Your CFO thinks Service is a Cost. Your competitors know better.

Disclaimer: Unless explicitly stated otherwise, these articles are based on general industry examples and topics only and do not relate to, represent, or imply any current or former employer.

When Service Failure Becomes Personal

Many years ago, I experienced this dynamic firsthand with a company car from a leading premium German manufacturer: a brand-new vehicle developed critical issues within weeks—a failing windshield wiper motor, a repeatedly crashing navigation system, and a defect in the brake assist system. What followed were multiple workshop visits where some of the faults were dismissed as “not reproducible,” despite being clearly documented on video, leaving the impression that the problem was not being taken seriously. Only after escalation to companies´ group CEO the issue was finally resolved through part replacement. As I told the workshop manager at the time:

What a disaster! If this had been my private vehicle, I would have withdrawn from the purchase long ago. Every minute I spend in your repair shop is lifetime I would rather invest elsewhere.

A Misclassified Function

Ask a CFO where the service organisation sits in the company’s value architecture and the answer, in many MedTech companies, will be somewhere between a necessary cost and a margin diluter. Ask a commercial leader and the answer is often similar: service is what happens after the sale, a support function that keeps customers from complaining rather than one that drives growth.

This framing is not only analytically incorrect. It is commercially costly. And as the MedTech industry navigates an environment of compressed hardware margins, increasing regulatory demands, and a customer base that is under sustained financial and operational pressure, the service organisation is becoming one of the most consequential levers available to executives who understand how to use it.

The global MedTech market continues to demonstrate structural resilience, with industry revenues reaching approximately US$584 billion in 2025 and sustained growth of six to seven per cent projected through the next cycle. But that headline growth conceals significant variation in profitability and customer retention across the industry. Companies that are outperforming their peers are, without exception, ones that have extended their value proposition beyond the initial device sale — and the service organisation is central to that extension.

Why After-Sales Has Been Systematically Undervalued

The undervaluation of service in MedTech is not accidental. It is the product of several structural factors that have persisted across the industry for decades:

First, revenue recognition. In a product-centric model, the device sale generates an immediately recognisable, largely predictable revenue event. Service revenue — whether from contracts, time-and-materials arrangements, training fees, or consumables — is often more fragmented, harder to forecast, and spread across longer time horizons. Finance functions trained on product economics tend to discount it.

Second, organisational incentives. Sales organisations in MedTech are overwhelmingly rewarded on device placement. The commercial infrastructure, the quota structures, the commission models, and the management attention flow towards placement volume. Service renewal, upsell of service contracts, and customer satisfaction outcomes are rarely weighted equivalently. The result is a structural neglect of the installed base, which is precisely where service revenue and long-term customer retention reside.

Third, the invisibility of service failure. When a product development project fails, it is visible, expensive, and attributable. When service quality degrades — response times slip, engineer competency declines, spare parts availability deteriorates — the damage is slower and more diffuse. Customers do not always articulate their dissatisfaction directly. They reduce their next purchase, choose a competitor for the adjacent product line, and are less forthcoming when new technology is presented. The revenue effect is real, but it takes longer to appear on a dashboard.

The service organisation does not merely support revenue. In a mature MedTech market, it increasingly determines whether revenue is retained, renewed, and expanded.

Three Ways That Underinvestment in Service Creates Compounding Loss

The commercial consequences of treating service as a cost centre rather than a value driver are not linear. They compound. Three mechanisms are particularly significant:

1. Device Availability and Clinical Dependency

In most clinical environments, uptime of critical equipment is not optional. An imaging system that is offline during scheduled procedures, a ventilator that requires unplanned maintenance, a diagnostic platform that is awaiting a field engineer — these are not inconveniences. They are operational crises for the clinicians involved, and they are directly associated with the manufacturer responsible for maintaining that equipment.

The clinical team that experiences repeated downtime does not distinguish between a product quality issue and a service delivery failure. From their perspective, the equipment does not work reliably. That perception — justified or not — attaches to the brand. And it is the single most powerful driver of switching behaviour in capital equipment procurement.

Organisations that invest in preventive maintenance programmes, remote monitoring and predictive analytics, and rapid response field service capabilities do not simply reduce downtime. They build a form of clinical trust that is extremely difficult for a competitor to displace, even with a superior product specification.

2. Contract Attachment and Recurring Revenue Erosion

Service contracts, when structured well and priced appropriately, represent some of the most valuable revenue in a MedTech company’s portfolio. They are predictable, high-margin relative to hardware, and deeply connected to customer retention. A hospital system that has signed a comprehensive five-year service agreement with a manufacturer is not simply a maintenance customer; it is a committed relationship with high switching costs and a natural commercial platform for adjacent technology sales.

Yet contract attachment rates across the industry remain significantly below their potential. The reasons are familiar: inadequate commercial focus on the transition from device sale to service agreement, poor customer experience at the point of first service interaction, pricing structures that feel punitive rather than value-based. Each of these is a solvable problem — but only if leadership treats it as one.

