What is equipment-as-a-service (EaaS)?

The “as-a-service” model is the future of the equipment industry. Taking their cue from the success of software-as-a-service (SaaS), physical hardware manufacturers are transforming their businesses through equipment-as-a-service (EaaS) models. These are bundled solutions that focus as much on managed services as on the equipment itself. EaaS is a subscription approach that understands physical assets and services to be deeply intertwined, rather than the two separate businesses they’ve traditionally been understood to be. 

EaaS is a disruptive opportunity and a competitive edge for traditional hardware manufacturers, who are enabling their equipment with software, sensors, and electronics while prioritizing data-driven services, user performance, and customer relationships. The classic sales model is being replaced by a more holistic offering that prioritizes the value the equipment can provide over the equipment itself, and centers on customer support throughout the lifecycle of the hardware. 

The advantages—for both manufacturers and customers—are many. And the approach is gaining traction. In a 2022 report, Bain & Company predicted that equipment manufacturers would “sell most equipment as part of bundled solutions including software and services” by 2030, reducing the share physical equipment takes in total profits. Already, many original equipment manufacturers (OEMs) generate more than 50% of revenue and 100% of profits with equipment-enabled services.

What is equipment-as-a-service (EaaS)?

Equipment-as-a-service is a business model offered by manufacturers that gives customers access to critical hardware through subscription fees or usage-based (“pay per use”) payment models. “Pay as you go,” “managed services,” “outcome-based asset contracts,” and “performance-based contracts” are all business models that equipment companies use to build out successful EaaS offerings. 

The core feature of EaaS is that rather than paying outright to own the equipment, the customer pays a subscription for access to the value, utility, or function associated with the equipment. The model is sometimes alternately known as hardware-as-a-service (HaaS), machine-as-a-service (MaaS), or device-as-a-service (DaaS). In specific industries, the model might take more specific names, such as robots-as-a-service (RaaS), 3D-printing-as-a-service (3DaaS), or sensors-as-a-service, for example.

Bundling proprietary software with proprietary hardware, which then requires proprietary service, is what makes a complete EaaS offering. No buyer has the expertise in-house to maintain complex proprietary equipment on their own—whether an autonomous forklift, an automated tractor, or a metal 3D printer. The EaaS model delivers the right technical expertise as part of an end-to-end solution that has the equipment at its center. 

How does equipment-as-a-service (EaaS) work?

EaaS is an evolution from one-time sales of capital goods to a recurring-revenue model. In other words, it shifts the business model from capital expenses (capex) to operating expenses (opex). EaaS has been made viable by advances in technologies such as artificial intelligence, big data, digital twins, and cloud computing. For example, IIoT solutions allow for remote monitoring and for performance data to be shared from the equipment directly to the manufacturer, providing transparency on machine usage for accurate EaaS billing. Industrial equipment manufacturers can implement EaaS with different payment models: time-based (e.g., a weekly or monthly term), scale-based (e.g., fixed by square footage), utilization-based (e.g., per hour of usage), or output-based (e.g. per number of tasks an asset performs). 

3 equipment-as-a-service benefits for equipment providers

What are the advantages of offering EaaS? There are three key benefits of equipment subscriptions that manufacturers and vendors realize:

Recurring, predictable revenue 

Consistent revenue is built into the equipment-as-a-service business model for OEMs, giving providers more predictable income than they’d have in a traditional capex model—not to mention better visibility into revenue and supply-and-demand predictions. Customers’ smaller up-front investment also tends to mean a faster budget approval process, so new customers onboard more quickly. This is also a win for revenue—and often for margins as well.

Higher profitability over time

While it’s true that the EaaS model increases the time it takes for a manufacturer to recover the costs of building out a piece of equipment, service providers ultimately benefit by capturing more of the total value that equipment creates. In other words, they make more profit over the lifetime of the equipment than they would if they sold it outright. 

Increased customer satisfaction and loyalty

Offering an entire end-to-end service rather than a single piece of equipment increases stickiness because customers rely on service providers for everything from ongoing maintenance to consumables. Because they’ll always have the most up-to-date, optimized version of the manufacturer’s managed hardware, they’ll be more satisfied with their equipment and its productivity. And given the nature of usage-based billing models that drive some EaaS programs, billing for such customers is aligned to value creation.

