Process Infrastructure-as-a-service and Peripheral Plant Infrastructure-as-a-Service are increasingly becoming part of the way to market, sell and operate industrial equipment.
The model for as-a-service in industrial infrastructure is not as much the well known SaaS-model that is used by technology companies such as Salesforce, but the Power-by-the-Hour concept that Rolls-Royce introduced in the 1960s and cultivated over time.
Expanding the concept of pay-per-use or pay-for-uptime to industrial equipment has a number of advantages. It also comes with a number of challenges to address in order to avoid surprises and disappointments for the different stakeholders involved.
In this blog article I will cover some of the aspects of moving into an as-a-service-offering for industrial equipment, based on my experience as a consultant in this field.
One of the key drivers to request as-a-service proposals is governed by the reluctance of some companies to engage in CapEx projects.
Another, and increasingly important driver to request as-a-service solution is to ensure better performance outcomes. With suppliers directly impacted by non-performance and downtime the level of commitment to obtain what was initially projected increases significantly.
Some businesses see moving to as-a-service is as a powerful accelerator of the selling process.
Long sales cycles, involving many decision makers and a lot of back and forth before coming to the final go-ahead is a thing of the past with as-a-service-solutions that can be sold in a low touch cycle with a minimum level of red tape involved.
In reality the selling process of as-a-service-solutions that involves high value goods and that touches core operating processes comes with a lot of risk and compliance proofing and engenders a lot of negotiation on financial and operational risk carrying.
This has an important impact on the selling process that is fundamentally different in the marketing, the selling and the customer success function from traditional capital goods selling.
Some companies have experienced the need to bring-in completely new sales, marketing and service teams to address as-a-service because the complexity of this process was fundamentally different from the traditional investment goods selling process that was mastered over time by their organisations.
In general an infrastructure-as-a-service collaboration will cover some for of matching study to investigate the required level of integration of the as-a-service process into the engineering operations model of the plant concerned.
The infrastructure is often split into repurposable and non-repurposable components. Repursable components can be recovered at the end of the contract and be redeployed in other installations. Non-repurposable components or lost and need to be scrapped.
The impact of the repurposable/non-repurposable ratio can best be compared to the leasing fee for a car that takes into account its reselling value at end of contract to offer an attractive monthly rate.
A key success factor for infrastructure-as-a-service is standardisation in combination with containerisation or the ability to put components on skids for easy transport and build-up and dismantling.
Depending on the type of infrastructure, the access to capital to fund as-a-service deployments and the income that is generated from technology matching studies, the as-a-service model can be the dominant or a non-dominant go-to-market model.
Some clients are happy to go for CapEx and do not want to pay for the flexibility premium that comes with as-a-service.
Some supply side companies are confronted with lack of investor appetite to fund a large number of as-a-service projects, especially if the performance outcomes can not be guaranteed.
Another aspect that has an impact on infrastructure as-a-service-only business models may be, that at a certain point in time, the attractiveness for investors reduces.
This can be the result of alternative investment domains that offer a higher and more secure yield or the result prohibitive rates required to cover risks related to potential warranty on repurposing costs.
Infrastructure as-a-service can be used in different go-to-market strategies.
The as-a-service option can be used to enter markets where the appetite for CaPex investments is low and where offering as-a-service may create a competitive advantage.
As-a-service can also be a way to bring new technology to hesitating potential reference users.
In this scenario hefty provision will need to be made to cater for performance and connective issues that can not be fully integrated in the pay-per-use of the pay-for-uptime fees.
As-a-service can also be used to fundamentally transform the business model from a sales + maintenance model to to a fully-fledged recurring revenue model with all the possibilities this brings in the field of income maximisation, shareholder value creation and securing close to perpetual income streams.
Operating any as-a-service infrastructure comes with oversight, monitoring, performance analytics and knowledge sharing based on data pooling.
Performance data are used to improve overall performance across industries and to develop best practices.
The use of AI for the interpretation of the available data allows for reliable predictions on performance, on maintenance and on timely replacement of components, often in combination with digital twins and elaborated performance enhancement models.
The Customer Success Function, where users are coaching in getting the most out of their equipment is a key element in the success of an as-a-service model and requires diligent thinking about the type of support. that will be given, the responsibilities accepted for the application of the recommendations and the cost of deploying a fully fledged Customer Success Function.
I hope you have enjoyed these 6 inputs on Infrastructure-as-a-Service. There is much more where this comes from. I had the pleasure of working on several as-a-service projects in industrial and B2B markets and have developed a number of assets and models that can help companies to integrate Industrial Infrastructure as-a-service in their strategic thinking and day-to-day operations.
The closing message is that as-a-service models are very powerful concepts that can propel companies to the pinnacle of their industry, but also that as-a-service is often underestimated when it comes to building resilient value cases, pricing models and risk management models.
I look forward to further discuss this interesting topic and to exchange views on this paradigm shifting concept.