What’s the difference between Machine-as-a-Service and a Machine Leasing Program?
“So…Machine-as-a-Service is kind of like a machine leasing program, right?”
This is one of the most common questions we get here at SteamChain. It’s a natural first impression.
While a Machine-as-a-Service (MaaS) program might look like a leasing program on the surface, in many ways, they’re actually very different. Here are 4 reasons why:
1) Leasing is only focused on capital, not risk
Leasing is just a financing utility. Plain and simple.
The money goes one way. The risk goes the other way…right into the hands of the end-user.
With Machine-as-a-Service, risk and upside are shared. If the machine isn’t performing, the payments slow down and both parties are incentivized to get the equipment back to optimal production levels. On the other hand, when the machine is humming, both the OEM and end-user share in the financial rewards.
2) Machine-as-a-Service is a partnership, leasing is transactional
When risk and reward are shared, it’s only natural that a partnership develops.
Leasing is a one-size-fits-all solution to a very complex business problem. It’s a financing mechanism to pay for equipment that promises improved performance, better quality, and more throughput.
With Machine-as-a-Service, the OEM doesn’t just make promises. They make obligations: Performance obligations that the OEM is incentivized to meet or exceed.
Machine-as-a-Service is a mechanism that creates incentivized alignment between the end-user and the OEM.
3) Leasing is time-based, Machine-as-a-Service is performance-based
In a MaaS program, you pay for the outcome over time as opposed to a monthly monthly fee. This means payments flex with the realities of your operation.
Is it the annual slow season for your business? You pay less.
If the machine is underperforming? You’re paying less (until your OEM partner helps you get things rolling again).
Are you smashing your production goals because of demand or efficiency gains? Sure, you’re paying more now, but that’s only because you’re getting paid more too.
A capital lease is a full-recourse financial utility. If you’re unable to make that payment, you’re still obligated to pay for the full term of the leasing program. There’s usually not a friendly cancellation policy.
With Machine-as-a-Service, if you no longer need the machine or it’s not meeting the requirements, you can return it. Simple as that. Machine-as-a-Service gives you more flexibility.
It’s worth repeating that Machine-as-a-Service is not a different form of a lease. It’s so much more. Yes, you can set up a MaaS program to do something that looks like a lease, but it can also be used for a variety of other usage-based agreements:
Automated service contracts.
You name it. At the end of the day, leasing is just another way to pay to have a machine on your floor. Machine-as-a-Service is the way to pay for what you really want: More production output.