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Equipment As A Service: Shifting from a CapEx to OpEx Model
Equipment as a Service (EaaS) is a business model where the producer of a product, instead of directly selling the product, rents or leases it to customers. It can be thought of as a pay-for-use model.
The advantage of a pay-for-use model is that there is predictability in cash flow. Rather than needing to pay for equipment outright, it is easier to budget and plan for predictable monthly payments. Budgets also shift away from managing capital expenditures to managing operating expenditures, which can increase flexibility and make cash flow schemes more predictable.
Vele Galovski, vice president at TSIA, said that “customers are increasingly wanting Industrial Equipment (IE) firms to not only make, sell and ship great products, but to own and sometimes even operate them, and to assist them in achieving the return on investment that was promised in the original sales call. This is what we mean by ‘equipment as a service’ (EaaS).”
The Opsession Blog commented that “EaaS opens the door to a whole new way of thinking. More than finance, it would be a total cash flow approach to acquiring, paying for, managing and disposing of equipment. The life cycle management may be the major plus point but it also ensures a truly integrated customer experience. The agreement might even include maintenance, service, asset tracking or other value-added life cycle management things.”
Oliver Bendig, CEO at Matrix42, said that “we have been talking about subscription models ever since Rolls-Royce pioneered it’s power by the hour concept in 1962, but we didn’t have the technology to scale XaaS models until now. But in the next decade we will eventually see ‘Netflix for Industry 4.0’ take off – complementing the traditional sell, lease and rent models.”
