Pay-as-you-go ERP underpins Michelin’s services strategy

Michelin used to offer services to help sell its tyres. But two years ago, the French company decided this was the wrong way around – instead, it needed to offer tyres to help sell services.

It decided, therefore, to set up a new distinct services organisation, named Michelin solutions. This freed the services unit from the performance metrics that were used run the tyre business.

"We're no longer focusing on selling tyres," explains Phillipe Miret, CEO of Michelin solutions. "We're focusing on providing value to our customers."

The first service that Michelin solutions has launched is called EFFIFUEL. Michelin will offer customers that operate a fleet of vehicles, such as haulage companies or travel operators, a commitment to reduce their carbon footprint.

To achieve that, Michelin fits telematic sensors in the customer's vehicles. A team of data scientists analyses the performance of the driver and the vehicle, and offers advice that will help cut fuel consumption.

Customers pay for EFFIFUEL on a per-vehicle, per-year basis. Indeed, that is the model for the entire Michelin solutions business.

So when Michelin sought an ERP platform to support the new unit, it looked for a provider who could offer a similar, pay-as-you-go engagement. "The model guarantees a good fit between our income flow and our cash flow," explains Miret. "It reduces the risk, and it aligns interests [between supplier and buyer]."

It therefore chose a cloud-hosted ERP service from Accenture, for which Michelin pays an annual fee for each vehicle subscribed to any of its services.

This arrangement means there is shared interest in the success of its services business. "Accenture is a partner that accepts that it's success will be linked with the success of our ecosystem," Miret says. "If our offers do not perform on the market, then the income flow for Accenture will not be as good."

The ERP platform is based on a cloud-hosted instance of Microsoft's Dynamics AX application. Miret says that technical specifications were secondary to the engagement model when it came to selecting a supplier.

"When you purchase a service, it's the supplier's responsibility to chose what technology they use," he explains. "We didn't want to enter a discussion where we were specifying technologies."

Accenture is also providing Michelin solutions with a call centre to help customers with technical problems, although this is paid for with a flat monthly fee, not on a pay-as-you-go basis.

Michelin has high ambitions for its solutions business. "In five years, this will be a €10 billion market and we are targeting a significant share," Miret says. "We are starting in Europe, but the goal is to become global in the coming years."

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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