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Andrew Penny, February 25 2020

X as a Service

One of our clients manufactures heavy-duty material handling equipment and sells it to the extraction industry around the world. The system is controlled by a central brain that ensures that all the moving parts function in harmony. Their solution is quite novel and well protected by patents but having a patent and being able to enforce it, especially in remote locations, is quite another thing. They were convinced that once a system was purchased their clients would simply get parts copied by local machinists and our client would lose out on revenue that was rightfully theirs. The client was on a path of establishing legal enforcers in various countries, banning sale to others and so on.

When we had a look at it, we realized that the hardware was actually pretty simple to make and indeed any machinist (or even blacksmith) could fabricate the parts. But we also noted that the real value was in the software that made it all work (think orchestra and conductor). Our recommendation was simply to sell the equipment at cost recovery prices. And then, rather than including the software that runs the hardware, to sell a subscription to it - Software as a Service or SaaS. This way we would capture a share of the ongoing value delivered to the client every month. Forever.

I know you have all heard of SAAS. I have a least a dozen running on my Mac as I write this; QuickBooks, Slack, Office 365, GMail etc…. And any readers in the software business likely already have a cloud version that clients subscribe to. But for those of you in non ‘software-centric’ industries, what can you do to include a service component that can be sold as a monthly subscription? With the hype around 5G communications and the explosion of IoT (Internet of Things) the opportunities for this will increase dramatically.

To do this effectively, you need to extract the ‘intellectual property’ from the product and sell it based on the value the client receives month-to-month. And, done well, your ongoing expense to deliver that value is minimal. For example, we recently learned of a company that is selling ‘Sun as a Service’, SunaaS, where they manage lighting systems through a software application in the cloud.

What about office furniture? (we just bought some new chairs). Why can’t my ‘smart chair’ adapt to me throughout the day to keep me active and healthy – I would buy a subscription to a service that monitored my activities and posture and automatically adjusted the chair for me – and linked to my Fitbit / Apple Watch, etc to add more value…..CaaS

We have a client involved in the mobility market (Wheelchairs) – Why not smart wheelchairs that adjust themselves based on the user’s needs – all driven by an application subscribed to in the cloud….. WaaS?

Another client in the mining industry is all over this and will be launching their own cloud services soon….. MaaS?

What are you planning…. ?aaS .

Thanks for reading,
Andrew Penny

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Andrew Penny

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