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What is Equipment as a Service (EaaS)?

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What is Equipment as a Service?

Equipment as a Service (EaaS) is a digital business model where machines or production systems are not sold, but rather provided for a recurring payment, often a subscription, a pay-per-use model, or a hybrid.

Equipment as a Service (EaaS) is becoming an increasingly popular digital business model because of its predictable, stable revenues for providers. It is similar to the widely accepted and used software-as-a-service business model and other XaaS (everything-as-a-service) models.

With EaaS customers can use equipment for a recurring fee. It is the primary approach to the servitization of products across the manufacturing industry. This can be a monthly subscription, a pay-as-you-go model, or a hybrid. The fee also includes maintenance and repair services, and access to a pool of software solutions to help customers get the most out of their equipment. This combination of equipment and software solutions are an integral part of the Industrial Internet of things (IIoT).

The industrial internet of things refers to the network of sensors, instruments, and other devices connected to a computer with industrial applications such as manufacturing or energy management.

Another important note is EaaS enables usage-based pricing models of IoT-enabled machinery. It is a simple concept: customers pay only for how much they use equipment and this is known because the devices are interconnected digitally. This will hopefully lead to more stable and predictable spending in manufacturing.

The advantages of Equipment as a Service

Device manufacturers and service providers have a great deal to benefit by adopting an equipment-as-a-service product catalog:

Lower barrier of entry for customers: an Equipment as a Service business model eliminates the need for businesses to make large upfront equipment investments, which often can be prohibitively expensive for many organizations. By offering a pay-as-you-go or flat subscription model, access to equipment is not as limited by cost. As a result, EaaS enables manufacturers and service providers to experiment and access new customer groups.

Revenue growth:  EaaS creates new revenue streams for equipment manufacturers by offering a wider variety of purchasing options for customers, such as equipment rental. It also provides consistent monthly recurring revenue (MRR). Further, the lower barrier of entry for new customers can lead to increased revenues. This lower barrier of entry can also make it less risky to launch in a new market.

IoT-enabled service strategies: with access to IoT data, a whole new world of possibilities for device manufacturers is opened. First is improved equipment design. Gathering usage data is mandatory for any EaaS product. Connected devices to the IoT cloud provide a steady stream of data regarding production, errors, downtime, and more. Machine improvements become truly data-driven. Additionally, access to usage data enables predictive maintenance to prevent downtimes. Imagine a machine telling you it needs maintenance before it breaks. EaaS enables manufacturers to integrate predictive maintenance regulations instantly.

Sustainable product design: a tremendously important benefit of equipment as a service is a reduction in waste. Equipment lasts longer due to predictive maintenance strategies, and when a company no longer needs a device, it can be effortlessly resold. Where companies traditionally purchased devices permanently and were sometimes disposed of before the end of their usefulness, manufacturers maintain a direct customer connection, enabling them to extend a device’s life. As a direct result, fewer devices must be made, and therefore less manufacturing waste is produced. This makes ESG compliance easier.  

The future of equipment is usage-based

An Equipment-as-a-Service business model is a holistic approach across the entire device lifecycle. It covers financing, cash flow, and equipment management with a data-driven approach. As it mandates a continuous connection to the customer, and access to usage data, it dramatically improves the overall customer experience. It includes onboarding, maintenance, repair, and updates to offer a truly integrated customer experience.

For EaaS to be truly capitalized on, a monetization and billing platform is essential. Industrial companies who build in-house solutions often end up wasting precious time and money only to find they need expertise externally. Explore Nitrobox’s platform and discover how we can help you launch or improve your equipment-as-a-service business model.

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Updated on 16. February 2024

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