Shifting from the product-focused business models towards selling machines through a usage-based business model is a major trend in industrial manufacturing. Service champions have increased their revenues by more than 400% by shifting from simple sales of their products towards offering service-oriented business models.
This article will demonstrate the equipment-as-a-service use case of Bosch Rexroth built on top of ZkSystems.
- Equipment-as-a-service is a major trend. It produces up to 400% more revenue (source) for machine owners than traditional sales and secures new customers who are shifting from CapEx (capital expenditure) to OpEx (operating expenditure).
- Using ZkSystems enables the most precise payment for power units based on the intensity of the usage, which is tracked via IoT sensors.
- Hydraulic power units have a lifecycle of up to 30 years. Offering equipment-as-a-service provides access to valuable usage data during the whole lifecycle.
What Is a Hydraulic Power Unit?
Hydraulic power units convert electrical power into the pressure and flow of hydraulic fluid to generate movement and force within a machine. They are used in a wide variety of applications, such as presses and tooling machines.
CytroBox is a hydraulic power unit manufactured by Bosch Rexroth. It is designed for a power range up to 33 kW in minimal space. Thanks to its highly modular, innovative design, it can be operated energy-efficiently and at very low noise levels. State of the art automation technology and several sensor packages enable easy integration into modern machine concepts.
The CytroBox comes with an IoT service called CytroConnect. CytroConnect solves typical maintenance and diagnosis services — all the information on the condition of the drive and sensors is easily accessible through Plug&Run.
Why Offer Equipment-as-a-Service?
Shifting from selling equipment towards offering equipment on a service basis is considered to be a major competitive advantage for industrial manufacturers. A study by the European Commission shows that more than 70% of manufacturers are expected to use services as a key product differentiator. Early adopters of service-based business models have experienced an annual business growth of 5% to 10%. Among these early adopters is Rolls-Royce, a company that generates over 400% more revenue (source) by selling jet engines as a service than it did with a traditional sales model.
Considering the specifics of hydraulic power units, Equipment-as-a-Service has following advantages:
- Data insights during the long lifecycles: The life cycles of hydraulic power units are very long and can reach up to 30 years. By selling the equipment in one go, the manufacturer often doesn’t have access to the usage data and has limited knowledge of how the equipment is used during these 30 years. With equipment-as-a-service, the manufacturer can keep an unbreakable link with their products, gathering important data to improve the equipment and upsell useful services to their clients.
- Cash flow optimization: A single hydraulic aggregate can cost up to $100.000, which can be challenging for clients who are conscious of cash flow. This is a deal-breaker for many customers who cannot allocate so much capital upfront. Equipment-as-a-service is the perfect business model for customers who want to shift from CapEx (capital expenditure) to OpEx (operating expenditure). This way, the equipment manufacturer can serve more clients with different expenditure preferences.
- Wide variety in usage intensity: Hydraulic power units are used for very different tasks and at very different intensities. The maintenance costs and the lifecycle of the power depend heavily on the specific usage. It wouldn’t meet the customers’ needs to offer the same fixed service prices and warranty conditions to the clients who use the machines at maximum intensity and those who used it at minimal intensity.
ZkSystems provides the right infrastructure to maintain a validated record of usage data across multiple parties. Let’s go through the minimal setup first, where only the equipment manufacturer (Bosch Rexroth) and machine user with multiple CytroBox devices are involved.
Infrastructure (Minimal Setup)
The ZkSystems client is installed on the CytroBox devices (which have both the required connectivity and the computing power), as well as in the cloud of the equipment user and the equipment manufacturer. A copy of the validated usage data are stored in the cloud of the equipment user and the equipment manufacturer. ZkSystems has no access to this data — only the parties defined by the equipment manufacturer are allowed to store the usage data. This way, both parties have the same copy of usage data, which is automatically validated by them. They don’t have to double-check the data manually and can create flexible usage-based billing and payments without going through highly expensive and complex manual audits of the equipment’s usage.
Infrastructure (with External Parties)
A very important advantage of this infrastructure is how easily third parties can join the network. Let’s imagine a bank is involved in usage-based financing of the equipment. Bosch Rexroth and the users of CytroBox can agree to provide the equipment usage data to the bank as well. In this case, a ZkSystems client can be installed in the bank’s cloud. This way, the bank can automatically validate the usage data in the network and rely on the validated record of the usage data from CytroBox equipment. This setup holds the potential to make financing, leasing, and warranties more flexible and programmatic.
Usage Data Overview
On the front-end of the ZkSystems application, both the equipment owner and the equipment user can see at which capacity the equipment is being used and how much will be charged for the current usage. Every payment-triggering event can be monitored live in real-time.
The use case above can enable very specific pricing models based on specific sensor data. For the CytroBox, the intensity of a hydraulic cycle was calculated based on rotation and pressure. This payment model is more precise than pay-per-cycle, pay-per-used-kWh, or pay-per-operation-hour. Using ZkSystems, the equipment manufacturer can set up and flexibly change the pricing model for the equipment.
Integration into Existing IT Landscapes
While pure token transactions sound great and offer automation, one has to face reality as well. Many enterprises today are not ready to jump onto token transactions. It makes sense because they have a heavy legacy of IT systems and processes. Instead of building yet another siloed application, we found a way to seamlessly and painlessly integrate this method into the corporate world. With ZkSystems, we have built interfaces for ERP and enterprise payment and billing systems. The payment records are collected and triggered at the end of the day or week via enterprise payment systems.
“Scalable and integration-ready solution by ZkSystems is the right technology for us to develop innovative Industrial IoT business models.”
- Veronika Brandt, Head of IoT Business Consulting at Bosch Software Innovations
Do you want to explore the potential of Equipment-as-a-Service for your own business? You can request a free consultation via our request form.
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