5. Servitization for OEMs: Shared Services
Opdateret: 11. apr.
Shared services are a type of servitization model that allows multiple customers to share access to a common pool of resources, including equipment, services, and personnel. In this blog post, we will dive deeper into shared services, exploring what they are, successful use cases, benefits for customers and OEMs, and how they can enable sustainability.
This post is part of our series on equipment-based servitization models for Original Equipment Manufacturers (OEMs) and Value-Adding Resellers (VARs).
What are Shared Services?
Shared services are a type of servitization model that allows multiple customers to share access to a common pool of resources, including equipment, services, and personnel. In this model, customers pay for access to the shared resources, rather than owning or renting the equipment themselves. Shared services can be used across a wide range of industries and products, including equipment such as manufacturing equipment, medical equipment, and laboratory equipment, as well as services such as maintenance, repair, and technical support.
Billing
Unlike other servitization models, shared services is more of a delivery model than a business model and the customers are typically billed as described in previous posts in this series. E.g., on their usage of the equipment or service, rather than a fixed fee. Due to this variable billing structure, the way in which shared services are billed can vary widely depending on the specific circumstances of the customer and the OEM.
Usage-based billing
Customers pay for their usage of the equipment, based on the amount of time or number of units they use. This can be a straightforward and transparent billing method, as customers only pay for what they use.
Allocation-based billing
In this billing method, customers are charged based on their percentage of equipment usage. This can be useful when customers require a guaranteed amount of equipment availability or when equipment usage needs to be fairly distributed among multiple customers.
Subscription-based billing
Customers pay a fixed monthly or annual fee for access to a certain amount of equipment usage. This can be useful when customers require a certain level of equipment availability, but do not want to be charged based on actual usage.
Capacity-based billing
In this billing method, customers are charged based on the maximum capacity of the equipment, regardless of their actual usage. This can be useful when customers require a guaranteed level of capacity available to them, but do not need to use the equipment at full capacity all the time.
Outcome-based billing
In this billing method, customers pay based on the outcomes achieved through the use of the equipment. For example, if the equipment is used to increase productivity, customers pay based on the value of the increased productivity. This billing method can be particularly useful in shared services servitization models where equipment is used to achieve specific outcomes for multiple customers.
Overall, the billing method used in shared services servitization models will depend on the specific needs and requirements of the customers and the OEM. It is important to choose a billing method that is transparent, fair, and aligns with the value created by the equipment usage.
Successful Use Cases
There are several examples of companies that have successfully implemented shared services, including:
VWR: The company offers shared laboratory services, providing customers with access to a shared pool of laboratory equipment and services.
IBM: The company offers shared technical support services, providing customers with access to a shared pool of technical support personnel.
Flex: The company offers shared manufacturing services, allowing customers to share access to manufacturing equipment and personnel.
Benefits
In addition to the benefits discussed in the previous posts in this series, shared services offer unique advantages that are not achieved through the former. In this post, we will focus on the specific benefits of shared services that differentiate them from other servitization models.
Customer Benefits
Cost Savings
Shared services can help customers save money by providing access to equipment and services at a lower cost than owning or renting them outright.
Increased Flexibility
Shared services provide customers with increased flexibility by allowing them to adjust their usage of the shared resources as needed.
Access to Expertise
Shared services can provide customers with access to expertise that may not be available in-house.
Reduced Risk
As the OEM retains ownership of the equipment in shared services, they bear less risk than in other servitization models where the customer may damage or misuse the equipment.
OEM Benefits
Potential for Increased Revenue
Shared services have the potential for increased revenue as multiple customers share access to the same pool of resources.
Improved Asset Utilisation
Shared services can help OEMs to improve asset utilisation by ensuring that equipment is being used efficiently and effectively.
Improved Customer Relationships
Shared services help OEMs to build long-term relationships with customers, as they become responsible for providing ongoing access to shared resources.
Sustainability
Shared services models offer a sustainability advantage by allowing for shared equipment and reducing the need for redundant resources. In addition, these models promote sustainability by incentivizing OEMs to design and manufacture equipment that delivers better outcomes with fewer resources. OEMs can leverage data analysis to identify areas where improvements can be made in equipment design, maintenance practices, and service delivery. By taking a proactive role in equipment maintenance, OEMs can extend the lifespan of their equipment and reduce the need for new equipment to be produced, which has a positive environmental impact.
Data utilisation
Access to equipment data is crucial for OEMs selling equipment on a shared services servitization model to optimise delivery and performance, develop new products and services, improve commercial terms, reduce depreciation risk, and reduce the cost of service delivery. Here's how important data is for each of these topics:
Optimising delivery and performance - 5/5
Access to equipment data is crucial for optimising the delivery and performance of assets in a shared services model. By monitoring the performance of the equipment and analysing the data, the OEM can identify areas for improvement and make necessary adjustments to optimise delivery and performance. This also enables accurate billing based on the actual usage of the equipment and allows for preventive maintenance, minimising downtime.
Developing new products and services - 3/5
Equipment data can provide valuable insights into customer behaviour and usage patterns, which can inform the development of new products and services that better meet their needs. By analysing the data, the OEM can identify new opportunities for innovation and develop customised solutions that deliver the most value to the customer. However, the importance of data in developing new products and services may be lower in a shared services model as the focus is on delivering a standardised service to multiple customers.
