The Hidden Costs of Running an In‑House Medical & Laboratory Equipment Maintenance Field Service Organisation

Executive Summary

Medical equipment maintenance is far more complex than hiring engineers. Original Equipment Manufacturers (OEMs) that keep field service in‑house often underestimate the total cost to serve. Salaries account for only a portion of the financial burden; overheads, infrastructure, training, downtime, compliance, spares, travel and administration are significant drivers. Industry analysis show that hidden costs such as user training, clinical engineering labour, consumable supplies and unplanned downtime can dramatically increase total cost of ownership. Procurement teams therefore measure total cost of ownership across the asset life cycle to make informed decisions. This article unpacks these hidden costs, explains why cost‑to‑serve matters, explores outsourcing versus in‑house models, and illustrates how TUPE transfers can protect service continuity during transition. A real example from Hugo Technology shows how transferring 12 engineers via TUPE reduced transition risk and maintained service quality.

A downloadable executive guide to outsourcing is available at the end.

Introduction

Medical and laboratory equipment underpin modern healthcare and scientific discovery. When these assets fail, patient safety, research integrity and revenue are at stake. Medical equipment maintenance refers to the planned and corrective activities required to keep devices safe, accurate and compliant. Laboratory equipment maintenance covers calibration, servicing and repairs of instruments used for diagnostics and research. OEMs historically build internal field service teams to install, maintain and repair their devices. However, rising customer expectations, regulatory complexity and workforce shortages mean that running an in‑house team is increasingly expensive. Understanding the full cost of medical equipment maintenance is therefore essential for strategic decision making.

Why Medical Equipment Maintenance Costs More Than Most OEMs Realise

The basic total cost of ownership (TCO) formula - purchase price + operating costs + maintenance - provides a high‑level framework. Yet many OEMs focus on salaries and direct labour costs and overlook the hidden costs that accumulate over the equipment life cycle. Real‑world costs extend beyond the basics and include both direct and indirect expenses. Direct costs are easy to identify: purchase price, shipping, installation and vendor fees. Indirect costs - often called “soft” costs are more difficult to quantify and typically unplanned. They include initial and ongoing user training, clinical engineering labour, disposable supplies, unplanned downtime and cybersecurity measures. Accruent’s guidance for hospitals notes that equipment lifecycle costs span planning, specification, procurement, installation, warranty, operation and deposition. Each phase introduces expenses such as staff time, IT integration, training, consumables and contract administration.

Medical equipment downtime has a disproportionate impact on revenue and patient care. Unplanned failures trigger corrective maintenance, disrupt clinical workflows and increase labour costs. Calculating mean time between failures (MTBF) and mean time to repair (MTTR) helps estimate when devices will need repairs and the cost of future downtime. Hidden costs also arise from data silos across clinical engineering, supply chain, finance and accounts; disconnects between these departments hinder accurate cost analysis and capital planning. Together, these factors mean that the true cost of in‑house field service can be significantly higher than initially budgeted.

The Hidden Costs Beyond Engineer Salaries

To illustrate the scale of hidden costs, consider the industry‑wide cost breakdown below. This example shows that engineer salaries represent only a third of total expenditure. Overhead and infrastructure, training and development, downtime, compliance, spare parts, travel, logistics and administrative systems all contribute meaningful percentages. When OEMs underestimate these areas, their service operations erode margins and divert resources from innovation.

In-House Engineer illustrative Industry Cost Breakdown

Downtime is particularly expensive. Studies show that unplanned corrective maintenance has higher long‑term costs and can significantly disrupt operations. Preventive maintenance, while involving regular costs, reduces unexpected failures, extends asset lifespan and offers better resource planning. This reinforces the importance of scheduled preventive maintenance programmes and adequate spare parts inventory to achieve high first‑time fix rates

Why Procurement Teams Measure Total Cost of Ownership

For medical device manufacturers operating an in-house field service organisation, procurement decisions extend far beyond purchasing equipment or negotiating supplier contracts. Increasingly, procurement teams are responsible for understanding the true cost of delivering field service across the entire customer lifecycle.

This means evaluating the Total Cost of Ownership (TCO) of the service operation itself, not simply the cost of employing Field Service Engineers.

Engineer salaries are only one component. Procurement and operational leaders must also account for recruitment costs, onboarding, technical training, manufacturer certifications, vehicles, specialist tooling, calibration equipment, spare parts inventory, logistics, warehouse operations, IT infrastructure, field service management software, management overhead, regulatory compliance, quality systems, employee retention and ongoing professional development.

As service organisations grow, these indirect costs can represent a significant proportion of the overall cost-to-serve.

