The increasing popularity of Pay-Per-Use (PPU) is supported by the trend towards full-service contracts. More and more corporate customers are relying on a complete package that includes both the capital goods and complementary services from financing, maintenance and customer service to final disposal. And so the model, which started out in the aerospace sector (Rolls Royce), is now gaining ground in other areas.
For example, manufacturing companies can always use the latest generation of machine tools, only pay for them according to capacity utilization and, if necessary, return them if the order books are empty. In this way, companies can avoid tying up their capital over the long term in fixed assets.
How do others offer pay-per-use?
The manufacturer only gets money if the machine is running. Payment is made transparently, usually as part of a monthly bill. And future calculations and offers can be based on the actual minute costs, which flow directly into the unit cost calculation.
The disadvantage that arises from this, however, is that the payment, which was made in full before the new business model, is now divided into small monthly payments. Although this benefits the customer, it is often the case that manufacturers are dependent on these bigger investments in order to support the daily operations of the company.
Therefore, we have developed the pay-per-use light concept to give OEMs a headstart.
Why do we offer “Pay-Per-Use-Light” instead?
Unlike other providers, with our “Pay-Per-Use-Light” offer OEMs get paid for the entire machine from financing partners of the Findustrial platform at the start of the project. Subsequently, the customer will then pay off the machine based on usage. This means that the customer neither has to make the high investment, nor does the manufacturer have to relinquish cash payment up-front. So, a win-win situation for both sides to get the ball rolling. On our platform, the participants are automatically matched according to their needs and can thus start the financing and implementation of the new project. We believe that this PPU light offer will give OEMs great insights into this new market potential without taking the full risk on their balance sheet from the start.
How do we make that possible?
Enabled by IIOT technology, the concept of usage-based business models is becoming more and more tangible. In cooperation with a financing partner, OEMs can use our platform to offer their customers corresponding financing models in addition to the machines, thus making it easier for them to acquire systems and machines. However, companies need to be ready to give us real-time insight into production data. Manufacturers who are also ready to provide data can benefit significantly from the pay-per-use model.
It is possible to achieve higher margins by offering additional services in the field of repair & maintenance or data analytics. At the same time, operating costs for the customer will be reduced through better utilization and reduced downtime of the equipment. One of the examples of smart services is predictive maintenance. By analyzing production data, patterns are identified, and issues predicted before they happen, resulting in prevented asset failures.
Financing of PPU based business models is not well understood yet.
This is most likely the weakest spot at every OEM, that’s why Findustrial was founded.
That is why we also offer the opportunity to get to know the pay-per-use format with customers first and we talk about further possible steps on how you can best start and implement a PPU business model.
The good news is, you do not have to wait until every topic of a PPU business model is fully in place. Most OEMs start with the “Pay-Per-Use light” approach described above. This could trigger investments at your customers which otherwise would wait for better visibility, especially during times like these.
We at Findustrial are convinced that the next decade will be the era of the subscription economy in the industrial sector with business models like „Equipment-as-a-service“ and „Pay-per-use“ gaining increased importance. It will be the fast-movers among the OEMs who will benefit most and finally outperforming their competition!
If you want to learn more about how you can leverage Pay-Per-Use business models in your business please feel free to make use of our online Assessment and you will receive a step-by-step guidance on how you can guide your business into this massive service potential for OEMs.