As the industrial sector grapples with economic and operational challenges, plants are re-evaluating their capital investment plans. Delays in capital expenditures can only provide short term relief, especially in those industries plagued by aging assets.
Even before Covid-19, many developed economies have been constrained by low birth rates and a shortage of skilled workers in key sectors. Trends towards a reduction in new infrastructure and a shift to maintaining and extending the life of existing buildings, factories, roads and cities.
In the last few years, an increasing number of our industrial customers and partners recognized these trends and the need for new growth engines and business models. When an organisation only sell a single piece of equipment or a component to replace one that has aged or is broken, the opportunity is limited. When new plants, buildings, and infrastructure are scarce, growth potential slows down. The result is that equipment, hardware, and component vendors are looking for new territories, or to reinvent their market position and businesses.
These new/old challenges, combined with the innovations in connectivity, IoT, Industry 4.0 and Digitalization, are pushing hardware companies to revise their value proposition and offer the market something new.
Enter HaaS – Hardware as a Service. Once hardware can be augmented with multiple sensors and connected to the Internet cloud, new and improved service-oriented business models can be introduced.
Imagine that you need to purchase a pump. In the past, once you had received a pump, it became your sole responsibility in terms of maintenance. Unless returned for warranty repair, you and the OEM have not had any contact regarding the pump. Now imagine that the pump has 5-10 built-in sensors (flow, temperature, position, pressure, current, wear etc.), and has internet connectivity. Suddenly, you can purchase not only a pump but a comprehensive platform for tracking the performance of all the pumps in your plant.
How will this work? You and the OEMwill be able to visualize the status of all installed pumps in the field. Hardware installed by the OEM will enable advanced Predictive Maintenance, provide ongoing value by increasing uptime and revenue, and reduce expensive plant downtime.
From the OEM’s perspective, the connectivity of the pumps enables it to track the performance of the pumps and gather field data that will enable it to learn about existing pump design and improve future models.
From a business perspective, you are no longer just purchasing hardware. In fact, you may simply be leasing the hardware as part of the HaaS offered by the OEM. The fee will be paid on an ongoing basis, ensuring recurring revenue. The result is new market values, improved efficiencies, and sustained revenue streams.
Of course, with disruptive change new challenges will arise. Will this force competition or alliances between software and hardware vendors? Will there be standardized software used by multiple hardware vendors or will individual hardware vendors build proprietary tools? How will industrial plants manage each piece of hardware separately if it comes with its own software? How does this impact IIoT platform standards vis-à-vis interoperability?
As customers adjust to this new reality, demands for single source solutions may result in industry consolidation and vertical integrations.
Every OEM, component, machine or hardware vendor should be considering this or is already building a new platform to provide such services to their customers.
We at SKF are participating in this revolution by offering Rotating Equipment Performance as a Service. In this hybrid setup, SKF leases bearings, seals, lubrication and condition monitoring, Predictive Maintenance and access to Remote Diagnostic Centres to manufacturers. The sliding fee-based model of this contract is determined by the extent to which a plant’s predetermined KPIs are met. What is perhaps most revolutionary about Rotating Equipment Performance as a Service is how it aligns SKF interests with those of our customers – when they win, we win.