Original equipment manufacturers (OEMs) are no strangers to boom or bust sales cycles. Traditionally, they’re either ramping up production to meet demand or seeking ways to slash costs when sales are down.
But Industry 4.0, or the Industrial Internet of Things (IIoT), is enabling new sales models that generate more consistent revenue streams for OEMs. There are considerable benefits for forward-thinking manufacturers that transition from selling a product to offering, “machines as a service.” Rather than relying on a one-time sale, they’re charging customers based on machine use and service.
Machines as a service can revolutionize the way OEMs design, sell and service products. It will be a win-win for OEMs and their customers, as both partners benefit from increased predictability.
Selling uptime as a differentiator
It’s a business model that’s becoming more prominent across a wide range of industrial products, including Rolls-Royce’s aircraft and marine engines. The U.K. company is an example of a manufacturer that’s leveraged IoT to turn a high-value asset into a continuous source of revenue.
Rolls-Royce offers “power-by-the-hour” service agreements that allow customers to pay a fixed rate per hour of operation rather than purchasing the engine outright. The company assumes responsibility for ongoing maintenance and provides predictive maintenance services based on insights from their IoT-enabled engines that wirelessly send machine data to four Rolls-Royce centers for monitoring.
Now compare that service model to the more common fail-and-fix approaches in which OEMs sell the equipment outright and only provide service when a machine breaks down. OEMs that adopt machines as a service differentiate themselves from competitors by guaranteeing 100% uptime and only charging for actual usage.