Understanding these costs enables OEMs to make informed strategic decisions about whether to continue operating an internal field service team, adopt a hybrid delivery model, or outsource selected activities to an authorised service partner.

Accurate TCO analysis should also consider operational performance. Key metrics such as Mean Time Between Failures (MTBF), Mean Time To Repair (MTTR), First Time Fix Rate, Preventive Maintenance compliance, engineer utilisation, travel efficiency and repeat visit rates all influence the real cost of delivering service.

Procurement teams increasingly work alongside Service Directors, Operations Managers and Finance teams to build transparent cost models that capture both direct and indirect operating costs. Without this level of visibility, organisations can significantly underestimate the true cost of maintaining an in-house service capability, making it difficult to compare internal delivery with outsourced alternatives on a like-for-like basis.

Ultimately, the objective is not simply to reduce costs. It is to understand the total cost-to-serve, improve operational resilience, and ensure the chosen service model supports long-term growth, customer satisfaction and sustainable profitability.

Should OEMs Outsource Medical Equipment Maintenance?

Outsourcing field service is not a one‑size‑fits‑all solution. It can deliver advantages when executed strategically, but OEMs must carefully weigh potential trade‑offs.

Advantages of Outsourcing

Cost Transparency and Operational Flexibility

Outsourcing can provide a more transparent and predictable operating cost by transferring responsibility for many supporting activities—including engineer recruitment, technical training, fleet management, specialist tooling, field service systems, scheduling and operational management—to an authorised service partner.

Rather than maintaining internal capacity to meet fluctuating demand, OEMs can scale service delivery more efficiently while paying for an agreed level of service through clearly defined commercial arrangements. This enables Service Directors to focus on improving service performance and customer experience, rather than managing the infrastructure required to support a nationwide engineering organisation.

For many OEMs, the primary benefit is not simply reducing costs—it is improving cost visibility, operational flexibility and resource utilisation while maintaining service quality.

Specialised Expertise

Service providers invest in advanced field service management systems and remote support technologies. For example, TechSee notes that remote video support can resolve many issues without a site visit, reducing dispatch costs and improving first‑time fix rates. Predictive maintenance and performance‑based service level agreements (SLAs) further decrease volume of visits and align provider incentives with equipment uptime.

Scalability and Coverage

External providers can scale engineer teams to match demand across regions and offer nationwide coverage. Hugo Technology, for example, has more than 50 engineers across the UK and supports installation, preventive maintenance, corrective maintenance, calibration and project management.

Access to Best Practice

Outsourced partners leverage multi‑industry experience and invest in training, tools and compliance. SAP points out that modern field service management solutions improve first‑time fix rates by prioritising the best technicians and ensuring parts availability.

Focus on Core Competencies

By delegating service operations, OEMs can focus on research, development and sales while still maintaining high service levels.

Considerations and Potential Disadvantages

Loss of Direct Control:

Outsourcing introduces a third party between the OEM and customers. Service quality must be governed by detailed contracts and monitored via KPIs such as first‑time fix rate, mean time to repair and customer satisfaction.

Integration Complexity:

Sharing technical documentation, parts lists, software updates and calibration data requires secure integration between OEM and service partner systems. Data security and intellectual property protection are critical.

Cultural Alignment

The service provider must understand the OEM’s brand values and customer expectations. Clear onboarding and training processes are required.

Transition Costs

There may be short‑term costs associated with onboarding, transferring staff (via TUPE if applicable), aligning processes and updating systems. However, a well‑planned transition mitigates risk and maintains continuity.

Overall, outsourcing can reduce cost to serve, improve service quality and enhance scalability when partners are selected carefully and KPIs are monitored. A hybrid model — retaining a core internal team for strategic accounts while outsourcing routine maintenance — can also deliver flexibility.

How TUPE Can Protect Service Continuity

Whilst not all outsourcing decisions require TUPE execution, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) is designed to protect employees when a business or service activity transfers to a new provider. In facilities management and field service, TUPE ensures that teams remain in place during contract changes. It keeps experienced site teams together and maintains service quality by transferring their employment to the incoming provider. TUPE applies to business transfers and service provision changes when employees are assigned to the service and the work remains broadly the same. Effective TUPE management involves early planning, consultation with staff, onboarding and coordination between all parties. Poorly handled TUPE processes can lead to knowledge loss, low morale and service disruption.

Hugo Technology’s Experience

Hugo Technology successfully completed a TUPE transfer of 12 field service engineers from an OEM. The incoming team was integrated without any interruption to service. Key success factors included:

Consultation and Communication: Detailed consultation with engineers before the transfer addressed concerns about job security, shifts and reporting. Open dialogue built trust and reduced uncertainty.

