Taking their cue from the success of software-as-a-service (SaaS), machine manufacturers are transforming their industry through machine-as-a-service (MaaS) business models. These are bundled solutions that focus as much on services as on the machines themselves. MaaS 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.
The approach is gaining momentum. In a 2022 report, Bain & Company predicted that machine manufacturers would “sell most equipment as part of bundled solutions including software and services” by 2030, ultimately reducing the share physical machines take in total profits. Already, many original equipment manufacturers (OEMs) generate more than 50% of revenue and 100% of profits with machine-enabled services.
MaaS is a disruptive opportunity and a competitive edge for traditional machine manufacturers, who are enabling their hardware with software, sensors, and electronics while prioritizing data-driven services, user performance, and customer relationships. The traditional sales model is being replaced by a more holistic offering that prioritizes the value the machine can provide over the machine itself, and customer support throughout the lifecycle of the machine. The advantages—for both manufacturers and customers—are many.
Machine-as-a-service is a business model offered by machine manufacturers that enables customer access to critical equipment on a subscription or usage-based (“pay per use”) payment model. “Pay as you go,” “outcome-based asset contracts,” and “performance-based contracts” are all business models that companies use to build out successful machine-as-a-service offerings.
The core feature of MaaS is that rather than paying outright to own a machine, the customer pays a subscription for access to the value, utility, or function associated with that machine. The model is sometimes alternately known as hardware-as-a-service (HaaS), equipment-as-a-service (EaaS), 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 MaaS 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 MaaS model delivers the right technical expertise as part of an end-to-end solution that has the machine at its center.
MaaS is an evolution from one-time sales of capital goods to a recurring-revenue model. In legacy equipment sales terms, it shifts the business model from capital expenses (capex) to operating expenses (opex). The success of the model has been made possible by advances in technologies such as AI, big data, digital twins, and cloud. For example, IIoT solutions allow performance data to be shared from the machine directly to the manufacturer, providing transparency on machine usage for accurate MaaS billing. Industrial machine manufacturers can implement MaaS 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).
The shift to machine-as-a-service parallels the shift from software sales to software-as-a-service (SaaS). In today's software contracts, businesses pay a recurring fee for software accounts, seats, or usage rather than purchasing the software outright and installing it themselves. MaaS follows the same “pay for what you use” mentality. This is a sign of the times not only because companies are now accustomed to this model for software, but also because younger generations of buyers are accustomed to financing purchases and regularly upgrading to the latest technology. The evolution of MaaS has been described as “the Netflix of Industry 4.0.”
What are the advantages of offering MaaS? There are three key benefits of machine subscriptions for OEMs, manufacturers, and vendors:
Because the as-a-service model is a fundamental shift from one-time machine sales to a recurring revenue stream over the lifetime of the machine, providers have more (and more predictable) income than they do in the traditional capex model. And because MaaS is an operational expense rather than a capital expense for customers, the budget approval process tends to be faster. This means customers onboard more quickly—an added win for revenue and overall financial performance.
While it’s true that the MaaS model increases the time it takes for a manufacturer to recover the costs of building out a machine, service providers ultimately capture more of the total value that machine creates. What’s more, because they leverage real-time data and analytics to improve their machines’ function and performance over time, MaaS organizations tend to offer more powerful solutions than their capex counterparts. Better solutions mean more market share, which equals more profitable businesses.
Offering an entire end-to-end service rather than a single machine strengthens the manufacturer’s ties to the user, since customers rely on the manufacturer for everything from ongoing maintenance to consumables. Because they’ll always have the most up-to-date version of the manufacturer’s machines, customers will be more satisfied with their overall solution. And because the manufacturer is in frequent communication with the customer, they’ll have more opportunities in which to offer additional products and services.
Machine-as-a-service models also provide substantial benefits to customers:
Because machine-as-a-service turns a steep capital expense into a manageable operating expense, it frees up cash flow and reduces financial risk for customers. It also puts the solution within reach of businesses who wouldn’t otherwise have access to it, offering them ROI from the outset. MaaS also provides users’ accounting teams with financial visibility, making it easier to plan budgets. That’s because machine solution providers typically either charge flat recurring fees or apply usage-based pricing structures. And since the manufacturer is responsible for maintenance and repair, customers don’t have to worry about the financial unpredictability of a machine failure.
As businesses grow and change, so do their technology needs. MaaS allows customers to scale rapidly without enormous upfront costs, but it also allows them to scale down without suddenly owning machines that sit dormant for long stretches of time. MaaS contracts typically don’t entail long-term commitments, and customers are free to tailor their engagement based on organizational needs. Working in close partnership with a managed service provider ensures machine volume always meets current business needs.
MaaS service agreements include predictive and proactive maintenance, technical support, repair, and replacement as part of the solution. They also include timely updates to the manufacturer’s latest technology—including both the physical machines and their software. After all, the manufacturer continues to own the machines, and so is incentivized to upkeep and iterate on them. This means MaaS 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 disruption due to extended downtime or equipment obsolescence are virtually nonexistent. Finally, MaaS providers can use the data they collect from their machines across customers to better improve upon solution design.
