Software as a Differentiator for OEMs

Overview

OEMs for intelligent machines are nearly always in competitive markets and the key selection criteria that differentiates suppliers is moving to software. Tesla exemplifies this trend. Equipment as a Service (EaaS) using digital twins is an emerging business model that enables the OEM to significantly improve customer satisfaction with higher reliability and less unplanned downtime. OEMs obtain a consistent, growing revenue stream that improves shareholder value.

Software as a Differentiator for OEMs

Software has become the key differentiator for intelligent products. OEMs tend to focus on hardware design and capability like speeds. But the selection criteria that matters to users has shifted to software. Increased complexity in machine design and technical sophistication can also be mitigated with improved usability for the operating software and operator interface. A couple of examples from personal experience:

• My brother recently purchased a Tesla Model 3 and gave me a ride. He was wildly enthusiastic about the car. However, all the features and functions that he enthused about involved software. The car’s hardware - like interior, dashboard, and exterior design – were not mentioned.
• My home printer came with software that was dumbed down to the point that it interfered with my use of the printer (and maximized ink usage). Another supplier had similar hardware and printing quality. I switched for a nice user interface with added control of the device.

Software for industrial equipment goes well beyond the machine’s functions and user interface. Internet of Things (IoT) and analytics enable remote asset health monitoring with predictive maintenance (PdM) using Digital Twins.

Equipment as a Service

EaaS extends servitization using a business model that involves bundled renting, remote monitoring, and maintenance services with periodic payments. This involves a shift from selling a standalone machine having an upfront large payment to solutions that combine product and services. This approach adds value with services and has a range of approaches.

• On one end of this range, an OEM sells the equipment and provides an aftermarket service for remote condition monitoring for the equipment at the customer’s location. The OEM sends alerts with prescriptive information to the user when issues are identified.
• On the other end, the OEM extends the monitoring to include maintenance services. A technician is scheduled for servicing to prevent unplanned downtime and improve operational performance.

Thought-leading OEMs are transforming from reacting to a service request after their equipment fails (with ugly customer issues) to a proactive repair approach that prevents unplanned downtime, improves reliability, extends asset longevity, and dramatically raises customer satisfaction.

ARC Advisory Group clients can view the complete report at  ARC Client Portal

If you would like to buy this report or obtain information about how to become a client, please  Contact Us

Keywords: Equipment as a Service, EaaS, OEM, Servitization, Tesla, Digital Twin, ARC Advisory Group.