5. Servitization for OEMs: Shared Services

Shared services are a type of servitization model that allows multiple customers to share access to a common pool of resources, including equipment, services, and personnel. In this blog post, we will dive deeper into shared services, exploring what they are, successful use cases, benefits for customers and OEMs, and how they can enable sustainability.

This post is part of our series on equipment-based servitization models for Original Equipment Manufacturers (OEMs) and Value-Adding Resellers (VARs).

What are Shared Services?

Shared services are a type of servitization model that allows multiple customers to share access to a common pool of resources, including equipment, services, and personnel. In this model, customers pay for access to the shared resources, rather than owning or renting the equipment themselves. Shared services can be used across a wide range of industries and products, including equipment such as manufacturing equipment, medical equipment, and laboratory equipment, as well as services such as maintenance, repair, and technical support.

Billing

Unlike other servitization models, shared services is more of a delivery model than a business model and the customers are typically billed as described in previous posts in this series. E.g., on their usage of the equipment or service, rather than a fixed fee. Due to this variable billing structure, the way in which shared services are billed can vary widely depending on the specific circumstances of the customer and the OEM.

Overall, the billing method used in shared services servitization models will depend on the specific needs and requirements of the customers and the OEM. It is important to choose a billing method that is transparent, fair, and aligns with the value created by the equipment usage.

Successful Use Cases

There are several examples of companies that have successfully implemented shared services, including:

VWR: The company offers shared laboratory services, providing customers with access to a shared pool of laboratory equipment and services.

IBM: The company offers shared technical support services, providing customers with access to a shared pool of technical support personnel.

Flex: The company offers shared manufacturing services, allowing customers to share access to manufacturing equipment and personnel.

Benefits

In addition to the benefits discussed in the previous posts in this series, shared services offer unique advantages that are not achieved through the former. In this post, we will focus on the specific benefits of shared services that differentiate them from other servitization models.

Customer Benefits

OEM Benefits

Sustainability

Shared services models offer a sustainability advantage by allowing for shared equipment and reducing the need for redundant resources. In addition, these models promote sustainability by incentivizing OEMs to design and manufacture equipment that delivers better outcomes with fewer resources. OEMs can leverage data analysis to identify areas where improvements can be made in equipment design, maintenance practices, and service delivery. By taking a proactive role in equipment maintenance, OEMs can extend the lifespan of their equipment and reduce the need for new equipment to be produced, which has a positive environmental impact.

Data utilisation

Access to equipment data is crucial for OEMs selling equipment on a shared services servitization model to optimise delivery and performance, develop new products and services, improve commercial terms, reduce depreciation risk, and reduce the cost of service delivery. Here's how important data is for each of these topics:

In summary, access to equipment data is critical for optimising delivery and performance, reducing depreciation risk, and reducing the cost of service delivery in a shared services servitization model.

Financing need

To successfully implement shared services, an OEM must have a robust IT infrastructure, including software and hardware, to support the shared services platform. The initial capital outlay for developing and implementing a shared services model can be substantial, making financing necessary. Financing can help OEMs to manage cash flow, reduce the upfront costs, and spread the cost of implementing shared services over time. This can help make the shared services model more financially viable and sustainable in the long term.

A third-party platform provider can help OEMs to reduce the initial cost of developing a shared services platform. By utilising a third-party provider, OEMs can outsource the technology and infrastructure needed to develop the shared services platform, reducing the upfront costs significantly. This approach can also help OEMs to spread the cost of developing the platform over time, making financing more manageable and affordable.

Financing options for shared services models may include bank loans, leasing arrangements, captive finance companies, or other sources of funding. OEMs must carefully consider the costs and benefits of each financing option to ensure that the model is profitable and sustainable in the long term.

Additionally, they must ensure that financing arrangements comply with applicable regulations and accounting standards.

Succeeding with Valueport.io

Valueport.io's EaaS capabilities can help OEMs successfully implement shared services models in servitization, securing benefits such as cost savings, increased flexibility, access to expertise, and reduced risk for customers and increased revenue, improved asset utilisation, and improved customer relationships for OEMs.

Accurately measuring and billing for shared services can be challenging, especially when dealing with multiple customers with varying usage patterns and billing models. Data-driven billing is crucial for successful implementation of shared services models, whether it's usage-based, allocation-based, subscription-based, capacity-based, or outcome-based billing. However, few OEMs have this capability today without significant investment.

Valueport.io's EaaS capabilities can help OEMs address the challenge of accurate and transparent billing for shared services by creating an independent "one-truth" for usage and billing amounts. The platform can collect and analyse usage data from multiple sources and generate accurate and transparent bills for each customer based on their specific billing model. This ensures that customers are billed accurately and fairly, regardless of their usage pattern or billing model. Additionally, Valueport.io's platform can provide customers with a transparent view of their equipment performance data, which can help build trust and long-term relationships.

Conclusion

In conclusion, shared services servitization models offer significant advantages to both customers and OEMs, including cost savings, increased flexibility, improved asset utilisation, and reduced risk. By leveraging a shared pool of resources, OEMs can build long-term relationships with customers and create sustainable solutions that promote better outcomes with fewer resources.

To successfully implement shared services, financing is necessary to manage cash flow, reduce upfront costs, and spread the cost of implementing shared services over time. Off-balance sheet financing and cash flow financing are two options that can help OEMs to manage the risk and uncertainty of developing a shared services platform.

Access to equipment data is also critical for optimising delivery and performance, reducing depreciation risk, and reducing the cost of service delivery in a shared services servitization model. It is important to choose a billing method that is transparent, fair, and aligns with the value created by the equipment usage.

Overall, shared services models provide a sustainable, cost-effective, and efficient way for customers to access resources and for OEMs to build long-term relationships and create value. By carefully considering financing options and leveraging equipment data, OEMs can develop successful shared services platforms that provide value to both customers and the environment.