Product-as-a-Service: Embracing the New Service Economy in Manufacturing

As technology continues to transform the world as we know it, manufacturing businesses are forced to change how they operate. Consumers have grown accustomed to the conveniences of technology in their personal lives, so they expect an individualized, automated customer experience in professional settings as well.

Meeting these demands isn’t easy, and many industrial-services organizations struggle to keep up. According to a recent study by McKinsey & Company, “only 13 percent of industrial OEMs offer digital solutions of any kind, and only 10 percent offer online self-service tools for placing reorders.” However, “B2B companies that do incorporate digital into operations have the opportunity to gain an edge in the market by providing a better customer experience.”

To stay relevant and competitive, industry leaders need to recognize that traditional business models are changing. OEMs have to adjust how they bring value to their client base so they can continue to meet customer demands, support profitable growth, and boost operational efficiency.

The Product-as-a-Service Revolution

Product-as-a-Service (PaaS) is the idea of selling outcomes and services of a product, rather than just the product itself. With PaaS, customers pay for a subscription service or bundle to achieve desired results. Payment for these services happens as a recurring fee instead of a singular cost. PaaS is a dramatic shift from traditional break-fix models, where the value is in making and selling products for a one-time payment.

Advantages to the PaaS model include:

  • Predictable revenue streams. Selling services with recurring fees creates a more predictable cash flow.
  • Increased sales. Selling services adjacent to a product results in new revenue streams.
  • Improved sustainability and efficiency. Selling services achieves the customer’s desired result without wasting time or materials.
  • Increased product uptime. With the focus shifting toward machine availability, PaaS maximizes operational time.
  • Stronger customer loyalty. Service is highly personalized, so it’s possible to develop an authentic relationship with the customer.

PaaS is mutually beneficial to customers and service providers. Its client-centric approach creates a superior customer experience.

Challenges with PaaS

There are some key considerations when shifting to a servitization model. Since PaaS focuses on meeting the specific and ever-changing needs of the client base, it requires automated technology for customization. Without leveraging digital solutions, businesses can’t offer high-quality customer experiences.

Data visibility is another concern. Implementing a PaaS model requires a single platform to capture and maintain all relevant contract data and streamline cross-functional processes.

The most significant challenge to delivering PaaS is financial risk. When businesses charge an upfront price for an undefined scope of service, it can result in unprofitable margins. Without predictive technology for optimization and pricing models, revenue, profit, and productivity are not secure.

How Syncron Can Help

Syncron Contract Price is an automated pricing solution that can help manufacturers deliver PaaS. It optimizes pricing for complex contracts using predictive technology to minimize risk and maximize margins of new and existing service offerings. By leveraging machine learning, it analyzes contract performance data for precise consumption forecasting. This information shows which contracts have a higher risk or a lower probability of profit, enabling manufacturers to set the right price, maximize margins, and improve customer satisfaction.

Syncron helps leading manufacturers increase profitability and revenue, reduce contract risk, and enhance the overall customer experience. Talk to a Service Lifecycle expert today to learn more about leveraging Syncron Contract Price for your servitization needs.