Equipment as a Service (EaaS) – Procurement Best Practices & Sourcing Strategies

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Equipment as a Service Market Global Size:

The expected growth of the global equipment as a service (EaaS) market indicates that more people are becoming aware of its benefits, which include lower initial expenditures, greater adaptability, and access to the newest technology. In the upcoming years, it is anticipated that this growing trend will generate profitable opportunities for consumers and suppliers of services in a variety of sectors. Thus, ELINT Market Research’s procurement intelligence study evaluated a $53 billion market size in 2022, which is anticipated to achieve $176.04 billion in 2026 at a CAGR of 35%. This forecast suggests that companies are increasingly choosing to use service-based approaches to obtain equipment instead of making individual buys.

Further, the report says that equipment as a service model is mainly rising in complicated construction settings like high-rise elevators, HVAC, and manufacturing. Also, this strategy eliminates initial investments and provides clients with a host of benefits by transforming capital expenses (CAPEX) into operating costs (OPEX). Moreover, the EaaS method offers a straightforward price structure and guarantees industry-best equipment reliability, which makes it a desirable choice for companies trying to maximize cost control and operational effectiveness. Not only this, but the EaaS work model is also beneficial for vendors as they can make regular income streams, build long-term service partnerships to increase client loyalty and use statistical analysis to enhance machine efficiency and maintenance forecasting. This mutually beneficial association between buyers and sellers causes the EaaS model’s predicted global adoption in numerous intricate and industrial use cases.

Market Definition:

The EaaS model is an emerging and attractive business model to form a long-term sustainable revenue stream for manufacturing companies which allows vendors to rent out equipment and examine, manage, and repair it to carry it in better working shape and boost customer availability. This model operates on a pay-per-use basis in diverse industries like office supplies, medical devices, jet engines, etc. Thus, sectors and individuals can rent out and pay for their actual utilization for short or long periods, instead of buying devices and machinery completely. Leaders operating in the global industrial manufacturing EaaS domain have already implemented this approach for novel sources of income to stand out in the market and satisfy customers.

Equipment as a Service Market Drivers:

1. Reduced Setup Costs –

The major growth driving factor for the equipment as a service market is reduced costs to install this model due to the emergence of IoT-enabled solutions for measuring and collecting equipment utilization. Further, the payment model used by EaaS suppliers can be predicated based on diverse precise metrics like equipment efficiency and IoT technology which has drastically lowered the price of this procedure. Organizations can properly manage operational information and success indicators by utilizing IoT sensors and connections to remotely examine how well equipment is working in real-time. This eliminates the requirement for costly human surveillance or data collection techniques. However, technology advancements have made it possible for businesses to make long-term connections and provide equipment as a service, which has led to the widespread adoption of the EaaS method in a variety of industries.

2. Demands from Financial Institutions –

Financial associations have vastly adopted equipment as a service to manage cash flow operations. This transition to using the EaaS model over traditional final methods caused a proliferation in the global equipment as a service procurement intelligence market which helped financiers streamline smoother transactions. Moreover, governmental initiatives to sustain EaaS-based financing companies also emerged rapidly.

Equipment as a Service Market Challenges:

1. Uncertainties in Sharing Risk Between EaaS Suppliers and End-Users-

The EaaS market encounters challenges due to various uncertainties in sharing risk between EaaS suppliers and end-users which leads to hesitance in using these models. Furthermore, it might be difficult to show how customers could benefit from the switch to an EaaS setup because some companies may find it difficult to quantify the advantages. Additionally, suppliers may find it difficult to make the internal adjustments needed to promote a service pricing model.

2. Cyber Security Concerns –

The EaaS assistance model poses cybersecurity troubles since IoT-enabled settings save all data on the cloud and cause possibilities of potential data breaches and unauthorized access.

Equipment as a Service Market Opportunities:

1. Introduction of New Accounting Regulations –
   New accounting standards mainly IFRS 16 and ASC 842 pose great opportunities for EaaS services. These rules changed the way assets have been identified due to the new treatment of leases, which traditionally reduced the amount of assets on their balance sheets by using rentals. Hence, firms are seeking alternate models like EaaS to reduce the number of liabilities on their balance sheets while still having access to the infrastructure they require. They can transfer equipment custody and maintenance to service providers, and use a compelling option to function with less capital-intensive assets using EaaS methods. Additionally, a favorable climate for the widespread acceptance of the EaaS operations model has been established by this regulation change, opening up new markets and spurring the industry’s growth.

2. Emergence of Third-Party Service Suppliers –

The emergence of third-party service supplier organizations like EquipmentShare, Xometry, and 3D Hubs offer EaaS solutions for a range of supplies, even though they don’t produce their own models. These companies have capabilities like technology, shipments, and service requirements to deliver intelligent EaaS services as representatives of the original equipment manufacturers (OEMs). They partner with OEMs to employ their infrastructure. Thus, these third-party service suppliers can rent out a vast array of machinery, such as building tools, 3D printing devices, CNC routers, and injection molding equipment.

Equipment as a Service Market Segmentation:

1. Types of Financing Models –

The subscription-based and outcome-based are two significant financing models in the EaaS market that help give access to the equipment to customers whenever they need it without the burden of ownership.

2. End User Sectors –

Primary end-user sectors of the global equipment-as-a-service procurement market include energy, transportation, IT, healthcare, construction, manufacturing, utilities, and retail.

Key Suppliers in the Equipment as a Service Market:

Worldwide equipment as a service market comprises prominent players which include Mitsubishi Electric, Advantech, Broadcom, Texas Instruments, Ericsson, Rockwell Automation, Bosch, and Siemens.