From Producer to Software Distributor

Servitization: A Paradigm Shift for the Manufacturing Industry

Increasing Market Pressure and Growing Customer Demands Are Making Servitization a Megatrend. More and More Companies Are Evolving from Producers to Total Solution Providers.

Probably one of the best-known examples of servitization is Rolls Royce’s ‘Power by the Hour’ service. Unlike the previous approach of airlines buying the engine as part of the aircraft and then having a separate maintenance contract to support it, Power by the Hour offered airlines a complete engine and accessory replacement service on a fixed-cost-per-flying-hour basis. A similar concept is being pursued by tool manufacturer Hilti, which provides its customers with the equipment they need, including maintenance and repair services, for a fixed monthly fee. In both cases, the customers are not paying for the physical products, but for the service provided.

Big Advantages for Both Sides

VBoth suppliers and customers benefit from servitization. In addition to enabling manufacturing companies to improve customer retention by meeting the growing demand for customized, service-oriented solutions, offering additional services helps to grow sales and improve their competitive position. For the customer, the advantages lie in optimization of the required service and use of state-of-the-art technologies. In addition, fixed costs can be converted into variable costs. The required machines and equipment are available at all times, peak times and lulls are compensated for, and downtime and idle times are kept to a minimum. Since no effort is required on the customer’s part to manage the products, they can concentrate on adding value through their core business.

An Advanced Trend

It’s little wonder that the German manufacturing industry is increasingly turning to servitization. According to a recent market study, 54 percent of machinery and plant manufacturers are currently planning and developing Equipment-as-a-Service (EaaS) business models. Almost 14 percent already offer customized services for their machines. The study still identifies considerable potential on the customer side. While 11 percent of the users surveyed already subscribe to servitization offerings, 25 percent are planning to make the switch in the near future; and this trend is growing.

Customer Benefits in the Foreground

This paradigm shift from manufacturer to service provider calls for a radical rethink by companies. Instead of the products and their manufacture, the focus has to be on customer needs and benefits for the customer. For machine and plant manufacturers, this means understanding their customers’ internal processes and developing an approach of continuous innovation.   

Servitization requires changes to processes, technologies, strategies, and even the entire business model. Companies have to reorganise their product management, personnel structure, and sales concept, and develop needs-based financing models. In addition, a wide range of innovative solutions are needed to help manufacturing companies with service lifecycle management (SLM), monitoring, remote maintenance, real-time data analytics, and predictive maintenance. The list goes on.

XEPTUM Is Here to Support Your Transformation 

What the market study also shows is that many machine and plant manufacturers would like competent help in their journey to become total solution providers. XEPTUM is an IT consulting partner with many years of project experience combined with comprehensive process and technology expertise. Whether you would like to sell your customers boreholes instead of drills in the future or short grass instead of sturdy lawnmowers, we would be delighted to support you in the development and technical implementation of a professional roadmap to get your company ready for servitization.

We will also advise and support your IT department in setting up or expanding a software department. Because we know that there are many challenges to overcome when creating, licensing, and selling software. Software is not a ‘normal’ product, but is subject to special conditions, for example regarding the right to object. There are complicated regulations governing the purchase of software as well as the buying and selling of licenses. Dealing with errors and defects is also a difficult business as they cannot be handled according to the standard provisions of the warranty laws. XEPTUM is an experienced partner who knows the pitfalls and can clarify any questions to guide you through the IT jungle.