A hitchhikers guide - through XaaS in IIoT
Playbook for XaaS
(scroll down for download)
The MindSphere World community stands for pioneering spirit around the topic of industrial digitalization and is, therefore, a very important place-to-be for all IIoT enthusiasts. In our "Technology" and "Business Processes" committees, various topics are driven forward with a great deal of commitment, from the ⇒ idea to the ⇒ concept to a mature ⇒ story around it.
A very successful example of this trend-setting work is the resulting "Hitchhiker's guide through XaaS in IIoT", which addresses the working mechanisms of commercial aspects of IoT business cases.
The basic idea of MindSphere World is the joint creation of know-how and sharing the results with all members. The community pursues the common goal of creating a breeding ground for innovation in the digital world. The handbook around the trending topic "pay-per-use" does this in a very insightful way. And the best part is that this result is also made available to non-members here.
For whom is this made
Everyone interested in these following topics and many more should download and read this guide.
Just like we assess the equipment over its life span, our customer relationship and even more so, cash flows from that relationship potentially require an evaluation over their lifetime, too.
If you consider your customer relationship to be an asset, your valuation concept should be more complex than “That makes 200k EUR to be paid in 30 days, thanks very much!”.
One suggestion is the adaption of Customer Lifetime Value (CLV). Here, the value of a deal is described as the sum of discounted future cash flows.
What is behind the idea of TCO? Often, the actual costs of an investment are not fully understood. Instead of looking into production costs or acquisition costs of the equipment, you consider all costs over the lifetime. This includes:
- acquisition costs -> e.g. purchase price, transaction costs, costs of capital
- infrastructure costs -> e.g. place it inhabits, depreciation
- costs of operating -> e.g. maintenance, utilities & supplies, electricity
- end-of-life costs -> e.g. recycling, disposal
- etc. …
Historically, when companies were selling mostly tangible products value chains were typically structured linear, sequential, and segmented essentially following the physical product flow.
In a XaaS business model, when companies provide services rather than selling physical products, different activities in the value chain form an integrated network as activities become more interconnected and interdependent.
How much responsibility and risk a party takes, is defined by your service contract. Hence, it is deal-specific. However, to simplify things, we like to cluster different models and their characteristics in three types of structures.
- Build and sell
- Build, own, and transfer
- Build, own, and operate
Within these structures, management effort and risk-taking change as the depiction on the right-hand sideshows.
Our thanks go to
Senior Manager Business Model Innovation
And all the people which helped to create this valuable asset
So if you want to learn more about the individual mechanisms in XaaS, download our manual now. You will receive many valuable insights, shortcuts, and directions for:
- Value propositions and value drivers
- Risk and key prospects for success
- Life cycle models and pricing factors
- The total cost of ownership and tax perspectives
- ... and much more