Equipment-as-a-Service Transformation
What is Equipment-as-a-Service?
Equipment-as-a-Service (EaaS) is a broad term that encompasses a range of performance- and usage-based offerings integrating equipment with related services. Equipment-as-a-Service agreements bundle capital assets, services, and other content into a single services contract. EaaS business models are often tied in with complex payment structures applied to sophisticated assets that may or may not be bundled with services. All of these offerings seek to meet the evolving needs and preferences of equipment end users.
Funding of equipment embedded in as-a-service agreements is less similar to a banking arrangement than to the ”servitization” of an underlying physical asset. Offerings within this category are sometimes referred to as managed services, pay-per-use, or consumption models, among other terms. Unlike traditional equipment financing, where the underlying asset is part of a financial contract between the end user and the funding source, Equipment-as-a-Service transactions are often a contract between an end user and a service provider. Service providers are typically equipment manufacturers, distributors, value-added resellers, or managed services providers. Services embedded in the contract are designed to address end-user requirements for comprehensive bundles that include the use of the equipment, options for consumables, maintenance, software applications, and other value-added components.
As artificial intelligence (AI), IoT connected sensors, and other technological advancements provide an increasingly rich stream of data and analytical capabilities, the potential for Equipment-as-a-Service and similar subscription-like offerings to disrupt and transform the equipment leasing and finance industry has steadily grown. This is driven by increasing demand among end users for innovative payment models that align cost with consumption, as well as the potential for service providers to tap into vast new revenue streams by bundling equipment with value-added services.
The adoption of as-a-service models presents a number of challenges to equipment finance and leasing firms. Traditional funders need to find new ways to evaluate and mitigate risk that reflect the growing complexity of today’s assets, and the likelihood that they will turn over or need to be traded in or upgraded more frequently. Billing and invoicing capabilities must be enhanced to account for more complex payment structures that encompass more than just equipment.
“The complexity of modern equipment is increasing at a rapid pace. End users need new solutions that give them flexibility in payment structures and the ability to upgrade as technology advances. Equipment leasing and financing firms that can meet this need will have a big advantage as the market continues to evolve.” – Diane Croessmann, Director, The Alta Group
Key Benefits of Equipment-as-a-Service
Equipment-as-a-Service and related managed services models are transforming the equipment leasing and asset finance industry. Addressing emerging market preferences is a fundamental requirement for companies that want to survive and thrive in the future. Developing the capability to implement EaaS, pay-per-use, consumption-based, or servitization models can benefit both financing organizations and manufacturers and distributors in many ways. For example:
- Better Alignment with End-User Requirements – Modern assets are more complex than ever, and many don’t function properly without ongoing software updates and related services. At the same time, we now have at least one generation of end users in the workplace who have grown up accustomed to using subscription models. Both of these trends mean that manufacturers, service providers, and funders all need to be able to offer a wider range of product offerings and payment structures to remain competitive into the future.
- Ability to Drive Incremental Revenues – The flexibility of Equipment-as-a-Service models and the proliferation of increasingly granular data coming from tech-enabled equipment create an opportunity for new revenue streams. Incremental profits from value-added services bundled into these models can help offset the increased risks associated with these contracts. In many cases, non-equipment revenue streams can become a significant new source of revenue.
- Greater Visibility of Assets – Assets that are equipped with advanced sensors can provide a rich stream of data that can help owners to avoid downtime through targeted preventive maintenance. By taking a comprehensive approach to building an EaaS model, companies can position themselves to take advantage of these powerful capabilities. As Alta’s advisors have written, we are entering the age of “Intelligence-as-a-Service.”
Our Approach to Equipment-as-a-Service (EaaS) Transformation
The Alta Group works with manufacturers, resellers, distributors, banks, captives, independent finance companies, and other entities to support all aspects of Equipment-as-a-Service transformation, from risk evaluation to identification of funding partners to operational considerations that can ensure success.
With decades of experience across all aspects of the equipment finance industry and a forward-looking perspective, Alta’s advisors can help your business adapt to changing market demands without abandoning your core fundamentals.
Alta’s advisors will help you lay a comprehensive foundation for a successful Equipment-as-a-Service offering. We use a proprietary investigation process to assess stakeholder requirements, including in-depth work in areas that include:
- Market analysis
- Value proposition development
- Risk evaluation
- Funding options and alliances
- Go-to-market strategies
- Legal readiness
- Operational readiness
- Asset management
- Pricing and accounting
“Alta’s advisors have stood up successful as-a-service offerings at some of the top equipment companies in the world. With more than 100 years of combined experience in this area, our team knows where potential problems could be hiding, and how to avoid them. Alta has earned a reputation as the most experienced, and the most comprehensive, in the equipment finance industry.” – Valerie L. Gerard, co-CEO, The Alta Group
Equipment-as-a-Service Case Studies
Helping a Technology Company Implement a Branded Customer Financing Program
A leading multinational technology provider turned to The Alta Group to design a branded customer financing program enhanced with EaaS. Alta evaluated multiple program models, delving into investment, accounting, risk, and execution timelines to ensure optimal speed and ROI. Our advisors delivered a comprehensive financing strategy with a full analysis of the go-to-market implications and operational requirements.
Comprehensive EaaS Strategy Review for a Global Bank
Alta assisted a global bank with a comprehensive review of its strategy related to Equipment-as-a-Service programs and transactions. Our in-depth approach reviewed processes from multiple angles, identified gaps in key areas, reviewed capabilities related to complex variable billing requirements, and more. Alta’s analysis provided a clear path to improve management of customer expectations and operational readiness to service complex billing requirements.
Market-Entry Research for an Independent Funder
The Alta Group guided a strategic market research initiative to uncover expansion opportunities in adjacent asset classes and Equipment-as-a-Service. Alta identified high-growth verticals, analyzed competitive landscapes, and validated business models. The insights helped shape actionable expansion strategies and prioritize areas with the strongest ROI potential. Alta supported the client through the decision process.
Equipment-as-a-Service Capability Assessment for a Fortune 500 Company
When a Fortune 500 health care provider sought to expand its program options to include as-a-service models, The Alta Group provided a comprehensive evaluation using its proprietary process to identify gaps and offer solutions to support as-a-service options for end users. Alta’s comprehensive support included gap closure recommendations and pricing templates for various EaaS products.
Supporting a Fortune 500’s Response to a Large As-a-Service RFP
A Fortune 500 company sought out The Alta Group for assistance in support of its response to an RFP for hundreds of millions of dollars in assets that required as-a-service capabilities. Alta ensured no gap was overlooked. We helped the company identify third-party servicing options, support risk mitigation efforts, and formulate the RFP response.
Get Strategic Support for Your EaaS Transformation
Equipment-as-a-Service models are changing the face of the equipment finance industry. Equipment and asset funders, as well as manufacturers, distributors, and others in this arena, have an opportunity to position themselves for future success by laying the foundation for a successful transition to as-a-service models.
The Alta Group’s advisory team is uniquely qualified to help clients assess readiness, develop strategic roadmaps, and implement managed services and Equipment-as-a-Service programs, leveraging Alta’s proprietary methodology, cross-functional expertise, and experience across industries and asset types.
Contact The Alta Group for tailored support in building or expanding Equipment-as-a-Service offerings, including assistance with partner identification, pricing strategies, legal readiness, operations, and go-to-market execution.
Expected Benefits
- Expand sales offerings
- Drive incremental revenues
- Optimize vendor relationships
