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Why OEMs are moving to Pay Per Use business model

Updated: Jul 14, 2021

Equipment as a service (EaaS) is the term used to describe a new way of paying for and consuming the utilization of equipment. Sometimes referred to as “pay per use” or “product service systems”, equipment as a service business model let manufacturers transfer a CAPEX into an OPEX and transfers responsibility for maintaining the asset from the end user to the equipment supplier.

Both Original Equipment Manufacturers (OEMs) and end users benefit from EaaS business models.

There are several benefits associated with consuming physical assets “as a service”, including:

✅ Reduced CAPEX: Migration from OPEX to CAPEX : this is the #1 reason equipment suppliers stated their customers were interested in moving to EaaS.

✅ Lower Total Cost of Ownership (TCO): by only paying for defining outcomes, customers can realize a lower TCO of equipment.

✅ Increased flexibility: EaaS end users have more flexibility to scale their operations up or down as their needs change.

✅ Improve margins: OEMs can adapt their pricing by utilization: in hours, days, months, etc.

✅ Acquire new customers: by providing EaaS, OEMs access to a bigger market of customers, find out more below in the market size point.

✅ Retain existing customers: existing customer has the possibility to combine offers and access to more services with the same provider.

✅ Reduce environmental impact: the materials can be easily recycled or reused by the OEMs if the equipment is damaged or out of service.

Market size*

The EaaS market is projected to grow from $21.6B in 2019 to $131.2B by 2025, yielding a Compound annual growth rate (CAGR) of 35%.
  • Both OEMs and end users predict EaaS market will grow, 67% of equipment suppliers are evaluated, planning on or currently offering EaaS.

  • Designing flexible payment options, 67% of end users in all discrete manufacturing industries say they would prefer to lease or purchase EaaS.

More information on the IT & IoT Trends – Q1/2021

Below two interesting examples of pay per use services :

3 modules for more machine productivity

HELLER is focussing on Industry 4.0 and digitization to increase machine productivity even further and support continuous engineering chains. The core aspects are complementary machine functionalities, "on-demand" services and more expansive service packages.

Comprising of three modules, the HELLER4Industry concept exemplifies the importance of simple operation, individual workpiece production and extended data analysis.

More information here.

Compressed air at a fixed price

With Kaeser's Sigma Air Utility you get a reliable supply of compressed air tailored to your needs. Instead of a large capital expense, you pay a monthly fee to have clean, dry and energy efficient air at the ready. Whether it's installed in your plant or outside in our weatherproof custom engineered enclosures, we'll monitor and service the equipment to prevent downtime.

With Sigma Air Utility you pay a fixed basic price that covers an agreed quantity of compressed air. When larger amounts are needed, a fixed contract price applies for the additional quantities used. All prices remain in effect for the entire duration of the contract, which means no price increases.

More Information here.

Have you already thought to create a Pay Per Use Service for your products?

*Source: Equipment as a Service Market Report 2020-2025 from IoT Analytics GmbH

Find the Full LinkedIn Article here

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