Business models are transforming. New models are now based on consumption and we are moving away from owning assets.

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Is PaaS the Way Forward for Your Machinery?

Business models are transforming. New models are now based on consumption and we are moving away from owning assets.

In today’s world, we see less limitations and a growing number of opportunities as new technology is being developed. In some cases, new ways of providing products and services have completely replaced old ones. Even well-established, product-oriented companies like Rolls Royce, which used to sell complete aircraft engines, have embraced the consumption model and are now offering “flight hours” instead. The concept is called Product-as-a-Service—PaaS.  

PaaS—Like Spotify, but for the Manufacturing Industry  

The idea behind PaaS is that suppliers can charge more for perceived added value than they can for just a product or service. Today, many people choose to subscribe to a music streaming service instead of buying CDs, for example. Sure, subscribing to a streaming service means a regular expense, but consumers are given access to an unlimited amount of music, which creates an added value.

Translated to the production of vehicles, machinery, and other capital-intensive equipment, the PaaS concept means that customers buy the products’ uptime and what the products do rather than the actual product. PaaS might be an attractive option as more and more companies begin to look for new opportunities to take an active share in the aftermarket. By offering experience-based services rather than physical products, the customer relationship and revenue opportunities do not end when the product is sold and passes through the manufacturer’s gates. Instead, it continues for the whole lifecycle of the product, regardless of whether it is agricultural equipment, heat pumps, or trucks.

Maximal Uptime with Proactive Efforts 

The customer-perceived value is tied not only to the physical product customers choose but also to the level of service they expect to have in the aftermarket. A lot of the work will be minimizing the number of errors and ensuring that the product’s runtime is maximized. This demands more from you as a supplier and your ability to predict errors and take preventive measures. In order to do this efficiently, it is important that you do not only look at the product as a whole. You must also be able to see the product’s components as “individual entities.” In the best case scenario, each component will then have its own service plan, including preventive service and warranty commitments. 

In the future, it will be possible to equip the components with sensors and follow up usage with IoT services, which will make it easier to predict errors and avoid costly downtime. 

Increased Demand for Better Customer Experiences 

As the PaaS trend grows stronger, customers are demanding much more of service providers when it comes to truly delivering added value. Anything a manufacturing supplier can do to get a firmer grip on the whole customer journey and take increased responsibility for the lifecycle of their products is thus a way to create more business opportunities. Newer business models make it possible to increase revenue, add value, and deepen the customer relationship. At the same time, companies also need to come up with new, more cost-efficient work processes that optimize service and maintenance. 

Many service providers are wrestling with smaller margins today and also, in the worst-case scenario, with unprofitable offers and customer segments. A lot of the time, the reason for that is that there is no insight into what actually works and what does not. And, more importantly, the systematic support that is required is often missing. 

Regardless of whether you choose to go all the way and offer PaaS or only choose to take part in some of the aftermarket, the key to success is having full control over costs—down to the individual entity level—and an ability to connect those costs to revenue streams. 

Would you like to know more?

Jonas Mondélus
Head of Business Development
+46 709 4142 86