth of parts, and your phone's not ringing."

Muller said it would be far easier for companies like his to ensure service needs were covered if ISOs would agree to pay a flat monthly rate for service contracts, with all parts and labor included.

But that's not the usual ISO way, said Peter Kulik of KLCI Research, a Dayton, Ohio-based consultancy that has examined the service issue in several research reports, including "Use and Delivery of ATM Services," "ATM Services Industry Benchmark" and "Entry-Level ATM Trends and Futures."

"The standard ISO business model is to make as much as they can into a variable cost," Kulik said. "Having an upfront service contract certainly doesn't fit that model."

Muller believes that more ISOs are rethinking their service expenses, however, as competition continues to tighten.

"You can't let customer service go down the tubes, or that customer is going to go with someone else," he said. "How you support your machines and conduct maintenance is one way to differentiate yourself when pretty much everyone sells the machines for the same price."

How the business began

Burns, who contracts with about 30 service technicians across the U.S. to provide ATM installations and service, has been in the ATM service business since 1993. In those pre-surcharge years, he said there was not much call for certification.

Traditional manufacturers like Diebold and NCR sold service contracts with their machines and trained and employed their own service forces. Retail manufacturers like Tidel and Triton didn't begin selling ATMs in any significant numbers until surcharging hit in 1996.

At first, most ISOs serviced all of their own machines. But that became impractical as the retail ATM business grew. As ISOs expanded their geographic reach, manufacturers began maintaining lists of trained technicians and providing referrals to help their distributors locate certified techs all over the country.

Today, most mid-size to large ISOs use their own technicians in parts of the country where they have a heavy concentration of machines and contract with independents or other ISOs to provide service in areas farther afield.

That was the primary reason Triton created its TASC (Triton Authorized Service Contractor) program in late 1998, according to John Westmoreland, the company's manager of technical services.

"(A distributor) might be in Florida, and have an opportunity to sell a machine in Oregon," he said. "They wanted to be able to utilize the service capacities of other ISOs and third parties."

The program also helps ISOs more effectively compete for national contracts, Westmoreland added. "It was difficult for them to do that before because they didn't have a traditional service offering like NCR or Diebold."

Back to school

Westmoreland emphasized that not all certified techs are also TASC members. Triton, which offers bi-monthly classes at its headquarters in Long Beach, Miss., requires TASC members to complete separate classes on all of the different Triton product lines they plan to service and also to commit to keeping a certain number of spare parts for those products on hand.

Triton maintains a list of 100 TASC members, Westmoreland said. He estimated that about 40 percent of them are direct distributors, with the remaining 60 percent split between independent service companies and sub-distributors.

Tranaxoffers a one-day training session at its Fremont, Calif. headquarters that results in certification, with classes attended by both Tranax distributors and independent service companies. Those who complete the class are qualified to install and configure Tranax ATMs and to perform what Director of Operations Mike Sedrel calls "major sub-assembly replacement," swapping out major parts such as the printer or dispenser.

In June of 2001, Tranax introduced its ASP (Authorized Service Provider) program. After completing the two-day ASP class, techs can perform sub-assembly repairs - replacing a circuit board on a dispenser rather than the entire dispenser, for instance. Sub-assembly repairs are generally a far less expensive fix than replacements, Sedrel said.

Barry Kirkpatrick, service manager for Financial Technologies, a Jackson, Miss.-based ISO with about 3,500 machines under contract and seven in-house service technicians, lauded the ASP program for its emphasis on advanced repairs.

"It's made us a better service provider to the industry rather than just a parts replacer," he said. "We save money on some very expensive parts. There's an electronic board that controls the printer, for example. We can replace the replace the board at half the cost of replacing the printer."

Tidel offers a monthly four-day training class in the Dallas area that covers all of its makes and models, said Mike Henson, the company's manager of training and technical services.

Because the $50 cost of Tidel's training is significantly lower than that of the other manufacturers (Triton, for instance, charges $350 per class), it's understandably popular among techs, said Dane Young, president of ePay Inc., a Saginaw, Texas-based company that contracts with about 200 techs across the U.S.

"A lot of guys will go to Tidel to learn the basics and then just teach themselves on the other equipment," Young said.

Burns, of ATM TechServ, agreed that it's a common practice for techs - most of whom work on multiple lines of equipment - to receive formal training on only one. It's not just the expense of the actual classes that must be taken into consideration, he said, but also travel expenses such as airfare and lodging.

"I think it would behoove the manufacturers to have schools on-site for their distributors and offer them the choice of earning certification there," Burns said.

(Triton does send trainers to conduct on-site classes for its larger distributors, according to Westmoreland.)

Henson, who estimates that Tidel has certified about 1,000 technicians (including those who work on its TACC safes), said the company strives to keep the costs of training as low as possible. "It's just as much of an advantage for us as it is for them to get the training because it helps us offer better customer service to the ATM owners."

Young, of ePay, would like to see Tidel and other manufacturers go one better. He thinks there would be more qualified technicians if manufacturers offered free training. "They're the ones who are putting a new machine out there, so I think they should take more responsibility for making sure they've got somebody to work on it," he said.

Kirkpatrick, of Financial Technologies, believes most ATM techs would benefit from third-party training that would focus less on specific products and more on basic service issues that apply to all machines.

