Last week we tried to give a short introduction why equipment operators should consider paying for usage instead of purchasing equipment.
But there are a lot of advantages also for Original Equipment Manufacturers (OEMs) who offer a service based business model. These benefits combine both a new way to generate revenue and a front row seat to witness how the smart factory evolves. Some of the value-added propositions of Equipment-as-a-service (EaaS) include:
1. Increased customer loyalty
By replacing one-off equipment sales by services over the lifetime of the equipment, OEMs will definitely build stronger relationships with their customers in different areas. OEMs will gain much more insights about its customers and their operations, putting them in a position to offer services which continuously increase customer satisfaction.
2. Acquiring new customers
Especially in times of economic uncertainty, limited visibility and focus on liquidity, new as-a-service offerings are becoming increasingly attractive for end customers. Therefore, OEMs who are able to offer EaaS or at least usage-based financing solutions will have a tremendous competitive advantage in acquiring new customers.
3. Recurring revenue streams
EaaS business models produce more frequent streams of revenues by offering usage based services that fit the customers financial capacities. This will make OEMs less vulnerable to fluctuations in demand, especially in times of economic crisis as we face it today.
4. Higher margins through smart services
With an EaaS business model it is possible to achieve higher margins by offering additional services in the field of repair & maintenance or data analytics. In general, those services produce higher returns than just providing the hardware itself. 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.
5. Circular Economy / Used equipment potential
OEMs are mostly better-equipped to re-use or recycle the equipment in case the customer returns it. By taking a pro-active approach and considering used equipment as an additional business potential, OEMs could leverage their broad customer base for this additional business opportunity. Furthermore, OEMs would already consider the new approach in the design of the product and materials used, resulting in a more environmentally sustainable way of doing business. Ultimately this approach should reduce emissions, waste and finally also cost to the environment and the OEM.
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 from the advantages outlined above – finally outperforming their competition!
If you want to learn more about how you can leverage EaaS business models in your business please feel free to make use of our online assessment (Assessment) and you will receive a step-by-step guidance on how you can guide your business into this massive service potential for OEMs.