After-sales in machinery manufacturing: where the profit really is.

1. The margin logic: why service earns more than the machine

The economics of mechanical and plant engineering are asymmetric: the machine is sold once, the money is earned over its lifetime. The study “Wettbewerbsfähigkeit in einer neuen Ära” by VDMA and McKinsey (September 2025) analysed the financials of more than 200 European machinery manufacturers for 2016 to 2024. Its finding: aftermarket margins are generally at least double those on sales of new units and can be up to four times higher at the top end. Companies with a service and after-sales share above 25 percent achieve an average EBIT margin of 10.6 percent, the others 7.0 percent - a gap of 3.6 percentage points at company level, not just within service.

The order of magnitude has been stable for years. McKinsey measured an average EBIT margin of 25 percent for aftermarket services across 30 industries in 2017, against 10 percent for new equipment. Deloitte puts service’s share of total profit at German machinery manufacturers at typically 30 percent, and at 50 percent or more for maintenance-intensive equipment - a consultancy estimate without published method, but uncontested in its direction. And the current study by KVD and Roland Berger (72 industrial companies in Germany, Austria and Switzerland, August 2026) supplies the figure behind the title of this article: service sales organisations set up fully proactively achieve an average EBIT contribution of 48 percent. Half the profit is therefore not an industry average but the result of a particular way of running service.

In international comparison, German machinery manufacturing is not out in front:

The same study names the reasons for the higher margin: customers who buy spare parts, updates and maintenance from the manufacturer face higher switching costs, are more likely to buy again and exert less price pressure on new-machine business. Service is therefore not only the more profitable part of revenue but also the part that protects the new-machine business.

2. Model calculation: how a fifth of revenue becomes half the profit

That a quarter of revenue can deliver half the profit is not rhetoric but arithmetic. The following is a model calculation, not a projection: it assumes an EBIT margin of 20 percent for service and 5 percent for new-machine business. Both sit below what Bain measured in 2010 for capital-goods manufacturers in Germany and Switzerland (an operating margin of 21 percent on services, four times that on new equipment), and within the range VDMA/McKinsey give.

A fifth of revenue, half the profit - with seven percentage points more service share it becomes six tenths. The calculation also shows why a percentage point of service share is worth more in machinery manufacturing than a percentage point of new-machine revenue: it is valued at four times as much.

3. Why most manufacturers leave the potential unused

If the numbers are that clear, every company should be expanding its service. The KVD/Roland Berger study shows why it does not happen anyway: 84 percent of the companies surveyed assign strategic importance to service, but only 62 percent have a documented service strategy. Service contributes more than 25 percent of revenue but receives only 7 percent of investment and 3 percent of research and development spending. And on average 23 percent of working time in service is non-billable - under 5 percent at the best-performing companies, above 50 at others.

Behind this is an organisational pattern: service is run as after-sales support, not as a business. It receives the machine after sales has sold it, reacts to breakdowns, invoices hours and parts - and has neither revenue targets of its own nor its own sales function. Roland Berger puts it this way in the English version of the study: companies that execute service as a dedicated business achieve superior EBIT margins; those that treat it as after-sales support leave significant value uncaptured.

The pattern does not affect everyone equally. According to VDMA/McKinsey, 60 percent of manufacturers in the product and component business generate more than 25 percent of their revenue from service offerings, but fewer than 30 percent of project-based manufacturers do. Whoever builds one-off plants finds it structurally harder to standardise and scale service - see section 8. For everyone else, the gap to the US and the Nordic countries is not a structural problem but a decision that has not been taken.

The business that is left lying does not disappear - it migrates. VDMA/McKinsey warn that an inadequate service level, such as long response times, opens the door to third-party providers. In a publication from October 2026, Roland Berger describes the installed base as the largest untapped profit pool in manufacturing - one that remains commercially opaque for most OEMs because service intelligence rarely reaches commercial decision-makers and post-warranty revenue migrates steadily to third-party providers.

