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A lot is changing in today's B2B world. Existing business concepts are being renewed, improved and adapted to today's possibilities in order to be competitive in the future. Companies that want to remain competitive in the long term must make their production more flexible and optimise processes.
The proliferation of the Industrial Internet-of-Things (IIoT) has created tailwinds for the pay-per-use business model. Few machine builders and vendors have included this idea in their agenda and have started to develop and sell suitable solutions. Machine-as-a-service developments continue to grow.
But what exactly does this development entail and where are the advantages for industrial companies ?
Instead of selling machines, as used to be the case, the corresponding functions and services are now being sold more and more.
With the corresponding models, the customer only pays for the actual use, while the seller ensures the functionality including maintenance and spare parts supply of the machine. The manufacturer offers a time-limited right of use. The seller's continuous monitoring, maintenance and repair is also intended to maximise the customer's uptime.
Customers only pay when the machine is in operation. High initial investments and the associated capital commitment are eliminated. Instead, thanks to pay-per-use, the costs always rise and fall with the current utilisation.
Greater flexibility, lower costs and a contractual guarantee for the machine's performance are seen as significant advantages. In addition, there is no longer any dependence on life cycles and there is less risk of breakdown. Predictive maintenance is becoming more efficient through the networking of machines and analysed data, and predictive data algorithms can thus be improved.
From an economic perspective, the pay-per-use model for industrial equipment solves two problems faced by users:
1. Financing: users do not invest upfront but pay later, usually from the operating cash flow generated by the use of the equipment. As a result, buyers benefit from lower investments, thus converting CAPEX to OPEX.
2. A risk transfer mechanism: This is where risk is transferred from the user of the equipment to the seller of the equipment, particularly in terms of operational risk (availability of the machine and its operation at performance and cost) and business risk (the risk of under-utilisation of the machine when orders and demand are below expectations).
In the pay-per-x model, the customer pays based on what he actually uses
-Pay-per-Hour
o Billing according to time of use (machine running time)
- Pay-per-part
o Billing according to quantity produced (number of parts produced)
- Pay-per-Page
o Billing according to printed packaging
- Pay-per-unit
o Billing according to quantity unit consumed
In connection with the pay-per-use model, people often talk about a subscription model.
However, the pay-per-use model is clearly different from the subscription model.
The pay-per-use model does not assume a fixed monthly or annual fee; you pay for what you use, whereas subscriptions usually have fixed price tiers. Both methods have advantages and disadvantages, which should be evaluated differently depending on the company and production planning.
In general, pay-per-use models can be useful and allow industrial companies to reap significant benefits. It is also a useful model for bringing innovative machines to market, as it lowers the barrier to entry for customers.
It will definitely be useful in many areas, but less so in others. In any case, it will soon become clear which areas will benefit from a pay-per-use process.
A lot is changing in today's B2B world. Existing business concepts are being renewed, improved and adapted to today's possibilities in order to be competitive in the future. Companies that want to remain competitive in the long term must make their production more flexible and optimise processes.
The proliferation of the Industrial Internet-of-Things (IIoT) has created tailwinds for the pay-per-use business model. Few machine builders and vendors have included this idea in their agenda and have started to develop and sell suitable solutions. Machine-as-a-service developments continue to grow.
But what exactly does this development entail and where are the advantages for industrial companies ?
Instead of selling machines, as used to be the case, the corresponding functions and services are now being sold more and more.
With the corresponding models, the customer only pays for the actual use, while the seller ensures the functionality including maintenance and spare parts supply of the machine. The manufacturer offers a time-limited right of use. The seller's continuous monitoring, maintenance and repair is also intended to maximise the customer's uptime.
Customers only pay when the machine is in operation. High initial investments and the associated capital commitment are eliminated. Instead, thanks to pay-per-use, the costs always rise and fall with the current utilisation.
Greater flexibility, lower costs and a contractual guarantee for the machine's performance are seen as significant advantages. In addition, there is no longer any dependence on life cycles and there is less risk of breakdown. Predictive maintenance is becoming more efficient through the networking of machines and analysed data, and predictive data algorithms can thus be improved.
From an economic perspective, the pay-per-use model for industrial equipment solves two problems faced by users:
1. Financing: users do not invest upfront but pay later, usually from the operating cash flow generated by the use of the equipment. As a result, buyers benefit from lower investments, thus converting CAPEX to OPEX.
2. A risk transfer mechanism: This is where risk is transferred from the user of the equipment to the seller of the equipment, particularly in terms of operational risk (availability of the machine and its operation at performance and cost) and business risk (the risk of under-utilisation of the machine when orders and demand are below expectations).
In the pay-per-x model, the customer pays based on what he actually uses
-Pay-per-Hour
o Billing according to time of use (machine running time)
- Pay-per-part
o Billing according to quantity produced (number of parts produced)
- Pay-per-Page
o Billing according to printed packaging
- Pay-per-unit
o Billing according to quantity unit consumed
In connection with the pay-per-use model, people often talk about a subscription model.
However, the pay-per-use model is clearly different from the subscription model.
The pay-per-use model does not assume a fixed monthly or annual fee; you pay for what you use, whereas subscriptions usually have fixed price tiers. Both methods have advantages and disadvantages, which should be evaluated differently depending on the company and production planning.
In general, pay-per-use models can be useful and allow industrial companies to reap significant benefits. It is also a useful model for bringing innovative machines to market, as it lowers the barrier to entry for customers.
It will definitely be useful in many areas, but less so in others. In any case, it will soon become clear which areas will benefit from a pay-per-use process.
JR New Horizons GmbH
Georgsplatz 1,
20099 Hamburg
JR New Horizons GmbH
c/o Mindspace
Georgsplatz 1,
20099 Hamburg
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