131, 95, 83: These numbers sum up the three reasons manufacturers must embrace smart, connected products.
A massive opportunity
- $131 billion is the size of the overall equipment-as-a-service market expected by 2025, a 35% increase from 2019
- 95% of McKinsey’s Machinery & Industrial Automation survey respondents expect to change their business models to be successful in the future
- 83%—of the TSIA 40 Industrial Equipment Index face shrinking net operating income margins.
As manufacturers you are in the hot seat to shorten development cycles, deliver a superior connected customer experience, and shift to everything-as-a-service (XaaS) to diversify revenue. Your customers, management and business partners won’t wait for you to catch up as your competitors are doubling down on digital.
You may ask: “Direct equipment sales have worked for us in the past. Why should I move to XaaS?”
The answer is that your margins and top-line revenue would shrink: Revenue would come from a smaller number of customers. Your competition would offer more flexible pricing and services programs, making it tougher to acquire and keep new customers. You’d be able to compete only on price. You would be left behind.
But what if you could create resilient, recurring revenue? You can increase your strategic value to your customers, tailoring services based on their needs and wants. You can shorten innovation cycles with faster product releases and innovate and differentiate to create new business models.
Smart, connected products
This is where smart, connected products come in.
- They are less costly to maintain with fewer on-site service calls. Real-time data keeps you informed of potential problems to address immediately—no need to wait for product failure. On average, remote asset condition monitoring reduces maintenance costs for Software AG customers by 50% and increases uptime by 23%.
- OEMs can double their services revenue within three to five years, without making large investments in capex, developing new products or building extensive cost reduction programs. On average, our customers who connect their products:
- Increase services revenue 30.5%
- Sales volume rises 4.5% in revenue
- Yearly total revenue gains 2.4%.
Grow revenue: Smart connected products offer you the ability to create new revenue streams. Grow revenue by selling services on top of equipment. By connecting products - including your brownfield and greenfield equipment, even your competitors’ equipment - you can create repeatable and resilient services revenue with higher margins.
Excite your customers: Knowing how and when your products are used empowers you to add features your customers value continuously and deprecate unused features just as fast. Be like Elon Musk.
Offer products as a service: Increasingly, manufacturers want to avoid big CAPEX investments, to keep expenses in line with revenue and better manage costs. Subscription services, with charges based on outcome and use, can create revenue not just once but across the entire product lifecycle.
Build better relationships: Improve your customers’ experience by using insights on usage and performance from your connected products. Engage with your customers more frequently to help them get more value from
your products. Customize service levels and pricing based on their use to deliver a truly unique and personalized offer.
In case you need more convincing as to the benefits of smart, connected products, click here to read how five of Software AG’s customers are leading the way in using IoT to create a connected customer experience, increase operational efficiency and generate new revenue in a truly connected world.
And read our ebook, Smart, Connected Products, in its entirety by clicking below.