4. The installed base as capital

Every machine delivered is an asset that generates service revenue over its lifetime - according to Roland Berger across a lifecycle that can extend from 10 to 50 years. The manufacturer starts with an advantage over every third party: it designed the machine, knows its parts and installed it at the customer. The advantage expires the moment nobody knows what has happened to the machine since.

In 2010 Bain defined what distinguishes service champions, and the criterion is still the most practical one: a service share of revenue above 30 percent, an operating margin in service above 20 percent and detailed knowledge of at least 80 percent of the installed base. The third point is the precondition for the first two. Whoever does not know which machines are where, in which configuration, with which modifications, which service history and under which contract cannot offer maintenance contracts, cannot sell spare-parts packages before the failure and cannot propose a modernisation at the right moment.

How large the difference is shows in the BCG study of around 100 industrial machinery companies (February 2025, mostly large corporations): the best companies sign 31 percent more of their customers to maintenance contracts at the time of purchase than the rest; on contract penetration of the installed base, BCG considers an increase of 20 percentage points possible. At the same time, only 4 percent of the companies surveyed say they have succeeded in generating recurring revenue from digital services linked to their equipment - although 28 percent of new machines now ship with remote connectivity.

In most mid-sized companies, the knowledge of the installed base exists - spread across the ERP system, the service reports, the hotline’s mailboxes and the heads of the technicians who have looked after the machines for years. It is just not in one place, not current and not usable by sales. That this knowledge disappears piece by piece with every experienced technician who leaves is something we have described elsewhere; here the subject is the commercial side of the same problem.

5. Service knowledge and data access as the growth lever

Expanding the service business rarely fails on the market and often fails on capacity: the same technicians who fix breakdowns today are supposed to fulfil contracts on top tomorrow. If a quarter of their time is non-billable because they search for information, chase queries or drive out a second time, every new contract is a capacity problem. The first lever is therefore access to knowledge, not headcount.

VDMA/McKinsey describe the target state as the “digital service expert”: remote support teams with access to extensive knowledge bases, solving problems quickly and precisely because of it; plant manufacturers who markedly raise the quality of their services by systematically pooling knowledge from different projects and sources. KVD and Roland Berger recommend scaling digital knowledge management, automation and AI so that processes work independently of individual people - and note that this lets smaller teams look after a larger installed base. Today only 6 percent of service revenue comes from digital services, and only 10 percent of companies use AI productively in service.

In concrete terms, access to knowledge works at three points we have measured in articles of their own: the share of visits completed on the first call (first-time fix rate), the time technicians spend searching (time lost searching for information) and the share of cases resolved by phone rather than on site. Each of these frees up capacity with which the same crew can bring more of the installed base under contract. Where AI demonstrably helps and what it requires is set out in the guide to AI in after-sales.

6. Counter-cyclical: what service carries when new business stalls

The timing of this question is no accident. On 17 September 2026 the VDMA cut its forecast for machinery production in 2026 to a real decline of 2 percent - probably the fourth consecutive year of falling output; in the first seven months, production was 4.1 percent below the prior-year period in real terms, and August order intake was 5 percent down (forecast, order intake). For 2027 the association expects growth of 3 percent.

It is in exactly such phases that the value of a service business shows. KVD and Roland Berger name the mechanism: when product revenue falls by 30 percent in a difficult economic phase, service revenue typically declines by only 5 to 8 percent - a rule of thumb whose method the study does not disclose. The financial data at VDMA/McKinsey support the direction: companies with a service share above 25 percent had a standard deviation in their EBIT margin of 2.5 percent from 2016 to 2024, companies with a low share almost 4 percent. And Bain described the service champions as crisis winners as early as 2009, when orders in machinery manufacturing in Germany and Switzerland were almost 30 percent below the previous year.

The installed base keeps running when nobody orders new machines - and needs maintenance and wear parts often precisely when the customer postpones the replacement investment. Whoever knows that demand and has it under contract loses revenue in the downturn; whoever does not know it loses the customer.

