What drove SMS group to begin providing XaaS and performance-based subscription models?
Pascal Kirchhartz: Over the last few decades, SMS group has expanded its services from being solely an equipment manufacturer to becoming an integrated solution provider. In response to a growing demand for full-line maintenance services, we have developed our Technical Outsourcing Services, which have been in the market for over 10 years. Furthermore, our customers are increasingly looking to reduce tied-up capital and focus on their core competencies, which is the production of metals, not the maintenance of machinery. To address this, we have developed performance-based "as-a-Service" models that offer new business opportunities. Instead of buying individual components, machinery or ancillary plants, customers get to use equipment as part of a holistic service package.
How has customer perception and openness to this new business model evolved since its introduction and what is the relative size of your XaaS business today?
Tobias Brune: We have noticed that interest in XaaS has increased in recent years. However, our customers were often reluctant to consider such integrated business models at first as they entail a shift in responsibilities and risks. Therefore, a sales strategy that involves a lot of consulting was required.
Today, XaaS models are an addition to our current portfolio. Our XaaS business volume is still low, but we expect significant growth rates for the coming years. It will certainly take time for such business models to establish themselves in the market and the customers’ frame of reference.
The solutions our customers need are highly customized. How do you deal with individual requirements in your XaaS model?
Pascal Kirchhartz: Over the years, SMS group has transformed from being an equipment manufacturer to becoming a provider of integrated plant solutions, which are highly customized to meet the specific needs of each customer. These solutions are fully connected digitally and are designed to meet customer Key Performance Indicators (KPIs) over the entire lifecycle of the equipment. Our XaaS models follow the same philosophy. We believe that the XaaS model represents a new level of partnership with our customers.
The XaaS contracts are structured to ensure that both parties share the common goal of exploiting the full potential of the plants and achieving the agreed KPIs efficiently. Together with the customer, we define possible performance indicators, and our solutions include all necessary measures to enhance or maintain a certain level of plant performance.
Which products do you offer the model for? Does XaaS also work for components, processes or entire plants?
Pascal Kirchhartz: SMS group provides XaaS when we identify possibilities to enhance the effectiveness of our equipment and create extra benefits for our clients. We presently provide such models for various plants and components in our range of products, such as forging plants, casters, and hot strip mills. As long as there is a compelling rationale, we proactively collaborate with our customers to create new products and references.
Metal powder atomization plants for additive manufacturing
SMS group supplies plant technology for the production of high-quality, high-purity metal powder for additive manufacturing and other technologies related to powder metallurgy.
Combining high production yield of metal powder, the best fitting particle size and shape at highest quality, the VIGA (Vacuum Induction Melting Gas Atomization) plant concept of SMS group demonstrates customers how to become the leading supplier in the 3D printing industry.
Could you provide us with a specific XaaS example?
Tobias Brune: A good example is our Powder-as-a-Service model, we offer for our powder atomization plant and additive manufacturing applications. The model consists of three core elements: the asset, complementary services and continuous improvement by digital solutions. It is important to understand that pay-per-output as a concept alone is not sufficient to provide benefit, so we have attempted to add more services to our XaaS idea to enhance the customer offering.
The payment procedure is automated. All manufactured metal powder is collected and analyzed, and the data is then supplied to both the customer and us for highly accurate pricing determination.
Many companies have a hard time identifying the right customers for an XaaS offering. Was it clear to you from the outset which customers would be suitable?
Tobias Brune: Early on we found that customers were more interested in our XaaS pilots when they were new to a particular market. However, when targeting established customers, we had to carefully analyze our customer segments to gain insights and identify which markets would be suitable for XaaS. The subsequent discussion around XaaS as a new business model required a high degree of openness from both our team and the customers. In plant engineering, where plants have long utilization cycles and the company has firm control over its maintenance capacities and structures, this presented a challenge. Nonetheless, as customers increasingly prioritize their core competencies, XaaS business models are becoming more commonplace.
Financing the XaaS model and managing the corresponding tasks seems very complex for companies with a traditional mindset. What was your experience with financing the model?
Pascal Kirchhartz: We have seen the development of more and more offerings in recent years. Companies from the financial sector are moving in the direction of pay-per-use financing and developing new products. From our perspective, such players have attractive offers for physically smaller assets.
However, for highly individualized assets in the multi-million euro range, we have seen that general third-party financing can be rather difficult. We therefore work with different financing partners just as we do in the traditional project business.
When you look back and reflect on your XaaS journey, what are the most important things you have experienced?
Pascal Kirchhartz: Thorough examination of both the markets and the requirements of customers is crucial. Successfully addressing the identified issue with an effective integrated solution heavily relies on this analysis. The solution should incorporate various elements such as equipment, electronics, automation, service, and digital expertise to provide sustainable financial benefits to customers. Once this is done, deliberations about which business model would be appropriate for a partnership can take place. Among various pricing models, XaaS can also be taken into consideration as an additional option.
Tobias Brune: Early on, companies should aim to implement a dedicated use case. Therefore, an interdisciplinary team that has direct access to key stakeholders is needed. Working on XaaS continuously reveals organization’s current shortcomings. Working on XaaS therefore means working on competencies related to digitalization, maintenance, operations, logistics and many more.