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 Equipment-as-a-Service Revolution
Equipment-as-a-Service (EaaS) is the idea of selling outcomes and services of a product, rather than just the product itself. With EaaS, 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. EaaS 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 EaaS 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 EaaS
There are some key considerations when shifting to a servitization model. Since EaaS 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 an EaaS model requires a single platform to capture and maintain all relevant contract data and streamline cross-functional processes.
The most significant challenge to delivering EaaS 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.
Deloitte points out, “Ultimately, OEMs need to be very thoughtful about which elements of the EaaS model they intend to develop in-house (which consumes valuable time and effort) and which ones they plan to provide in collaboration with external partners (which in many cases may be the only feasible option). It will be essential for equipment manufacturers to take on the role of orchestrating these capabilities in the best interest of the customers – and with the aim of protecting their own market share.”
How Syncron can help
Syncron Contract Price is an automated pricing solution that can help manufacturers deliver EaaS. 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.
*Monitor Deloitte: Equipment-as-a-Service From Capex to Opex – new business models for the machinery industry