In a world where organizations are trying to create more value with their products and services, one thing to consider when looking for smarter equipment, is the shifting of business models. Equipment-as-a-Service (EaaS), also known as Product-as-a-Service, Machine-as-a-Service, and in some cases, Servitization, combines equipment and services into a single package. This involves renting or leasing out machinery to end users and collecting periodic payments for use of the equipment. This business model can help end customers lower their equipment Total Cost of Ownership (TCO) and gain more flexible equipment costs that respond to changes on demand. There is a shift from reliance on equipment as a sale, to equipment as a lease, shrinking hardware margins to more profitable after-sale services and parts.
Customer expectations are rising. Customers want to pay for what they use, have someone else worry about uptime, and expect parts to be replaced only when necessary. In tandem, they want to ensure that they are gaining sustainability benefits from their chosen business models and strategies.
In recent years, the Equipment-as-a-Service (EaaS) business model in IoT has gained popularity as a more sustainable and environmentally friendly approach to running a business. By shifting from a traditional model of ownership to a service-based model, businesses can reduce their carbon footprint, improve efficiency, and increase sustainability. Now, a few points on what sustainability benefits can arise when shifting to an EaaS model, and how it enables organizations to be more sustainability focused, enabling them to focus on what matters – their customers and our planet.
Carbon footprint reduction
One of the key benefits of an EaaS business model is the reduction in carbon footprint. By offering EaaS rather than a product, businesses can reduce the need for production, transportation, and disposal of equipment. This leads to a reduction in greenhouse gas emissions and a positive impact on the environment. Additionally, EaaS allows businesses to reduce the amount of equipment they own and the amount of storage space they need, lowering their carbon footprint further.
By outsourcing the management and maintenance of equipment, businesses can focus on their core operations, improving efficiency and reducing waste. Additionally, EaaS providers often offer advanced equipment that is more energy efficient, reducing energy consumption and costs for businesses. By improving efficiency, businesses can reduce their carbon footprint and positively impact the environment.
Improved resource utilization
By offering Equipment-as-a-Service, businesses can match equipment utilization to demand, reducing waste and increasing efficiency. Additionally, EaaS providers often offer shared equipment options, allowing multiple businesses to share the same equipment, reducing the need for multiple pieces of equipment, and increasing resource utilization.
By reducing the amount of equipment that organizations own, EaaS reduces the need for disposal and reduces waste. Additionally, EaaS providers often offer advanced equipment that is more energy efficient, reducing energy consumption and costs for businesses.
By outsourcing the management and maintenance of equipment, end users of smart, connected equipment can reduce their overhead costs and focus on their core operations. Additionally, EaaS providers often offer equipment at a lower cost than traditional ownership models, reducing costs for organizations and in tow, improving relationships on both sides.
Access to new data
Before EaaS, once a machine was sold and out the door, the data from that machine was gone. A mystery to the equipment manufacturer. With EaaS, equipment manufacturers now have access to machine data and can analyze the performance of installed equipment. Having access to this data allows for more efficient designing and operating of smart equipment going forward, opening the door to the design of greener products.
A new lease on life
Equipment-as-a-Service doesn’t just increase recurring revenue for equipment makers, it opens the door to more business opportunities. EaaS allows equipment manufacturers to lease out equipment to machine users and contracted partners who pay a monthly fee to use the machine instead of buying and owning it outright. Furthermore, unsold machinery or equipment that is not currently being used can be made available under a lease agreement. This in turn comes across as a more reasonable approach to customers who prefer the flexibility of leasing vs. buying. And it gives new life to equipment, promoting a circular rather than linear economy.
Greater connections with customers
Equipment makers are enabled to monitor and optimize the performance of connected smart equipment, to help their customers meet their needs more efficiently. With greater control over equipment function and maintenance, equipment manufacturers can improve the service life of their equipment, leading to environmental sustainability.
In conclusion, the shift to an EaaS business model can be construed as a more sustainable approach to running a business, from both an equipment manufacturers standpoint, and from an end customer’s perspective as well. Both can reap massive benefits, from both a financial and sustainability perspective. An EaaS model can lead to countless sustainability benefits, thanks in large part, to products being made smart and connected, as these enable the deployment of IoT use cases like remote monitoring, smart field services, and performance management, which combine nicely with an EaaS model. By shifting from a traditional model of ownership to a service-based model, businesses can reduce waste, increase efficiency, and positively impact the environment. An EaaS business model is worth considering, however, one must consider all options, and what is right for their business, market, and ultimately, their customers. IoT at the end of the day, is an enabler, helping organizations to act sustainably.