The alternative — a fragmented, time-and-materials customer base with low contract penetration — is commercially fragile. These customers are significantly more susceptible to competitive displacement at the next capital cycle, more expensive to serve per interaction, and less likely to expand their relationship with the manufacturer.

3. Regulatory Exposure Through Field Intelligence Gaps

There is a third dimension of service underinvestment that is less commonly discussed in commercial terms but carries significant board-level consequence: the post-market surveillance function. Under the EU Medical Device Regulation and equivalent frameworks in other major markets, manufacturers have a structured obligation to monitor the performance and safety of their devices in clinical use. This includes collecting, analysing, and acting on information from field service interactions, complaint handling, and clinical feedback.

A service organisation that is under-resourced, inadequately trained, or poorly connected to the quality management system is a post-market surveillance liability. Field engineers who observe patterns of device misuse, unusual wear, or unexpected failure modes but have no structured mechanism to report and escalate that information are, in regulatory terms, a compliance gap. And compliance gaps in post-market surveillance are increasingly visible to regulators who have the authority to suspend market access.

The industry has seen cases where regulatory findings led to suspended manufacturing at individual sites — with damage that outlasted the remediation by years. These were not merely financial setbacks: some marked the beginning of a reputational decline that led to an irreversible loss of customer trust and, in certain cases, to the site’s closure.

The service organisation is, in this sense, both an important commercial and regulatory asset. Companies that integrate these dimensions — treating field service as a source of safety-critical intelligence, not just a repair operation — are better positioned commercially and regulatorily.

What a Strategically Mature Service Organisation Looks Like

The transition from service-as-cost to service-as-asset requires deliberate change across several dimensions.

Based on observable patterns in organisations that have made this transition successfully, the following characteristics are consistently present:

• A service P&L with genuine accountability: Service revenue, margin, and customer retention metrics are tracked separately, managed by dedicated leadership, and reported at board level. Not as a subset of commercial KPIs, but as a standalone business dimension with its own growth targets.
• Contract architecture that aligns value with price: Service offerings are structured around clearly articulated customer outcomes — uptime guarantees, response time commitments, competency development — rather than generic coverage descriptions. Customers who understand what they are buying are significantly more likely to renew and expand.
• Digital service delivery infrastructure: Remote monitoring, predictive maintenance, digital training platforms, and field engineer enablement tools are not optional enhancements; they are the baseline for a competitive service operation in 2026 and beyond. Organisations still operating predominantly on reactive, time-and-materials models are structurally disadvantaged.
• Integration between service and commercial teams: The field service engineer who visits a clinical site regularly often knows more about the customer’s needs, concerns, and future plans than the account manager who calls quarterly. Organisations that create structured mechanisms to capture and act on that intelligence — in both the commercial and post-market surveillance dimensions — extract disproportionate value from their field presence.
• Customer satisfaction measurement as a leading indicator: Net Promoter Scores, response time metrics, and first-time fix rates are not just operational dashboards; they are leading indicators of commercial outcomes. The organisation that treats a declining customer satisfaction score in its service operation as a revenue risk — and acts on it accordingly — will consistently outperform the one that treats it as a support team problem.

The Board Question

For executives and board members, the fundamental question is not whether to invest in the service organisation. Most companies already spend significant money on service. The question is whether that investment is structured to generate returns commensurate with its strategic potential.

A service organisation that is positioned as a cost centre, managed to headcount efficiency metrics, and disconnected from commercial strategy will deliver exactly what that positioning implies: cost containment, not value creation. Repositioning it requires a change in how it is measured, how it is resourced, how it is connected to the commercial engine, and how it is governed.

The companies that have made this transition are not simply more profitable in their service line. They retain more customers, win more replacement cycles, generate more predictable revenue, and carry less regulatory risk. In a market where hardware differentiation is increasingly difficult to sustain, the service experience is often the most durable competitive advantage available.

Conclusion: The Strategic Case for After-Sales

The question of whether to treat the MedTech service organisation as a strategic asset or a support function is not primarily a philosophical one. It is a financial one. The installed base is the most valuable asset most MedTech companies hold—it represents existing relationships, proven clinical integration, and the platform for future revenue. The service organisation is the function most responsible for protecting and extending that asset.

Leaders who invest in it—not incrementally, but with genuine strategic intent—will find that the returns are both more durable and more defensible than those available from almost any other part of the commercial model. Those who do not will eventually discover the cost of that choice in ways that are considerably harder to reverse.

In MedTech (and not only!), a customer who experiences poor service does not give you a second chance—they simply buy elsewhere.

Dr. Carl Machado is an executive with global responsibility for Service & Support, Education, and Governance in a leading MedTech company. He writes on leadership, governance, and organisational effectiveness in healthcare technology.

Sources

GE HealthCare Technologies Inc., Full Year 2024 Earnings Release (Form 8-K), February 2025.

Royal Philips, Annual Report 2024, February 2025.

Siemens Healthineers AG, Annual Report 2024.

STERIS plc, Annual Report on Form 10-K, Fiscal Year 2024; Q1 FY2025 Earnings Release, August 2024.

Getinge AB, Year End Report 2024, January 2025.

EY, Pulse of the MedTech Industry Report 2025.