De-risk equipment management

The world of technology has finally caught up to the promise of the Equipment-as-a-Service model. EaaS is a system by which OEMs or service providers assume maintenance and management responsibility for large equipment, freeing companies to concentrate on business priorities and not spare parts and service schedules. This effective and elegant solution to a big problem was first deployed in the 1960s – and yet it is only taking off now.

That is because the enabling technology was not readily available. The airline industry was the first to roll this out. Typically, when an engine failed, the carrier had to purchase and install a new one, wiping out millions of dollars for both the purchase and in lost revenue. One manufacturer realized airlines don’t need to be in the engine business, so it developed a subscription model called “power by the hour.” It was a brilliant idea, but the clunky technology of the time made larger rollouts impractical.

That has now changed with the advent of efficient IoT, cloud, and Intelligent Industry technologies, and EaaS is ready to solve your equipment headaches.

The global market for EaaS is growing, with the greatest adoption in sectors focused on high-value industrial products, with manufacturers bundling products and services. This model opens large opportunities for IoT enablement, predictive maintenance, and contract management in the IT space. Modern EaaS requires less capital investment and helps OEMs improve revenue by approximately 2.5 times and net cashflow by three to four times, with recurring revenue.

The subscription model can be supported by new digital technologies such as IOT, cloud, AI, and ML.

An approach that essentially rents equipment to end-user companies eliminates the traditional drawbacks of the equipment-purchase approach. These weaknesses include:

• A total lack of insight into the equipment’s performance and interaction or loyalty with customers
• No opportunity to pitch AMC contracts and to explore untapped revenue streams, due to less customer engagement
• The higher capex investment required by the end customer for new equipment.

EaaS is a go-to solution for both sides

This comprehensive, flexible solution that bundles products and services into a single subscription price delivers significant benefit to both vendors and their customers. A 2019 industry study of total lifetime equipment value found EaaS can deliver 50 percent of revenues to the vendor, compared to only 25 percent in a traditional sales model. And it does this while reducing total operating costs by 15 percent.

This approach is a cultural shift in the way companies operate and involves changes in several aspects of business functions, including sales, finance, customer management, IT systems, and product portfolio alignment, along with services, IoT-izing the products to be sold in this model, etc.

However, there are certainly risks in the new business model, such as data security, non-payment of dues, service network capability of OEMs for increased demand, and the financial risks of reliability of the product.

To address both the advantages and risks of this business model, Capgemini offers an EaaS platform to enable a smooth transition. The model encompasses and synthesizes pricing for equipment and defines a degree of control along with online contract management, asset tracking, an IoT-based dashboard for equipment, AI/ML-based predictive maintenance, and modern remote services enabling opportunities for data monetization. This platform addresses the business risks of these technologies and mitigates the financial and non-financial challenges to enable tangible and intangible business benefits.

What comes next?

At Capgemini, we help our clients explore integrated solutions for after-sales maintenance operations. With the EaaS transformation, the OEM provides guarantees on the performance of the equipment and the customer pays for the uptime. It also lets customers concentrate on their core business goals as the OEMs are in charge of the equipment.

To learn more about this solution or see it live in action, contact:

Roshan Batheri Capgemini’s Director of the Automotive & Manufacturing IndustryHub, at roshan.batheri@capgemini.com.