X-as-a-Service is not yet so widespread in the service world that everyone has been able to gain experience with it. That's why we want to discuss the difficulties that often arise when implementing it in practice.
X-as-a-Service means that machines are no longer offered as products at a fixed price, but are sold together with services as a service. Products, software and associated services are then billed as a package for a fee. What exactly is included varies from case to case. What they have in common, however, is that ownership is no longer transferred and the customer only pays for the service provided, regardless of how exactly the service is provided.
This is an interesting business model because it provides the provider with permanent and constant income. And over the entire life cycle, it is ensured that the services are purchased from the machine provider and not on the open market. You can therefore actively insulate yourself from the competition and provide the customer with exclusive support over the entire life cycle.
At the same time, the customer can keep their investment costs as low as possible and plan costs better. And a not inconsiderable part of the business risk is transferred to the provider. Because if there is no production, there is no payment. At least in its pure form, which is only offered in the rarest of cases.
In reality, the business risk is usually shared, for example by setting a minimum purchase quantity or similar. X-as-a-Service is already established as a business model in some industries. In many places, however, it is still a dream of the future. X can really stand for anything here. There are also many similar abbreviations. EaaS for Equipment-as-a-Serviceto name just one.
The idea is not to sell the machine, the system or simply the product "standalone", but in a bundle with services and software offerings. Payment is then made on the basis of a jointly agreed metric. Either per operating hour, per meter of road paved or per part produced. The costs for the product, service and included software components are converted to a suitable output figure, on the basis of which the customer then pays according to individual consumption.
In aviation, for example, it is not uncommon for airlines not to buy the turbines for their aircraft, but to pay only for the performance of the engines using the X-as-a-Service model. The "Power-by-the-Hour" model has probably made Rolls-Royce somewhat famous in this context. Today, we want to shed some light on what is important in such business model revolutions in mechanical engineering and what can go wrong.
You need to have your service processes under control!
Of course, you should always make sure that your maintenance and repair services, as well as any other services you offer, are carried out to a high standard and efficiently. Especially when you think about it, Availability guarantees or X-as-a-Service into your portfolio, this topic becomes even more important.
After all, you are committing to ensuring that your products have a high level of availability and, in the case of X-as-a-Service, you do not earn any money if your machines are down. Ultimately, the customer benefits from the fact that you have a vested interest in ensuring that your machines are highly available. You should also be able to meet this requirement. So if you still see problems here, you should make improvements as quickly as possible.
Inefficient processes in such a business model are no longer at the expense of customer satisfaction, but directly reduce your economic success. You should therefore have achieved a certain level of excellence in your delivery processes before you consider investing in these business models.
With X-as-a-Service, you must define exactly what is included in the scope of the contract!
With an X-as-a-Service model, the customer books an all-round carefree package, so to speak. Nevertheless, there are logical limits to this. You should ensure that basic things such as consumables are included in your offer. Of course, you also need to protect yourself against misuse.
The customer should nevertheless be encouraged to use the machine provided as carefully and sparingly as possible. To this end, you must carefully consider which consumables and spare parts are included in the contract. You should price them in such a way that the normal use of the machine is covered. Repairs, maintenance and spare and consumable parts should correspond to the requirements of normal use.
In practice, this can sometimes be more difficult than it sounds at first. Depending on how complex a machine is, this can require a lot of experience. If you include too many services, you will have to charge high prices and may maneuver your X-as-a-Service offerings out of the market. If the scope is too small, the customer will at some point wonder why they even took up the offer.
And this applies not only to the classic services related to ensuring technical functionality, but also to all other services that you want to include in your offer. Should training be included or not? Do you also want to include consulting services? Which software packages are included in the XaaS standard?
In all these decisions, you must always think from the customer's perspective and assess whether this is what your target customers really want. Because if not, you will price yourself out of the market, as the customer will find the price too expensive for what they want to use. You may also need to take a more individual approach to preparing offers and calculating the business model from the outset.
Define target groups precisely!
The world of "as-a-Service" sounds tempting to many service managers in mechanical engineering. However, such subscription models are not for every customer. So before you draw up your strategies on the drawing board in management, you need to think carefully about who will ultimately buy your subscription models.
Many customers have reservations, others are open-minded. You need to consider which customers these are when designing the offer. If you design a great as-a-service offer and then try to throw it onto the market using the watering can principle, you will often fall short of your ambitious goals. A comprehensive target group analysis is essential beforehand.
The likelihood of a successful sale also depends on the nature of your offer. In mechanical engineering, it is often the case that customers who have a machine in operation virtually all the time are more likely to buy it. More persuasion is required here. On the other hand, there are more sales opportunities for those who do not use a machine around the clock but want to be able to rely on it when needed. If you price it correctly, this can also be good business for you. However, in the end it makes no sense if your machine just sits in the corner. A balance must be struck here. However, this can vary greatly from industry to industry and must be assessed on an individual basis.
Incidentally, a provider is also allowed to decide for itself to whom it makes such an offer and to whom it does not. It is not just a question of which customers might be interested, but also which customers you are not interested in making the offer to. For example, due to bad experiences, such as dubious payment practices or poor handling of the equipment.
The planned capacity utilization of a machine is often a good indicator of whether a customer will be receptive to the business model. However, this does not necessarily have to be the case. Issues such as the customer's risk aversion, seasonal fluctuations in business or liquidity also often play a role. In any case, you need to know in advance who you are designing the new business model for. Only then can you design it in such a way that it resonates with the target group. You need to understand the needs of your target group for the XaaS model in order to be able to serve them optimally and at attractive conditions.
Persuasion is often necessary
In many cases, X-as-a-Service offers advantages for both providers and customers and is already enjoying growing acceptance in some cases. However, the topic is still uncharted territory for the vast majority of customers. You must therefore also focus your sales and marketing efforts on explaining such concepts to customers. A good story is worth its weight in gold here. Buying a machine is still the standard in the industry. Even if this does not only bring advantages.
Sales staff often have to justify the price, for example, which is naturally higher in the long term for as-a-service than for purchase. It is important to point out that the operating costs of the machine, reliability and other factors are also included in the price. Discussions about the price are difficult and tough. With a value calculator, however, you can try to approach the topic differently and calculate the value to the customer, which is offset by the costs.
There are also contract models, for example, in which the provider also takes over the operation of the machine. This is usually done remotely. Even in such cases, this is usually a new situation for the customer, which is sometimes met with skepticism. In general, we are moving away from a simple buyer-seller interaction and entering into a long-term business relationship that can be structured in a variety of ways. Of course, this sometimes requires more explanation and more persuasion on the part of the supplier. However, this is worthwhile for both sides if it is set up correctly.
