Adoption Drivers of PPU based business models

In the last article we talked about the benefits for equipment manufacturers (OEMs) of EaaS business and financing models. 

Today we want to give you an overview about the most important drivers which will lead to increased adoption of EaaS and Pay-per-use business models.

1. Ease of measuring KPIs

Equipment that immediately improves easy-to-measure customer KPIs (e.g. cost per piece) will be more likely to be sold as a service since on the one hand the benefits are very obvious and on the other hand there is no capital expenditure necessary.

2. Focus on Liquidity

Industries with liquidity shortages will find EaaS or Pay-per-use financing more attractive. The preference to buy equipment as a service or finance it via third parties will prevail in industries with a lack of cash, as the investment hurdle disappears. Especially in times like these, they will choose variable payments / operating expenses (OPEX) instead of a huge initial investment (CAPEX) more than ever.

3. Equipment complexity

Complex equipment is more likely to be sold as a service, as customers do not need highly qualified technicians who take care of repair & maintenance of the machine internally. Instead, the OEM will take care of this. With the data generated from the machines, knowledge and learnings will grow significantly at the OEM, leading to highly efficient maintenance processes even for complex equipment.

4. First Mover

In many industries, OEMs will use innovative business models to differentiate themselves from the competition. By early adaption of such business models, they can gain significant market share, which most likely will be kept long term due to the nature of EaaS business models (growing customer-lock in).

5. Value of increased efficiency

Capital intensive industries which benefit a lot even from small improvements in equipment KPIs (e.g. uptime) will more likely shift to EaaS or Pay-per-use business models as the business value of such improvements is very high. 

6. Cost of spare parts / consumables

Operators with high costs for spare parts or consumables will prefer OEMs who offer an EaaS model. In this case OEMs are in a much better position to manage and store expensive spare parts and consumables and provide them as needed to their customers.

What does this mean for the different industries? Which ones are already transforming their business models and who is next?

The following chart shows the current and potential EaaS adoption status for various industries. The data comes from the latest Equipment as a Service Market Report 2020-2025 from IoT Analytics. 

Source: Wopata Matthew (2020): Equipment as a Service Market Report 2020-2025. How OEMs are moving to pay per use business models. Hamburg: IoT Analytics.

You want to know what potential your company and industry has for equipment-as-a-service or pay-per-use business models?

Feel free to make use of our ➡️ online assessment and you will receive a step-by-step guidance on how you can guide your business into this massive service potential for OEMs.

Get in contact with the team of Findustrial and we start the journey with you and your equipment suppliers!

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