3 equipment-as-a-service benefits for customers

Equipment-as-a-service business models also offer a variety of benefits to customers:

Cost-efficient equipment at a fixed recurring price

Because EaaS pricing models turn a steep capital expense into more manageable operating costs, they free up cash flow for customers. Beyond low upfront costs, EaaS provides accounting teams with financial visibility, making it easier to plan the organization’s budget. That’s because EaaS providers typically charge flat monthly or annual fees—and because the manufacturer is responsible for maintenance and repair, customers don’t have to worry about the financial unpredictability of equipment failure.

Easy scalability 

As businesses grow, transform, and experience seasonality, their technology needs change and fluctuate. So does their equipment usage. EaaS doesn’t just allow businesses to scale rapidly without paying huge sums of money at once; it also allows them to scale down without suddenly owning superfluous equipment (consider a seasonal ecommerce company, in which warehouse equipment might otherwise sit dormant for long stretches of time). Working in close partnership with a managed service provider ensures customers’ asset volume always meets their current business needs. 

The most up-to-date equipment, maintained by the provider

EaaS service agreements include proactive maintenance, repair, and replacement as part of the solution, as well as timely updates to the manufacturer’s latest technology—both hardware and software. After all, the manufacturer continues to own the equipment, so they’re incentivized to upkeep and iterate on it. This means EaaS customers don’t have to maintain in-house experts or worry that an asset will crash as soon as its warranty is up. So the risks of extended downtime or equipment obsolescence are virtually nonexistent.

4 equipment-as-a-service examples

EaaS models are being adopted across industries as organizations seek more flexible and cost-effective solutions for accessing equipment. Industries where EaaS is gaining traction include manufacturing, construction, healthcare, agriculture, transportation & logistics, energy, hospitality, and retail. 

Bear Robotics

Bear Robotics’ Servi is an indoor self-driving service robot used to run food, deliver drinks, and bus tables, automating employees’ repetitive work in industries like hospitality and healthcare. Bear’s Servi Plus model includes all the features of the original Servi, plus an expanded payload and dish capacity to support rush hours and larger restaurants. The company’s autonomous mobile robots (AMRs) allow human workers to maximize time with patients and focus on delivering exceptional guest experiences.

Bear Robotics offers both EaaS and outright purchase options. Rental models include comprehensive services such as installation and area mapping, workflow consultation, 24/7 technical support, software updates, hardware maintenance, daily email reporting, and warranties, with terms that may vary by contract and location.

Simbe

Simbe’s flagship commercial robot is “Tally.” Tally autonomously collects and analyzes inventory data in retail environments, scanning products on shelves to ensure they’re in stock, in the right location, and accurately priced. The robot and its navigation are powered by computer vision, radio frequency identification (RFID), and machine learning. Tally operates during store hours, giving retailers real-time recommendations to improve brick-and-mortar operations. 

With their equipment-as-a-service model, Simbe doesn’t sell Tally units outright. Instead, retailers pay a monthly fee depending on the deployment size, the number of SKUs scanned, or which of Tally’s features are actively used (e.g., whether customers are utilizing the robots’ computer vision and/or RFID).

Fox Robotics

Fox Robotics offers autonomous forklifts (FoxBots) that automate customers’ receiving dock operations 24/7. Fox starts with a Mitsubishi forklift and retrofits it with a suite of sensors and proprietary firmware to enable precise navigation, trailer unloading, and pallet picking capabilities. Fox primarily serves the materials handling and logistics sectors. 

The company characterizes its EaaS offering as the future of warehouse automation. Rather than cost-prohibitive fixed systems that only large enterprises have access to, Fox’s robots are low-cost and scalable. Its customers can deploy or withdraw robots in response to fluctuations in demand.

Brightpick

Brightpick manufactures warehouse automation solutions for order fulfillment for customers in the e-commerce, e-grocery, and third-party logistics industries. Its two primary offerings are the Brightpick Autopicker, an autonomous mobile robot (AMR) for in-aisle order picking, inventory replenishment, dynamic slotting, and more; and the Brightpick Dispatcher, a solution for post-pick order consolidation, buffer, and dispatch.

The company offers its robots under two different purchase models—a capex model and an equipment-as-a-service model. The latter allows customers to automate their warehouses with lower overhead costs. The equipment is paired with Brightpick’s proprietary software, Brightpick Intuition, which uses data and analytics to orchestrate and optimize the fleet and the fulfillment process, ensuring maximum efficiency on the warehouse floor.

