Growing service export is creating new opportunities for Swedish companies

News - 20 AUG 2018

For many years, the driving force of Swedish exports has been the physical products exported by Swedish industry. Swedish companies successfully conquered global markets with their high-quality, innovative products. Swedish companies now have fresh opportunities for conquering foreign markets as the export of services gains increasing importance. EKN is now working on new insurance solutions that will give even greater support to exports of services.

The export of Swedish services has increased strongly in recent years. Export of services increased by as much as 74 per cent between 2000 and 2017, while the export of goods fell by one per cent.

The reason is clear. Global markets have arrived at a technological breakpoint; innovation, globalisation and digitalisation are creating what can only be described as a global revolution in the service sector.

This gives existing service companies a great opportunity to address the international market, but it also gives new opportunities to companies exporting goods to increase the service element in their exports. Customers are increasingly looking for solutions to problems, rather than just physical products.

“Many companies no longer wish to own expensive equipment, when it is cheaper to only pay for the time they are using it. This is a development we have seen in many industries, and exporting companies have a great deal to gain by adapting to the trend,” says Marie Aglert, Director of the Large Corporates Business Area at EKN.

Transforming business models

The service revolution, or servicification as it is sometimes called, is causing many companies to transform their previous business models. Leasing a private car has become a popular alternative to buying and the same model can be applied in many other areas. Volvo CE, one of the world's leading suppliers of construction machinery, is one Swedish company that is working on meeting the demand for new solutions.

“In a sense, the business model is being turned on its head. We are finding that customers don’t necessarily want to own the machines any more. We believe that in a very few years about 30 per cent of our big global customers will be using us as a provider of services, although the normal, purchasing route will still be available of course,” says Greger Svanström, Global Director of Trade and Customer Finance at Volvo CE.

If Swedish companies are to be just as successful in exporting services as exporting goods, it will be important to find new financing solutions aimed at services. EKN can already insure payment risks in service exports but is working to produce better and smarter solutions for Swedish companies. The often very rigid international regulations that EKN must follow can be a problem, however.

“The way in which payments are set up is an example of this. Payments for services often vary a great deal according to the actual demand and utilisation at any given time. Such a structure does not match the regulatory requirement and at present it is difficult for us to get around this,” says Marie Aglert.

Affects the balance sheet

Volvo CE has found that the move to servicification also means changes to the balance sheet, because they are not only selling machines but also owning them. This brings an even greater need for smart financing solutions.

“Ultimately, the increased size and scope of an inflated balance sheet would make it difficult for us to take on these transactions with existing forms of finance. If we could resolve this by insuring the ten-year income flow, then we would be able to sell our claims and keep our customers,” says Greger Svanström.

But it is not only the big Swedish corporations that need new solutions for financing their service exports. The global service revolution is also opening doors for the small and medium-sized companies that are often right at the forefront of innovation and technology - and for
these companies a smart financing solution from EKN could make all the difference.

“Our aim is to be the world's first export credit institution with a really top of the range financing solution for servicified products. Sweden is a global leader for technical solutions and equipment. If we can work with the companies and banks to get the right financial solution in place, we can make Swedish companies even more competitive internationally,” says Marie Aglert.

Photo: Volvo CE