8 min read

From CapEx to OpEx Part 4: New Business Models - Efficient Services


Digitalization, IoT, and global networking - these three trends allow for the complete transformation of business models. In many cases, customers aren’t buying what they actually need, but instead they are purchasing a tool that allows them to obtain the thing they want. For example, the customer doesn’t need a compressor - what they need is compressed air. The compressor requires space, energy, and maintenance, and necessitates a high initial investment which takes years to offset and ties up capital.  

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Logically, it makes more sense to look for a compressed air supplier and to conclude a contract whereby they agree to deliver a specific amount of compressed air for a fixed monthly fee, as is the norm for commodities like water and electricity. Incidentally, it is precisely this model that the compressor manufacturer Kaeser is offering, under the name Sigma Air Utility. The customer provides the space for the compressor, Kaeser analyzes their compressed air requirement and then provides a constant, reliable supply of the quantities agreed.  

Manufacturers become operators 

However, this also means that the manufacturer retains responsibility for their product. The customer goes from being the operator of the product to the recipient of a service with a contractually guaranteed scope and availability. The manufacturer has to maintain their own systems and ensure the reliable running of those systems. Where service used to be a customer loyalty measure or an additional source of revenue, it is now the basis of the entire business model.  

Another complicating factor is that, although the systems are located on the customer’s premises, they are not maintained by the customer. This requires the machinery to be so intelligent that it can notify the user automatically when interventions are necessary. This takes predictive maintenance from a clever approach to an absolute necessity - especially as any downtime has to be discussed with the customer. 

Availability as a necessary basis 

After all, the business model is based on the reliable availability of the contracted service. As demonstrated two posts in our blog series (“Reducing Capital Commitment by Optimizing Spare Parts Storage” and “Documentation Helps to Reduce Service Costs”), comprehensive planning and efficient implementation of maintenance, repairs, and retrofit measures are possible as long as the correct information is available. However, this is now made even more difficult by the fact that you cannot simply look on-site to see which assemblies are integrated into the machine. There must be constant, reliable information about the current condition of the system, otherwise all planning is doomed to fail. 

A new service and business model with many advantages 

With the right digital transformation strategy, it is possible to make the transition from being a company that sells products and provides after-sales service, to a service provider that the customer pays regularly and as required. There is a wide range of advantages to this kind of business model. Among other things, it opens up new customer groups, as many projects fail due to the high initial investment involved in purchasing machinery, especially with start-ups and new companies.  

Steady revenue flow 

The provider moves from a sales model in which the sale of products results in sporadic peaks in turnover, to a steady flow of sales with regular incoming payments for the service. These sales can be planned both for the customer purchasing them and for the provider, who fulfills long-term supply contracts. 

Predictable costs 

The cost side of things can also be designed to be as predictable as possible, by providing machinery at the customer’s site that works reliably and provides constant updates as to its condition. This way, service and maintenance can be planned, and the associated costs are largely predictable. Optimizing the machines that reduce costs is of direct benefit to the provider. 

Advantages of the new service and business model

Digitalization is a necessity - not "nice to have” 

These new business models are not only appealing - they are inevitable. As soon as such a model becomes available from a competitor, not only is the share of sales at risk, but in fact the entire existence of the company. Having a digitalization strategy is not just an added bonus, it is imperative. Digitalization is not a new machine that you can simply buy, connect, and reap the rewards. Digitalization is a process that affects the entire company.  

Machinery that is to work in an operator model at the customer’s premises has to be designed differently, sold differently, and serviced differently. All company departments must be trained to play their part in this new digital world to make their contribution in this new world, and that requires the right digital tools: Digital twins of the product, production, and the information about the product. 

The right software + the right support = smooth transition 

The transition to this new world of digitalized, service-based business models can be a smooth one - and there are tools available to make that happen. For example, the sister companies Quanos Content Solutions and Quanos Service Solutions offer integrated software systems which are specifically tailored to the documentation requirements in the development of service and maintenance strategies.  

As specialists in the creation, management, and distribution of technical information and service information, united under the umbrella of the Quanos Group, they have configured their solutions to allow companies to make the leap into the new after-sales service no matter what their starting level. They can also help companies plan to gradually progress to the next level and beyond. 

With the help of Component Content Management System SCHEMA ST4 and the all-in-one service information system Quanos SIS.one, all the relevant documents for the machinery, such as operating instructions, data sheets, 3D models, or catalogs, are compiled from the source systems and grouped together according to the customer’s requirements. A central portal is used to establish a comprehensive, digital understanding of the maintenance requirements, necessary maintenance measures, and spare parts, which in turn forms the basis for predictive maintenance. Further steps can also be taken to link the knowledge obtained with data about replacement parts and stock levels, in order to automate processes. 

Frequently asked questions 

Establishing this sort of system does of course raise a series of questions. What happens to the existing software and the old data? Can the latter be converted and transferred without major reworking? How can complex requirements on access authorization and data protection be integrated into the system? How are product versioning and foreign language output managed? 

Providers like Quanos use a combination of software-immanent openness to solutions and project-specific advisory support to address these challenges head-on. Intensive exploratory discussions are held to qualify the framework conditions, followed by a proof-of-concept workshop, which is an important milestone. In a closely managed process, the requirements of the product provider can be continuously compared with the possibilities of the software system - a process model that allows progression to the next desired level of the service based business model, even after the commissioning of SCHEMA ST4 and Quanos SIS.one. 

Curious to know more?  

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