In the world of IT “as-a-Service” has been a major trend over the last 15 years. Once the availability, speed and reliability of the Internet reached the point where applications could be accessed in someone elses data center, it’s made sense to look for opportunities to reduce costs. Why not you pay for what you use (Software as a Service) rather than invest in the infrastructure, software, support staff, etc., required to run an application yourself?
Similarly, software platforms and hardware infrastructures sold “as a Service” have taken off. It’s much faster and usually more cost effective to buy what you need rather than invest up-front. With increased volatility in the world due to politics, innovation and economics, many companies value flexibility over predictable asset amortization. You’ll see this is reflected in a growing preference for Opex over Capex investment.
A third trend is the growing investment in the Internet of Things (IoT). The more you embed sensors and actuators into physical assets, the more potential you have to change the business models for those physical things. This article will explore the implications of these changes and what they mean in our new “as a Service” world as we progress from purely physical assets to a purely digital ones.
Service for product: the case for smarter maintenance
Traditionally buying a physical asset meant an up-front acquisition or a lease, plus ongoing maintenance, for which you would be responsible. The simplest example is buying a car. You have sole use of the vehicle, and every so often, you take it to a garage for an oil change or new tires.
Thanks to IoT, that’s changing. Now, our physical assets (like a car) are able to report usage and status. For example, my car can tell me via an app that it’s due for a service in the next month. The most forward-looking manufacturers take the owner out of the equation and send software updates directly to the vehicle.
In additional to connected cars, more and more products across a variety of industries are able to report back to their manufacturers. This helps the manufacturer understand usage trends and identify problems that lead to increased warranty costs.
One example is Electra, the largest manufacturer of air-conditioning units in Israel. The company recently launched a connected aircon unit that is able to report faults back to the company. That means that when a unit needs repair, an engineer knows what part is needed to fix a problem on first visit. Customers are happier (and cooler) and Electra can lower its costs.
Services with product: extending value for business and its customers
Moving on from services that improve a product, we start to look at services that augment it. Back to my car example; when I bought my first car, I considered its aesthetics, performance and price. When I choose my most recent car, I was more interested in the services that came with it, like the navigation system with real-time traffic insights and the entertainment system’s ability to stream music from my Spotify account.
In the same way, we are seeing manufacturers offer IOT-based services around the physical product. One example is Sandvik Mining & Rock Technology, which makes drilling and earth moving equipment for mines. Their objective is to help their customers get more value from their equipment. To accomplish that, they provide dashboards that help their customers assess the performance of their equipment and operators against industry benchmarks. That helps boost productivity and output.
According to the company: Never before has it been possible to measure so much on equipment. Combined with other process information, this onboard fleet data can help inform actionable insights to improve your business.
Digitalization means leveraging digital technologies to drive efficiency and profitability. From autonomous and connected equipment to data analysis and process optimization, we’re launching new digital solutions to help you improve safety, reduce environmental impact and optimize efficiency and profitability.
Product as a service: creating new solutions
Things start to get especially interesting when a traditional physical product is consumed in a new way. A good example is an innovative solution to a rather mundane but important problem.
With recent changes to the National Fire Protection Association (NFPA) regulations covering public buildings and facilities there are now higher costs to remain compliant. Failure to comply brings significant penalties, including fines, additional audit scrutiny, reputational damage and even facility closure in extreme cases.
In an average sized public building, there will be around 1000 exit signs. Each sign requires a monthly inspection and an annual 90-minute battery test. The estimated annual costs of manual inspection are $25 per sign per month, which adds up to $300,000 every year. Even if the building owner does not outsource the effort, the time that their own maintenance staff spends (roughly 100 hours per month) is time that could be more productively spent on maintenance and improvement tasks.
Using IoT to create a smarter solution
A new solution developed by Willard IoT, in conjunction with IBM, offers a smart way to increase the integrity of the compliance process while drastically reducing the costs of recording and reporting status. Best of all, this new solution is delivered as a service, which means clients don’t have to worry about ongoing maintenance and updates.
This exit sign solution uses sensors in the sign to measure light status and battery health. The results of this data is presented in a dashboard that summarises the status across multiple signs, grouped for convenience (i.e. by floor/area, building, etc.). This solution provides a highly accurate and reliable summary of the current status and testing regime. It also ensures compliance and greatly reduces the risk of an audit failure.
Less obvious are the benefits of delivering the solution as a service. For a fixed price per sign per month, the solution is installed and configured. The maintenance of the exit signs is included, too. So any failures detected by the automatic testing can be quickly remediated. Since support and updates for the solution are included, any problems can be quickly resolved.
A look at the cost savings
The savings that can be achieved through this solution are typically over $6 per sign per month. So for a typical building with 1000 signs, that would result in over $100,000 per year. And that is before any additional costs for maintenance and replacement are taken into account. Over the normal five-year amortization period for a capital investment in a standard sign, that would be over half a million dollars in savings.
The next frontier: when data becomes the product
With all of these connected offerings comes a wealth of data about how products are being used and services consumed. The fact is, data is the new natural resource. And more product manufacturers and operators are looking at ways to monetize it.
Firms Should Look Beyond Just Cost Savings To Capture The Full Value Of IoT
Business execs often fixate on cost savings as the primary IoT value contribution, but the potential business value of IoT reaches much further. Successful companies will leverage their IoT investments to optimize their existing operations, differentiate their products and services, and transform entire markets through new offerings.
Ovum describeshow the adoption of increasing digitalisation leads to…
… a coherent enterprise that can sense, anticipate, respond, and adapt at the right pace to remain persistently relevant to its customers. Ovum’s term for such an enterprise is “customer-adaptive.” The fundamental trigger point for adaptation is the customer.
Access to data from new sources – generated within and acquired from without – can be a powerful force to shape the offerings – and even the purpose – of the organization.
At IBM, we’re ready to help you explore your own data initiatives and your “as a Service” opportunities. I invite you to visit our website and talk to one of our experts.
Ovum – A Customer-Adaptive Architectural Approach for Digital Business Transformation, 17 April 2018 (INT001-000040)
About the author:Mark Swinson is the Worldwide Go-To-Market Leader for the Watson IoT Platform. He joined IBM in 1995 and has worked many different areas of IBM’s software portfolio. The locus of his career has been in integration – starting with application-to-application integration and evolving through high-performance, low-latency messaging into the realm of IoT. He has been a part of the Watson IoT Business Unit since 2016, and worked on helping our clients realize value from IoT through cloud-based platforms and industry-aligned solutions.