Servitization, an introduction
Servitization―the emerging practice of wrapping a suite of services around a product, rather than merely providing a product―has the potential to change the way manufacturers go to market radically. In some servitization models, the customer owns the product and takes advantage of related services; in other models, the product itself is provided as a service. Servitization can be applied to an almost limitless number of products―automobiles, commercial equipment, farm equipment, and all manner of technology, to name a few. With servitization, manufacturers create new revenue streams that can drive growth, ease margin pressures, and balance seasonal sales.
The servitization trend capitalizes on consumers’ growing comfort with subscription or as-a-service offerings, from movies to food prep to collaboration platforms at work. Buyers are beginning to expect the same experience in their business-to-business interactions. With servitization, manufacturers can deliver the high-quality, personalized experience that customers want, with a complete service offering ―from product selection to installation, maintenance, upgrades, insurance, and consulting. By improving the customer experience, manufacturers foster longer relationships with customers, increasing profitability, and customer loyalty.
To capitalize on the servitization trend, manufacturers often need to invest in new finance platforms. Many are using home-grown systems with bolted-on financial applications that cannot go beyond traditional lending and leasing functions. They need a lending and leasing system that can accommodate flexible terms, such as pricing per mile or hour, or a combination of traditional rental and usage fees.
Manufacturers also need a lending and leasing system that supports the Internet of Things (IoT), a critical enabling technology for servitization. IoT enables products to automatically communicate data about product usage, location, condition, and performance between all parties’ systems and devices, facilitating usage-based payments and superior customer service, from managing and planning maintenance to upgrade opportunities. As manufacturers plan their transition to servitization models, IoT capability is, therefore, increasingly essential.
Servitization enabled by IoT also eliminates the uncertainty of traditional leasing arrangements. Customers would often under- or over-utilize equipment―leading the customer to pay too much or the manufacturer to recoup a depreciated asset. Servitization enables customers to enter into a flexible lease based upon actual use of the product. If customers use the equipment for less than the contracted timeframe, they pay less. If they use the equipment more, they spend more or return the equipment at a predetermined product lifecycle threshold.
To take advantage of this new way of doing business, manufacturers need a comprehensive, unified lending and leasing solution that delivers:
Oracle Financial Services Lending and Leasing is purpose-built to enable servitization for manufacturers in any industry. Its pay-for-use capability can be configured to allow for rental and usage for a single customer, and its open architecture can integrate with any compatible system or device. Coupled with Oracle’s Internet of Things Intelligent Applications Cloud, manufacturers gain a complete servitization solution.
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