Equipment-as-a-Service (EaaS)

Why EaaS models are moving from a theoretical option to a strategic imperative

Over the past 24 months, many asset sales teams were confronted with requests from their customers for a more flexible business model – namely Equipment-as-a-Service (EaaS). Internal business development teams, on the other hand, also have increasingly focused their attention on this area as successful implementations have been outlined in numerous published case studies. In essence, three core drivers have led to the pursuit of a large number of EaaS pilot projects in the industrial products sector:

1. Decline in equipment sales and margin
   In the industrial products sector, it’s no secret that the majority of profits is no longer earned in the new equipment business. In fact, after sales offerings such as spare parts or technician support have become the number one profit driver. But with an increasing trend towards lower margins of new equipment, many OEMs have also identified EaaS models to enable a reliable source of steady high-profit income streams.
   
2. Customer demand
   Industrial equipment manufacturers are increasingly pressured by their customers to offer more flexibility. Of course, this requirement is then passed on to OEMs. As a result, we have seen a growing focus on operating expenditures instead of capital expenditures to enable more operational agility. Instead of purchasing five machines, customers are now looking to purchase 3-4, but would like to use capacity on the remaining 1-2 machines on an on-demand basis.
   
3. IIoT technology advances 
   Many technologies that are basic enablers for Equipment-as-a-Service models simply did not exist 10 years ago. Among others, this includes IIoT, 5G, cloud infrastructure or big data analytics. Today, companies want to leverage the investments in digitization they have made over the last few years – and EaaS models are often in focus.

Equipment-as-a-Service Survey

EaaS continues to make headlines in many industries – however, there are still only few public examples of successful endeavors.

This survey thus aims at better understanding where machinery companies currently stand on their EaaS-journey and what potential they attribute to the topic.

Completing this survey will not take more than 8 minutes of your time and you will be among the first ones to receive the analysis on the results.

Equipment-as-a-Service (EaaS) – mobilizing a future strategic imperative

How industrial equipment manufacturers can kick-start their transformation and take it to scale

Essentially, there are four core areas in which machinery OEMs have to fulfill specific requirements in order to build and scale Equipment-as-a-Service models:

1. Service offering (e.g. which specific services should be part of the value package?)
2. Leasing & financial model (e.g. how should assets be refinanced if no upfront payment of the equipment price is charged?)
3. Operations & IT (e.g. how are the different technologies such as predictive maintenance integrated to optimally steer operations and maintenance?)
4. Billing & invoicing (e.g. which changes are required to move the current billing system from an asset-focussed to a solution-focussed business?)

The specific configurations of these four dimensions depend on the respective organization and whether the current focus in on a) piloting an EaaS model or b) scaling an existing EaaS business.

To support industrial products manufacturers on their journey, the Deloitte whitepaper outlines which specific measures need to be prioritized across the four areas.
 

The Monitor Deloitte approach: EaaS X-ray based on target customer journey

While the measures outlined in the whitepaper can be applied for the vast majority of equipment OEMs, their detailed configuration will depend upon one factor: specific customer requirement in the respective segment. To set these very requirements as the “true north” of the EaaS transformation, Monitor Deloitte has developed a pragmatic model that allows companies to answer three questions:

1. What exactly are customer requirements for an EaaS model in our specific case?
2. How mature is our organization with respect to these requirements?
3. Which immediate actions are required to achieve the target state of each requirement to enable successfully offering and scaling an Equipment-as-a-Service model?