Equipment-as-a-service vs standard business models

What primarily distinguishes EaaS from the traditional model of equipment sales are the additions of products and service offerings beyond the equipment itself. Hardware manufacturers or managed service providers that offer EaaS subscriptions offer much more than physical assets. They’re responsible for installation, for training, and for monitoring and maintaining the solution. They may offer subscriptions to proprietary software that integrates with their equipment. And they may include supplementary services like security protection or storage backup.

This bundling of products and services alongside the equipment—along with cloud solutions that allow for automation, machine analytics, predictive and preventative maintenance, and cybersecurity—essentially create an ecosystem rather than a standalone asset. In other words, EaaS customers purchase an end-to-end solution rather than a product.

Equipment-as-a-service vs machine-as-a-service (MaaS) vs device-as-a-service (DaaS)

EaaS, MaaS, and DaaS are all as-a-service models that provide access to physical hardware rather than ownership of it. The equipment continues to be managed by the manufacturer or service provider. As such, providers of all three business models have a range of things to consider that SaaS providers don’t: delivery and shipping, asset tracking, hardware repair programs, and more. The only difference between EaaS, MaaS, and DaaS is semantic: While some companies call their offerings “equipment,” others call them “machines,” and still others call them “devices.” But EaaS, MaaS, and DaaS are the same business model with the same complexities and opportunities. 

Who is equipment-as-a-service for?

An equipment-as-a-service model makes business sense for manufacturers and hardware solution providers when their offering meets a handful of conditions. Here’s when to consider offering equipment as a subscription:

• When the manufacturer produces a high-value asset with justifiable ongoing value to the customer (e.g., complex equipment with ongoing value delivery from an EaaS software layer)
• When it doesn’t make financial sense for the buyer to own the equipment outright (e.g., when upfront costs would be too high, or the hardware would sit dormant for long stretches of time)
• When the primary value proposition is connected as much or more to the ongoing service as to the equipment (e.g., the buyer continuously engages the manufacturer because the buyer doesn't have the knowledge, training, or components to maintain proprietary hardware)
• When the equipment can be monitored, managed, or enabled remotely (e.g., upgrades and updates can be deployed over the air, with usage and performance data shared from the equipment back to the manufacturer)

Equipment manufacturers interested in offering EaaS must be prepared to offer a unified solution with a range of advanced services—installation, training, monitoring, and maintaining the equipment, for example. EaaS models can be particularly powerful for solutions that are newer-to-market, where customers might be hesitant to commit to capital expenditures because the manufacturer’s equipment has no record of success.

EaaS is the right model for customers, on the other hand:

• When the business doesn’t have the cash for up-front equipment investments
• When production schedules or output fluctuates (since EaaS is a scalable solution)
• When the business doesn’t have the in-house expertise to maintain the equipment themselves
• When the business wants to perpetually run the newest, most up-to-date version of the manufacturer’s equipment and stay technologically relevant in its industry

How to implement equipment-as-a-service in your organization?

Equipment manufacturers are motivated to move to full subscription models due to their economic benefits, customer value creation, product stickiness, and the opportunities for improved equity multiples they provide. Despite these benefits, shifting from a traditional capex to a full-scale opex model can be an arduous undertaking. 

Moving to a hybrid EaaS sales model is one way equipment manufacturers can begin the transition to a full subscription program. A hybrid model allows a manufacturer to start small, run EaaS alongside the existing business, and create additional value over time through added software and services. Once that hybrid recurring model gains traction, the model proves out, and program metrics such as payback become clear, it becomes more straightforward for the manufacturer to transition their business to a full subscription model.

To begin successfully implementing an EaaS model, manufacturers should:

1. Choose which of their hardware is best suited for the model. (If the equipment is not yet cloud-based, the manufacturer has some work to do when it comes to incorporating IoT and digital technology, creating software, etc.)
2. Determine how predictive maintenance, repairs, and service will be accommodated
3. Consider the equipment’s effective life cycle, output/work volume, and likely service costs to determine the usage fee for each machine
4. Strategically bundle their EaaS offering by differentiating their core offering from add-ons and specialized components
5. Develop their EaaS pricing plan. (This will be a collaborative effort between Finance and Sales.)

Are you an equipment manufacturer looking to implement an EaaS business and pricing model? Most folks have questions when getting started. Our experts would love to talk with you about answers.