There is a crisis brewing in the developed world. Economic growth is constrained by low birth rates and a shortage of skilled workers in many sectors. An aging population reduces the labor participation rate and stretches tax resources. Immigration influx from less developed economies cannot make up for this downtrend and cause social and political challenges.
The immediate result is that less and less new infrastructure is being built, and efforts are centered on maintaining and extending the life of existing buildings, factories, roads and cities.
An increasing number of our industrial customers and partners recognize these trends and are looking aggressively for new growth engines and business models.
When you only sell a 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 challenges, combined with the new trends of connectivity, IoT, Industry 4.0 and Digitalization, hardware companies recognize the need 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 are a pump manufacturer. In the past, once your pump has been sold to a customer, you lost track of it. Unless returned for warranty repair, you have not heard back from it. Now imagine that the pump has 5-10 built-in sensors (flow, temperature, position, pressure, current, wear etc.), and has internet connectivity. You can now offer your customer a platform that will track the performance of all the pumps in their plant.
How will this work? You and the customer will be able to visualize the status of all installed pumps in the field. Your hardware will enable advanced Predictive Maintenance, and provide ongoing value to your customer by increasing uptime and revenue, and reducing expensive plant downtime. In addition, as the manufacturer, you can now track the performance of your pumps, and gather field data that will enable you to learn about existing pump design and improve future models.
From a business perspective, you are no longer just selling hardware. In fact, you may consider financing the hardware for your customers using a leasing model, provided that in return they commit to subscribing to your HaaS services. 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 Presenso (www.presenso.com) are participating in this revolution by offering a complete Industrial Predictive Maintenance analytics solution to hardware vendors that have little or no understanding of data science and analytics, but would still like to tackle this new paradigm and compete in the new environment.
At Presenso, we look forward to taking part in the HaaS journey.