7. The path to a systematic service business

The sequence is remarkably consistent across the studies, and it does not start with software:

1. Run service as a business. A documented service strategy with targets of its own - service share, EBIT contribution, contract penetration -, its own profit and loss statement and one person measured on the result. That is the step 38 percent of the companies surveyed by KVD have not taken.
2. Record the installed base. A maintained register per machine: location, configuration, modifications, service history, contract status, contact person. Bain’s 80 percent mark is the target; the service reports of recent years are the most important source for reaching it.
3. Sell contracts at the purchase, not after the failure. The maintenance contract belongs in the quotation for the new machine, the spare-parts recommendation in the commissioning. That is the difference between reactive and proactive service sales from section 1.
4. Move knowledge out of heads and reports into a system. Hotline, remote support and field service work on the same knowledge base with source references; every solved case flows back. Only then does non-billable time shrink and capacity for additional contracts open up.
5. Measure monthly. Service share of revenue, EBIT contribution of service, non-billable time, contract rate of the installed base, first-time fix rate. Five metrics are enough if they are on the table every month.

8. Limits: when expanding the service business is not the first step

The figures in this article are averages across companies with published financials and across surveys in which the interested are more likely to take part. They do not apply to every company equally. Three situations in which the path from section 7 does not come first:

1. Pure one-off plant engineering. When every plant is unique, maintenance contracts and spare-parts packages can hardly be standardised - the reason for the project-based manufacturers’ gap in section 3. The realistic lever here is pooling project knowledge for remote support and modernisation, not contract sales.
2. Customers with their own maintenance. Where large operators do the maintenance themselves as a matter of principle, the manufacturer is left with the spare-parts and expert business. Building a contract organisation is not worth it then - parts availability, documentation and remote access that makes the customer’s own maintenance better are.
3. A service team at its capacity limit. Whoever already fails to meet response times should not sell additional contracts. Every unfulfilled contract is an invitation to the third-party provider. Create capacity first - through access to knowledge and a higher remote share - then sell.

9. Frequently asked questions

10. Sources

All figures cited in the text with their origin. Studies by consultancies with a commercial interest are labelled as such; none of the sources is a vendor of service software. Several sources are in German, as they are the actual evidence.

• VDMA and McKinsey & Company, Wettbewerbsfähigkeit in einer neuen Ära (September 2025; financials of more than 200 European machinery manufacturers, 103 of them from Germany, Austria and Switzerland, 2016 to 2024; association with a consultancy as knowledge partner): margin comparison, 3.6 percentage points, service shares by region, volatility, project-based manufacturers, third-party providers, knowledge bases. In German.
• KVD and Roland Berger, Service! Delivers! Resilience! (KVD release of 6 August 2026; survey of 72 industrial companies in Germany, Austria and Switzerland; association with consultancy): service share, investment share, strategy, non-billable time, EBIT contribution of proactive organisations, decline in downturns, digital services, AI use. In German. English version with the lifecycle figure and the quote on service as a dedicated business: Roland Berger, 16 July 2026.
• McKinsey & Company, Industrial aftermarket services: Growing the core (27 July 2017; analysis across 30 industries worldwide, not specific to machinery; consultancy): 25 versus 10 percent EBIT margin.
• Deloitte, Service Performance Steigerung im Maschinenbau (11 December 2024; consultancy perspective without published method): service share of total profit. In German.
• Boston Consulting Group, Aftermarket Services Drive Growth and Higher Margins for Industrial Manufacturers (18 February 2025; survey of around 100 industrial machinery companies averaging more than USD 2 billion in revenue; consultancy): maintenance contracts at purchase, contract penetration, connected new machines, recurring digital revenue.
• Bain & Company, Wachstumsmotor Service (Bain Brief 2010; analysis of capital-goods manufacturers in Germany and Switzerland in autumn 2009; consultancy): operating margin on services, characteristics of service champions, order slump in 2009. In German.
• Roland Berger, The agentic shift (October 2026; position paper without a stated sample; consultancy): installed base as profit pool, migration to third-party providers.
• VDMA, Maschinenproduktion 2026 schwächer als erwartet (forecast of 17 September 2026) and order intake August 2026 (5 October 2026; association): business-cycle data. In German.
• VDMA, Service & Kundendienst (topic page, undated; association): service share of around 20 percent according to the VDMA customer-service benchmarks. In German.