Equipment-as-a-Service (EaaS) is an innovative usage and financing model in machine manufacturing, in which companies do not buy machines, but pay for their performance instead. In contrast to a classic sale of a machine, in the EaaS model, it is made available to users by the manufacturer for a fee. The machine manufacturer is responsible for maintenance, service, consumables and spare parts. Even the availability and output can be guaranteed. The user company saves itself the high capital expenditure and passes on some of the operational risk to the machine manufacturer (OEM).
In return, this incorporates the risk and the value creation for the machine user into its flat rate. The usage fee can, for example, be billed monthly as a flat rate or based on a "pay-per-use/pay-per-outcome model." OEMs thus generate continuous revenue over years rather than just a one-time payment from the sale of the machine.
Furthermore, this business model also strengthens customer loyalty, as there is a regular exchange. This means that the machine manufacturing company is always close to what is happening to its customers and can meet their requirements even better.
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A 2022 study by IIoT company Relayr in collaboration with Forsa showed that 14 % of German machine manufacturing companies surveyed already offer EaaS models. More than half are in the concrete planning and development of EaaS offers and almost 90 % would actively deal with the topic, according to the survey.1)
Equipment-as-a-Service (EaaS) is an attractive service concept for many machine manufacturers, which guarantees them reliable revenues over a longer period and their customers considerable added value in the aftermarket.
Thanks to the high flexibility of this model, the latter can adapt their capacities to demand and thus react agilely to market changes. At the same time, they benefit from increased cost efficiency, as high initial investments are eliminated, and instead predictable monthly costs make the financial burden calculable.
Another significant advantage is the technological up-to-dateness: The customers of machine manufacturers always have access to the latest technology without having to invest in regular upgrades themselves. In addition, EaaS also means comprehensive service (including maintenance, repairs, software updates), so that companies can benefit from all-round support for their systems and focus on their core business.
This model opens new opportunities for machine and plant manufacturers, especially in the printing industry. The high level of automation and complexity of the systems is making it increasingly difficult to sell new machines. So, alternatives are needed to expand or at least maintain market share despite stagnant new business.
This is a challenge that Heidelberger Druckmaschinen AG (referred to as "HEIDELBERG" in the text below) also faced. As the world market leader in sheetfed offset printing with a market share of over 50 %, the global player is setting new standards in the aftermarket in its industry.
Background: The company offers different types of contracts with different terms and services as standard for each machine sold.
The market for service contracts, subscription models and subscriptions is large. HEIDELBERG currently has 15,000 service contracts of all kinds, which account for around 15 % of total sales. In view of stagnating or declining sales of new machines, motivation is high to further expand this business area with recurring revenue.
It is noteworthy that 40% of sales are generated by consumables. This underlines the importance of the EaaS model for the company and explains the strong interest in expanding it.
The EaaS model is not suitable for every user – which is why HEIDELBERG continues to offer classic services (e.g. for remote maintenance) as basic contracts. Nevertheless, Equipment-as-a-Service plays a central role in the Group's aftermarket and is to be expanded as a "service flagship" in the coming years.
It includes:
The establishment of Equipment-as-a-Service at HEIDELBERG was challenging for several reasons. On the one hand, customers had to be convinced that they could achieve a significant benefit for their production with this new service offering – keyword: Overall Equipment Effectiveness (= OEE).
This is a central aspect of Equipment-as-a-Service: By combining high-quality machines that are always up to date with the latest technology, as well as comprehensive services and digital technologies (AI, IoT), HEIDELBERG helps its customers to significantly increase the productivity of their systems. For example, a manufacturer of folding packaging increased its productivity by 15 % with EaaS.
Dr. David Schmedding, Chief Technology & Sales: "You need patience to establish the EaaS model. It's always about the customer seeing added value in it and not just a kind of financing solution for machines." HEIDELBERG has concluded around 100 EaaS contracts worldwide so far, and the trend is rising. Large corporations, in particular, are showing increasing interest, according to the manager.
HEIDELBERG's EaaS model is based on modern digital technologies.
As a matter of fact, Equipment-as-a-Service offers machine manufacturers considerable advantages. Through this model, they benefit from stable, recurring income in the double-digit range, as the example of HEIDELBERG shows.
EaaS includes not only the machine itself, but also service and consumables, so that customer loyalty is strengthened in the long term – another benefit for OEMs. Also, manufacturers can always keep their machines up to date with the latest technology, as they remain their property. In addition, they gain valuable insights into actual customer needs, which opens cross-selling potential.
Current surveys show that EaaS is becoming increasingly important in machine and plant manufacturing:
These figures make it clear that a significant proportion of companies in the machine and plant manufacturing sector are already intensively involved with EaaS and that many are planning or have already implemented the introduction of such models.
With around 100 EaaS contracts worldwide and increasing interest, especially from large companies, HEIDELBERG shows that EaaS is not just a theoretical possibility, but a practical and successful strategy.
(Sources)
1) BA Beschaffung Aktuell
2) Industry of Things
3) MM MaschinenMarkt
4) www.ncs.de