Many of today’s equipment manufacturers are facing a similar challenge – their markets are increasingly competitive and contested, and their margins are shrinking. In this highly competitive environment, it’s becoming difficult to keep profits from shrinking, and just as difficult to generate new business.
One of the ways that the companies that manufacture industrial and commercial equipment can grow revenues and increase profits is by identifying new offerings to bring to market. And the offerings that many of them are toying with aren’t new products – they’re services.
This new trend of product and equipment manufacturers working to become services companies is detailed and explained in a new eBook co-authored by Modern Equipment Manufacturer’s Ryan Schradin, and Steve Shaw of Sierra Monitor Corporation.
In this new eBook, entitled, “The HVACaaS Revolution,” the authors take a deep dive into the financial reasons why these companies are embracing services, the technologies that are making it possible and the steps that equipment manufacturers can follow if they’d like to add services to their portfolio of offerings.
The eBook finds that the introduction of services by manufacturers can do more than simply increase their revenue and drive up profits. It can actually help increase the company’s value to both investors and potential acquirers. According to Steve Shaw, “Subscriptions and monthly service fees are guaranteed revenue that can be used to illustrate additional company value, making the company worth more to both investors and potential acquirers.”
And the decision to embrace services isn’t just good for manufacturers and their bottom lines. It’s something that could also benefit the end user. As Steve writes, “Ultimately, there is no organization, company or individual that knows a device better than its manufacturer. By selling maintenance and management services to the equipment owner following the sale of the equipment or device, the manufacturer can …provide operational guidance and insight and deliver a better, more efficient experience – at a reasonable monthly rate.”
However, as the old saying goes, “You have to spend money to make money.” To make the mutually beneficial – and profitable – addition of services to their offerings, the eBook finds that companies must first make an investment into their technology and products.
Offering services and embracing the “As a Service” model requires that companies harvest information and data from their installed devices in the field. Once that data is being aggregated and analyzed by the manufacturer, the door then swings open to the introduction of service offerings. In fact, according to the eBook, the cloud-enablement of devices is “step one” of four that manufacturers can follow to introduce service offerings.
Although the eBook does focus on the HVAC industry, the addition of service offerings extends across industries and a wide swath of equipment manufacturers. In fact, the Modern Equipment Manufacturer recently spoke with Steven Baird, the fire protection product marketing manager at Armstrong Fluid Technologies, about his company’s desire to cloud-enable their fire protection equipment, and here is what he said:
“As we build up the database of the pumps in the field, we – as the equipment manufacturer – are going to be able to benefit from cloud-enabling the equipment as well. We’ll be able to analyze the data across these systems to identify the warning signs of a system failure or problem. This will enable us to better serve our customers and more proactively service our installed devices, since we’ll see the signs of trouble in advance. This could even open the door for us to sell service contracts to our customers that will involve us proactively and preemptively servicing our devices before they become a problem on-site.”
Equipment manufacturers may be facing increased competition and shrinking margins, but there is a way to drive new revenue streams for their companies. With an investment in new technologies and cloud-enabling their devices, they can become service providers – opening the door to more revenue for their companies and better experiences for their customers.