The machine-as-a-service model has taken hold in a wide range of industries, from manufacturing, to farming, to the airline industry. (Perhaps the earliest example of MaaS was Rolls-Royce’s 1962 “power by the hour” model, in which exhaustive jet engine maintenance and replacement services were offered at a fixed cost per flight hour.) Here are some other industries that are benefitting from machine subscriptions:
In the construction industry, MaaS solutions typically include services such as real-time equipment tracking, remote monitoring and diagnostics, predictive maintenance analytics, and utilization monitoring to improve efficiency, productivity, and safety on construction sites. Hardware solutions sometimes include add-ons that allow customers to operate the equipment autonomously.
For example, Built Robotics—founded in 2016 and headquartered in San Francisco—has two primary offerings. The first is the RPD 35, an autonomous piling system that surveys sites, determines how to best distribute piles, drives them with a hammer, and inspects them—all at a rate of up to 300 piles per day. Built’s second offering is the Exosystem, an aftermarket upgrade that transforms heavy excavation equipment into fully autonomous robots. The company’s machine-as-a-service offering includes hardware, software, training, and 24/7 support. The Exosystem is run on Built’s proprietary software platform, Everest, which serves up live video and instant notifications, and tracks detailed production and utilization metrics.
In agriculture, machine-as-a-service solutions include technologies for precision farming, automated cultivation, and crop monitoring. MaaS companies offer a range of services including precision irrigation systems, automated harvesting solutions, crop monitoring sensors, and farm management software. These solutions are aimed at optimizing yields, reducing costs, and improving sustainability in agriculture operations.
For example, Monarch Tractor—founded in 2018 in Livermore, California—manufactures the MK-V, a 100% electric, driver-optional tractor for use in vineyards, orchards, dairy farms, blueberry farms, and elsewhere. The tractors are equipped with computer vision and 360° camera coverage that allow for situational awareness and a continuous stream of images that farmers can access from a central database. Farmers can also manage multiple tractors at once—for seeding, hauling, tilling, spraying, plowing, weeding, and harvest—through the Monarch app on their phones. Monarch sells its tractors outright and then charges monthly subscriptions for its proprietary software. Add-ons include Monarch Connect, with real-time alerts, operational insights, and custom map visualizations; and Monarch Automate, with autodrive operations and remote supervision of multiple tractors.
MaaS models are emerging to provide businesses with access to 3D printing technologies without the need for upfront investments in the machines. These companies offer a range of services including on-demand 3D printing, rapid prototyping, additive manufacturing consulting, and even end-to-end production solutions.
Formlabs—founded in 2011 in Somerville, Massachusetts—manufactures a 3D printing ecosystem used for prototyping and in-house printing in the industrial, automotive, manufacturing, dental, and other industries. Alongside a series of industrial-quality 3D printers (Formlabs offers 5 different models), the OEM also manufactures post-processing machines for washing, curing, and finishing prints. The company also has a portfolio of 45 proprietary resins.
Formlabs’ machine-as-a-service business model is both full and hybrid: Some customers purchase their printers outright, while others lease them short-term in order to scale, respond to supply chain shortages, or launch limited-edition products. Customers can also purchase accessories (materials, resin tanks, built platforms, etc.) as they require them. Formlabs has three proprietary software offerings—PreForm, which simplifies print preparation, and Dashboard, both of which are free; and Fleet Control, which is available at a monthly subscription cost. The company also offers service plans like dedicated phone support and “hot swap” replacements.
What primarily distinguishes MaaS from traditional machine sales are the additions of products and services beyond the machines themselves. Machine manufacturers that offer MaaS subscriptions offer much more than the physical asset. 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 machines. And they may include supplementary services like security protection or storage backup.
This bundling of products and services alongside the machines—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, MaaS customers purchase an end-to-end solution rather than a product.
MaaS, EaaS, and HaaS are all as-a-service models that provide access to physical hardware rather than ownership of it. The hardware 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 the three is semantic: While some companies call their offerings “machines,” others call them equipment, and still others call them “hardware,” MaaS, EaaS, and HaaS are the same business model with the same complexities and opportunities.
A machine-as-a-service model makes business sense for manufacturers and machine solution providers when their offering meets a handful of conditions. Here’s when to consider offering machines as a subscription:
Equipment manufacturers interested in offering MaaS must be prepared to offer a unified solution with a range of advanced services—installation, training, monitoring, and maintaining the equipment, for example. MaaS 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 machines have no record of success.
MaaS is the right model for customers, on the other hand:
Machine 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 MaaS sales model is one way machine manufacturers can start the transition to a full subscription program. A hybrid model allows a manufacturer to start small, run MaaS 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 a MaaS model, manufacturers should:
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