Industrial equipment companies are in the middle of a massive transition. The Services part of their businesses are following the Remote Service Continuum to help customers improve their operations, achieve outcomes, and receive more value. TSIA research shows that more and more industrial equipment (IE) companies are offering their technology on an “as-a-service” or subscription basis.
TSIA's Remote Services Continuum.
Today, most of the products from industrial equipment and instrument manufacturers are smart, connected products. And, that “smartness” is increasing through the inclusion of additional sensors, increasing edge computing power and the capabilities to process and analyze a huge amount of data in the Cloud, creating digital value. This, in turn, creates a hybrid architecture of local storage and computing power connected to both the Cloud and vendors.
Today, most industrial equipment companies are good at monetizing hardware maintenance, but they are only at the beginning to monetize software support and maintenance.
This environment creates additional non-subscription-oriented business opportunities, such as:
To capture this value, TSIA recommends building a Digital Value Chain to give data monetization the same level of focus as the value creation with products.
An example of a digital value chain.
There’s a long-term trend occurring, where customers want their supplier to take more responsibility for helping them reach and improve their outcomes. Customers want to pay for products and services as they consume them and as they achieve their desired goals. This is described in the TSIA book, B4B: How Technology and Big Data Are Reinventing the Customer-Supplier Relationship.
This trend is creating a demand for subscription offers where customers can pursue a pay-per-use model.
These customer demands are causing technology suppliers to rethink how they operate in a number of ways:
This makes the growth of subscription revenues in IoT faster than in SaaS (software-as-a-service).
Subscriptions in industrial equipment are different, and besides pure information services, are more than a pure cloud service or SaaS. Subscriptions for equipment means that you’re providing a product and adjacent services and the software to process edge computing on-site.
This shows that subscriptions are more than financing the product and leasing it, or even just a different payment method. There is always a service included to run and optimize the usage of equipment.
Here are some examples of how industrial equipment organizations can offer subscriptions:
These include remote and on-site support. It’s the nature of physical products that they need to be provided on premise with adjacent services to run the equipment (such as managed technology-as-a-service) and edge computing.
Equipment components, like sensors or controls, need computing power on-site to ensure efficiency and low latency, which means a fast and secure reaction without delay through a cloud connection. Security functions especially require an on-premise installation. In many industries, security requirements do not allow connecting equipment with the Cloud.
The main subscription offer found in the industrial equipment industry, this option is ideal for on-premise hardware and software enriched by cloud services to store and process data. Edge computing, enhanced by analytics capabilities in the Cloud, offer additional value. In this case the vendor collects relevant data from the connected install base and can learn from it. They can also leverage machine learning to provide predictive and prescriptive maintenance and define best practices on how to use the equipment.
This offer can be used as information services. For customers who prefer the CapEx model and industrial equipment companies which do not yet provide equipment as-a-service with a subscription model, information services can still create high value. Examples of this offer are applications which help the customers to optimize the usage of the equipment through visual dashboards and assisting them in improving results and the management of the asset.
Subscription offers for industrial equipment.
Additionally, we see subscriptions for standalone services like training as a subscription, or support for field engineers or consultants.
Based on TSIA research, here are some top recommendations you can use to get started in developing your subscription/as-a-service offer within your industrial equipment organization:
At TSIA’s upcoming Technology & Services World conference, taking place October 21-23 in Las Vegas, I will be sharing TSIA research on this topic and other insights relevant to industrial equipment organizations. Register today to make sure you don’t miss out on great sessions like:
Register today and get a discount on your ticket. I look forward to seeing you there!
Post Date: July 30, 2019
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Professor Harald Kopp, is director, Industrial Services Research, for TSIA, as well as a teacher in a MBA program for sales and service engineering at Furtwangen University, Germany. His focus is chiefly on services in industrial automation, equipment, instruments and technology companies. He has 20 years of experience in the areas of research, consulting and management in industrial services, supply chain management, and IT-Management in industrial equipment, automotive and enterprise IT industries.
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