Knowledge Retention: Service histories, calibration procedures and customer preferences were transferred alongside the engineers. Maintaining technical documentation and retaining tacit knowledge ensured that preventive maintenance schedules, calibration standards and corrective procedures continued seamlessly.

Business Continuity: Engineers’ terms and conditions, pay and pensions were preserved under TUPE regulations. This stability meant that customer SLAs, preventive maintenance compliance and first‑time fix rates remained unaffected during and after the transition.

Operational Resilience: Hugo Technology’s established ISO 13485‑certified processes and nationwide infrastructure provided a robust framework for integrating the transferred engineers. The company’s experience in installation, calibration and compliance meant that engineers could continue delivering high‑quality service while benefitting from new tools and training.

Improved Financial Visibility: Alongside the successful transfer of engineers, the OEM also transitioned the day-to-day responsibility for recruiting, managing and supporting the field service operation to Hugo Technology. Rather than managing numerous individual cost centres - including salaries, employer costs, recruitment, technical training, vehicles, tooling, field service systems, operational management and ongoing engineering support - the OEM moved to a single contracted service arrangement with clearly defined commercial terms. This provided greater budget certainty, improved cost transparency and a more predictable annual operating cost, while allowing internal teams to focus on strategic priorities rather than managing the operational complexity of a nationwide field service organisation.

The TUPE process demonstrated that outsourcing, when handled with proper consultation and planning, can protect service continuity and mitigate operational risk. It also highlights the importance of choosing an experienced partner with strong onboarding procedures.

Questions Every Service Director Should Ask

• What is our true cost to serve per device when we include direct and indirect costs such as downtime, training and spare parts?

• How do our preventive maintenance compliance rates compare with industry best practice? Are we scheduling enough preventive visits to reduce corrective maintenance costs?

• How well utilised are our field service engineers? Are there regional imbalances or capacity gaps that affect response times?

• Do we have the technology infrastructure - such as field service management software, remote support tools and predictive maintenance analytics — to support modern service expectations?

• How resilient is our field service organisation to labour shortages and changing customer expectations?

• What are our contingency plans for service continuity in the event of staff turnover or contract changes? How would TUPE be managed in a transfer scenario?

Questions Every Procurement Manager Should Ask

• Do we fully understand the true cost of operating our in-house field service organisation, or are we only measuring the costs that appear on our P&L?

• If we were building our UK field service operation from scratch today, would we design it in the same way?

• How much management time is consumed by activities that don't directly create value for our customers?

• Are we carrying engineering capacity for peak demand that is underutilised for much of the year?

• Have our service costs grown in line with revenue, or are they increasing disproportionately as the organisation expands?

• Which elements of our field service operation genuinely differentiate our business, and which have simply become operational necessities?

• Could specialist service partners deliver greater scale, flexibility or geographic coverage than we can economically maintain ourselves?

• If one of our largest service contracts doubled in size tomorrow, how quickly could we scale without significantly increasing operational risk?

• If we continue operating our current service model for the next five years, will it still support our commercial ambitions, customer expectations and profitability?

  
  

If several of these questions are difficult to answer with confidence, it may be an indication that your field service operation would benefit from an independent review. Many OEMs reach a point where maintaining an in-house engineering organisation becomes increasingly complex, making an outsourced or hybrid service model a practical way to improve operational resilience, simplify management and create greater cost certainty. If you're considering your future service strategy, Hugo Technology would be happy to discuss your current operating model and explore whether an alternative approach could better support your long-term objectives.

Conclusion

Running an in‑house medical and laboratory equipment field service organisation involves far more than paying engineer salaries. Hidden costs - overhead, training, downtime, compliance, spares, travel and administration can significantly increase the total cost to serve. Understanding these costs requires comprehensive total cost of ownership analysis across the equipment lifecycle and metrics such as MTBF, MTTR and first‑time fix rate. Procurement teams use this insight to decide whether to maintain or outsource services.

Outsourcing offers predictable costs, specialised expertise, scalability and access to advanced technologies. However, it demands careful partner selection, integration and governance. TUPE transfers (optional), when managed properly, protect employees and ensure seamless service continuity. Hugo Technology’s successful transfer of 12 engineers demonstrates that with consultation, knowledge retention and robust processes, transition risks can be mitigated.

Service directors and procurement managers should regularly evaluate their cost to serve, preventive maintenance compliance and first‑time fix rates. By asking the right questions and leveraging decision matrices, they can choose the service model that best supports patient safety, customer satisfaction and operational efficiency.

Request the Executive Guide to Outsourcing Medical & Laboratory Equipment Field Services

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