Improving commercial terms - 3/5
Equipment data can help identify areas where customers may not be achieving the desired outcomes, which can inform commercial terms such as pricing and contract terms. However, in a shared services model, the pricing and contract terms may already be standardised and negotiated upfront, making the importance of data in improving commercial terms relatively lower.
Reducing depreciation risks - 5/5
Access to equipment data is essential for accurately predicting equipment lifespan and value, reducing depreciation risk. In a shared services model, the risk of depreciation may be higher due to the increased usage and potential for misuse. Equipment data can help monitor usage patterns and identify areas where maintenance or upgrades may be required, reducing the risk of depreciation.
Reducing cost of service delivery - 5/5
Equipment data is crucial for optimising maintenance schedules and identifying potential issues before they become costly problems, reducing the overall cost of service delivery. In a shared services model, equipment data is even more critical as multiple customers are using the same assets, making it necessary to optimise maintenance and service schedules to minimise downtime and ensure asset availability.
In summary, access to equipment data is critical for optimising delivery and performance, reducing depreciation risk, and reducing the cost of service delivery in a shared services servitization model.
Financing need
To successfully implement shared services, an OEM must have a robust IT infrastructure, including software and hardware, to support the shared services platform. The initial capital outlay for developing and implementing a shared services model can be substantial, making financing necessary. Financing can help OEMs to manage cash flow, reduce the upfront costs, and spread the cost of implementing shared services over time. This can help make the shared services model more financially viable and sustainable in the long term.
Off-balance sheet financing
Off-balance sheet financing is an option in shared services models. Often the OEM needs to retain ownership of the equipment to ensure proper maintenance and upgrades and to make it available to all users/customers. This can increase the risk for the OEM, as they may need to invest capital in the equipment upfront. Off-balance sheet financing can help alleviate this risk by removing the equipment from the OEM's balance sheet. This can free up capital for other investments and reduce the impact on the OEM's balance sheet.
Cash flow financing
Cash flow financing is another option that can help OEMs manage cash flow in shared services models. Since revenue is generated based on the use of the equipment or service over time, there may be a delay between the upfront costs of producing the equipment and the revenue generated. Financing can help bridge this gap and ensure that the OEM has the necessary cash flow to sustain the model. This is particularly important in cases where the OEM needs to invest significant capital upfront to develop the shared services platform.
A third-party platform provider can help OEMs to reduce the initial cost of developing a shared services platform. By utilising a third-party provider, OEMs can outsource the technology and infrastructure needed to develop the shared services platform, reducing the upfront costs significantly. This approach can also help OEMs to spread the cost of developing the platform over time, making financing more manageable and affordable.
Financing options for shared services models may include bank loans, leasing arrangements, captive finance companies, or other sources of funding. OEMs must carefully consider the costs and benefits of each financing option to ensure that the model is profitable and sustainable in the long term.
Additionally, they must ensure that financing arrangements comply with applicable regulations and accounting standards.
Succeeding with Valueport.io
Valueport.io's EaaS capabilities can help OEMs successfully implement shared services models in servitization, securing benefits such as cost savings, increased flexibility, access to expertise, and reduced risk for customers and increased revenue, improved asset utilisation, and improved customer relationships for OEMs.
Accurately measuring and billing for shared services can be challenging, especially when dealing with multiple customers with varying usage patterns and billing models. Data-driven billing is crucial for successful implementation of shared services models, whether it's usage-based, allocation-based, subscription-based, capacity-based, or outcome-based billing. However, few OEMs have this capability today without significant investment.
Valueport.io's EaaS capabilities can help OEMs address the challenge of accurate and transparent billing for shared services by creating an independent "one-truth" for usage and billing amounts. The platform can collect and analyse usage data from multiple sources and generate accurate and transparent bills for each customer based on their specific billing model. This ensures that customers are billed accurately and fairly, regardless of their usage pattern or billing model. Additionally, Valueport.io's platform can provide customers with a transparent view of their equipment performance data, which can help build trust and long-term relationships.
Conclusion
In conclusion, shared services servitization models offer significant advantages to both customers and OEMs, including cost savings, increased flexibility, improved asset utilisation, and reduced risk. By leveraging a shared pool of resources, OEMs can build long-term relationships with customers and create sustainable solutions that promote better outcomes with fewer resources.
To successfully implement shared services, financing is necessary to manage cash flow, reduce upfront costs, and spread the cost of implementing shared services over time. Off-balance sheet financing and cash flow financing are two options that can help OEMs to manage the risk and uncertainty of developing a shared services platform.
Access to equipment data is also critical for optimising delivery and performance, reducing depreciation risk, and reducing the cost of service delivery in a shared services servitization model. It is important to choose a billing method that is transparent, fair, and aligns with the value created by the equipment usage.
Overall, shared services models provide a sustainable, cost-effective, and efficient way for customers to access resources and for OEMs to build long-term relationships and create value. By carefully considering financing options and leveraging equipment data, OEMs can develop successful shared services platforms that provide value to both customers and the environment.