As margins on new machines shrink, manufacturing OEMs are looking into new business models with software and innovative after-sales services - most of them data-driven.

For the last few months, I've collected about 100 companies focussed on these new service-offerings and published them together in the Landscape shown above.

I received much feedback on LinkedIn. Together with my research, here are some interessting recommendations and learnings found so far:

Most already have digital business offerings

Large OEMs have established software offerings and provide advanced service contracts that are built upon data, predictive maintenance and IIoT. Smaller players with less than 1000 FTE - which make up most of the manufacturing industry - in contrast are mostly offering regular services via phone and mail.

In summary, the majority of the market might move towards smarter services offerings and therefore more standard and cheaper software (that can enable this) is needed.

Every company is a software company

More companies are building and selling their own software in addition to e.g. machines. They essentially become software companies and have setup softwares sales, support and development processes.

Many modern improvements into manufacturing processes can be made with software, therefore this shift to offering software is not suprising. OEMs can utilize their long domain experience but need to learn how to build software (fast).

To an OEM, I would also recommend to focus on integrations and your existing customer relationships in order to deflect e.g. startups trying to solve the same problem.

Equipment-as-a-Service (EaaS) not always wanted and required

Multiple people gave feedback, that as-a-service models are not demanded by their markets and not at the focus for digitazation efforts. This might be surprising but shows, that existing models around leasing and financing work.

Who will keep the machines on their accounting (e.g. as liability) and what happens in special cases (e.g. low usage, multiple machines) is still unsolved.

Still, having the ability to understand the total cost of ownership - which is required for EaaS pricing - and collecting data remains a goal for most OEMs. Having those numbers can boost sales based on multiple reports from manufacturers.

Nobody talks about money

"How much money do they make" is an often asked question - where the answer is hard to get by as public data is sparse and companies do not talk. It's likely most companies are currently investing more into new business models than actual revenue can cover.

It is still recommended to invest money (wisely) in this area, as smart digital services and the collected data could allow for such competitive benefits that it will become a requirement in order to stay in the market (e.g. manufacturers are requring data connections on every product).

No playbook, no defined solution path (yet)

There is no clear path to as-a-service models or innovative software offerings - that fits every company. This might change later and therefore reduce the investment costs mentioned above.

Right now there are a few traits we can see from the landscape

• Collecting the data from each machine in a central place for a better machine understanding
• Having a defined service-offering ("Advanced Service Contracts") mostly with Predictive Services as a step before EaaS.
• Either have large plants with high investment cost or low-key parts that make sense for EaaS. No clear account solutions visible.
• EaaS ist always offered in addition to exiting buying options (except for a few startups)

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So far, the path to new business model is still open-ended and no clear winners have emerged. Still, I expect to see more innovation in this space especially in the lower cost-end over the next few years.

The landscape has already grown to more than 130 companies - I'll post the updates on LinkedIn and on my new Newsletter No New Machines. Subscribing is free.

If you have any more input, don't hesitate to contact me.