Following the rapid success of Software-as-a-Service in the IT platform, Hardware-as-a-Service, or HaaS, has the potential to become new trend in the manufacturing world. The recent advances in technology and the new highly intelligent cyber-physical systems can change the way revenue is generated for original equipment manufacturers.
HaaS has a large potential for the manufacturing industry due to the shear intelligence of machines being produced now and how expensive they are becoming. Hardware-as-a-Service model creates a system where the end user can pay the OEM based on production or usage of the machine. This financial model would decrease the upfront cost of the machine while aligning the interest of the OEM and end-user. HaaS offers an affordable, real-time solution for small manufacturing companies who need intelligent machines to complete with large conglomerates but cannot afford the initial upfront cost for the most advanced machines.
So How does a HaaS model work? A simple illustration of the Hardware-as-a-Service principle would be a medium-sized office in a design agency, run by twenty employees. The agency wants to reconstruct their marketing presentations and magazine every other month, the organization occasionally needs professional quality prints, but are hesitant to spend $6,000 on a commercial printer that they will only utilize for that specific task.
With a HaaS model, they could receive a printer and then pay for it on a use-case basis. Maybe they will pay 10 cents per black-and-white page and 25 cents for color. While this would be in line with most local print shops, they avoid buying a personal printer and wasting company time to find out-of-office print services.
The OEM or financer, meanwhile, gets to move product and let their product generate revenue. This is not a new idea, however, SteamChain aims to re-create this financial model in the manufacturing industry today.
With usage-based financing, the upfront capital costs are substantially lower than that of purchasing the asset upfront. For companies with high revenue, purchasing a machine outright is justifiable, however, HaaS gives smaller businesses with lower capital funds the opportunity to implement the same systems as their fellow competitors at an affordable, usage-based rate. This aligns the incentives for both OEMs and end-users.
An example of this would be a new micro-brewery wants to start selling their products throughout the Midwest. This micro-brewery needs an industrial canning machine that can handle this amount of production. The specific canning machine that would best fit the micro-brewery costs $350,000 dollars. Instead of the end user paying the OEM in installments the end user can now pay the OEM a lower upfront fixed cost and proceed with either a usage based financing agreement or a performance based financing plan. Both of these options will generate more than $350,000 dollars for the OEM, and the end user will pay based on the production or usage of the machine.
Many new companies cannot afford to purchase such advanced equipment at an up-front, fixed cost. This causes the new company to either use less feasible techniques, finance the machine through a 3rd party, or use outdated equipment. This greatly increases the risk of being outperformed by their competitors and deemed under-qualified by prospective consumers.
An issue in the manufacturing industry today is a machine not operating properly after it has been delivered and ran by the end-user. This causes mistrust and problems between the OEM and end-user and that is bad for business and waste important time on both sides. With this new HaaS approach the transparent data coming from the machine will show exactly how the machine is performing. Since the OEM is being paid based on the performance or usage of that machine, if the machine is not operating at the needed efficiency or not working at all it is in the best interest of the OEM to get to the machine and fix the problem.
Through the HaaS model, the OEM has a high incentive to keep the equipment properly maintained. The data coming from the programable logic controller (PLC) will show the production levels of the machine. When the machine is not operating at the desired rate, a maintenance professional will be sent out to fix the issue.
HaaS makes it very easy for companies to scale. This is true for both end-user and the OEMs. End-users are able to scale their products due to the purchase of the more advanced, more expensive machines. With the usage-based financing, the end-user will only need to pay for more production when more production is needed. The need for more production means that the end-user company is doing well and can now scale their products appropriately.
Meanwhile, OEMs ship more equipment. Combined with smart data gathering, they can also keep an eye on equipment use. OEMs may be able to find opportunities to sell more equipment or may find underused resources that can be deployed elsewhere.
SteamChain has utilized blockchain technology and other advanced software programs to make HaaS a reality in manufacturing today. By aligning the interests of both OEMs and end-users, SteamChain enables OEMs to be paid on the productivity of the machine over its lifecycle, and ensures that financed equipment can meet performance criteria. SteamChain’s forward-thinking, technological infrastructure and financing experience ultimately benefits all parties involved with the usage-based financing agreement. SteamChain is able to create a recurring revenue system for OEMs while also giving end-users a broader choice on machines on the market.