Kirkpatrick said other equipment-focused industries often offer this kind of training to supplement the instruction at schools run by manufacturers.

"I envision something like what they do in the air conditioning business, which is to teach people how to fix an air conditioner, no matter what make or model it is," Kirkpatrick said. "There are service issues that are the same with all of these various models and generations of machines." 

Wielding the warranty

Tidel, Triton and Tranax - which make up the bulk of the retail installed base in the U.S.  -  require any work covered by warranty to be performed by certified technicians only. However, said Fibervision's Muller, while parts are covered under warranty for a year after the machine is installed, labor is generally only covered for the first 90 days.

Not a whole lot goes wrong with ATMs in those early months, he said, especially in low-volume sites. "You'd be surprised at how little has to be done under warranty."

For that reason, ATM TechServ's Burns said, many techs shun warranty work. "They get more than enough non-warranty business to stay busy."

Burns suggested that one way to ensure that more techs would obtain certification would be to offer a higher pay scale for those with the credentials.

While certification provides a starting point for evaluating a technician's skills, it's no substitute for experience, said ePay's Young. "I'd rather have a tech who's not certified but has been on the job for four or five years than one fresh out of school," he said, adding that his ideal tech is one that possesses both certification and field experience.

Some ISOs now insist on certification because "they've been burned too many times in the past," said Mike Roeter, Fibervision's operations manager. "Maybe they got billed for three hours instead of one because the tech didn't know what he was doing."

More expertise is required as even low-end hardware becomes more sophisticated. "There's a huge gap between the 9500 and the 9700," Roeter said, mentioning Triton's first machine, released in 1995, and its latest model.

Selling service

While many ISOs have focused almost exclusively on hardware sales in recent years, some larger groups - especially those with in-house service staffs - are beginning to view service contracts as both a way to differentiate themselves from the competition and earn some additional revenue.

"We've been pretty successful with that," Kirkpatrick, said, adding that the easiest time to sell a contract is when a merchant is facing a major repair for the first time.

"They're usually pretty shocked to find out how expensive some of these parts like printers and dispensers can be," he said.

While every situation is different, Kirkpatrick said his company sometimes provides the repair at a discount if a customer then agrees to purchase a service contract. All subsequent repairs, as well as bi-annual maintenance visits, routine supplies like receipt paper and an Internet-based reporting system that allows merchants to view transaction activity, cash balances and other details, are covered under the contract.

Jim Stein, chief operating officer for Momentum Cash Systems, a Houston-based ISO with 3,000 ATMs under contract and 18 in-house service technicians, agreed that service is a logical selling point for ISOs equipped to offer it. "Everybody's been throwing out these machines, but nobody's been stepping up to work on them," he said.

In fact, he said, Momentum has "taken it a step further" by selling its services to smaller ISOs. Service was an early emphasis for Momentum, which owns nearly a third of its own ATMs, a larger percentage than most other ISOs.

"Once you get an infrastructure built, your guys might spend two hours a day keeping your machines up and running," Stein said. "Why wouldn't you use the other six hours to generate a little revenue?"

Stein said that large corporate accounts generally don't mind paying a little extra for service if guarantees are provided for items such as response times.

Yet Fibervision's Muller believes it's still more common for ISOs to downplay service contracts. "They're saying 'this machine never breaks down' as a selling point, so then it seems a little odd to try to sell a contract just in case it does break down," he said.

Just the parts, please

Parts seem to be a bigger issue than certification. Both manufacturers and ISOs would like service technicians to keep commonly needed parts on hand to cut down on return visits, which are needed after a tech diagnoses a problem but does not have the necessary part to fix it.

For warranty work, manufacturers only provide reimbursement for visits during which actual repairs are made; therefore ISOs must often cover the cost of these diagnostic calls.

However, ePay's Young said it isn't economically feasible for most techs to keep parts on hand - especially since many of them work on multiple makes and models. He estimated that about 40 of his 200 techs routinely carry spare parts.

He believes most techs would keep parts on hand if they could afford to do so. "There's nothing more discouraging than going out to a location and having to charge a customer when the machine isn't working after you leave," he said.

To encourage ISOs to provide their own parts, Young said he charges them a hefty restocking when ePay parts are used. "I charge them retail plus 10 percent plus shipping," he said. "That's 20 percent more than they'd pay if they did it themselves."

Triton's Westmoreland said the manufacturer offers two incentives in an attempt to increase the number of techs carrying spare parts (as mentioned before, a requirement for TASC members). Techs who purchase "spare parts kits" from Triton - at a lower cost than if they were purchased separately - pay no fee for training classes. And techs are given a "handling fee" of 10 percent of a part's value - up to $100 - when they order a new part from Triton to replace an in-stock part used to make a repair.

Kulik, of KLCI Research, said that many of the ISOs he's interviewed have told him that
manufacturers do not always live up to their promises to ship needed parts overnight. ISOs try to compensate for this unreliability, Kulik said, by conducting statistical forecasting.

"If they have 1,000 ATMs, they may go through an average of three printers a month, so they try to keep that many on hand and maybe one more, to give themselves a buffer," Kulik said.

Like most other cost-conscious businesses, Kulik said, ISOs prefer to keep their inventory to a minimum. "There's no real value in an inventory until something breaks."

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