How Manufacturing is Pivoting to a Product-as-a-Service Model

The significance of migrating from a product-based business model to a service-based business model can be defined with a simple illustration: American Business Center (ABC) Inc. sells printers via multiple channels. In the past, that's all they did - sell a product to a distributor or directly to the end customer. However, ABC Inc. is now trying to sell printing as a service.

ABCs of Subscription Services

To achieve this transformation, ABC Inc. now offers subscription services like periodic printer ink cartridge refills. How does this change in approach affect the technology landscape?

From a systems point of view, ABC Inc.'s product-based model requires a sales application like Oracle CPQ for configuration and pricing, and it requires a financial application like Oracle Cloud ERP to manage inventory and the supply chain. However, a whole new aspect of customer service and experience must be accounted for in the service-based business model. While an effective subscription management application is required to efficiently manage the organization's service subscriptions; customer services, including field services, are also needed to make the service-based model effective. Revenue recognition is also more challenging in a service model.

Today's customer is no longer simply satisfied with the timely resolution of a service request—that's reactive and often too late! Customers today expect proactive services- the service provider should be able to proactively understand what the customer may need in the near future and provide the solution in advance. IoT & AI tools embedded in customer experience applications, like Oracle Service Cloud, offer service providers the ability to cater to the proactive service demands of customers.

The popularity of the service-based model is surging in the high-tech and manufacturing industries. For example, one of our high-tech manufacturing customers came to Accelalpha to

move them from a manual pricing system based on spreadsheets to a subscription pricing model.

They needed to put together customized product bundles and price them properly for subscription and then manage billing and revenue recognition which can be complex for subscriptions. Now the customer has a scalable solution that has enabled a new subscription model for selling products while ensuring they can win new business and develop recurring revenue streams.

Another example involves an American manufacturing company of test and measurement devices, who came to Accelalpha to simplify its process of maintaining complex products and subscription bundles. The company also wanted to implement a solution that could seamlessly integrate configurations with its website and allow customers to order products online.

Accelalpha implemented Oracle Revenue Management Cloud (RMC) and Oracle Subscription Cloud (SMC) applications to improve the quoting and billing processes with end-to-end integration to Microsoft Dynamics 365 and the organization’s Oracle EBS system. Their customers can now manage their subscriptions online.

Additionally, the solution has increased quote value and win probability by utilizing pricing guidance, analytics, and an automated billing process. This customer-first approach is driven by one major factor - long-term, high-profit margins. As a result, investing in cutting-edge technology is paramount for setting an organization up for success in the service-based model.

The following is a list of common challenges that organizations moving from product-based to service-based business models must overcome:

• Streamline and increase the effectiveness of field service operations.
• Anticipate customers' future needs.
• Increase sales volume and margins.
• Ensure accurate and timely revenue recognition
• Enable remote asset monitoring and management.
• Improve new product development.
• Increase customer satisfaction.

Oracle has an extensive array of applications that can be leveraged within the Manufacturing industry to make the transition from a product to a service model. A manufacturing organization will have a seamless operational advantage when utilizing the following applications:

1. Oracle Subscription Management
2. Oracle Revenue Management
3. Oracle Service Cloud
4. Oracle Field Service Cloud
5. Oracle Cloud ERP

However, making an all-encompassing change may only be possible for some organizations, many others must make small incremental steps to digital transformation.

The Oracle CX applications have been designed to set organizations up for success in all customer relationship endeavors. For example, the Oracle Service Cloud helps improve visibility and collaboration between sales and service teams throughout the lead-to-renewal cycle. This integrated service solution enhances communication and differentiates the manufacturer for its superior customer service.

It offers flexible, immediate customer service, with a human touch, across a wide variety of digital channels. The Oracle Service Cloud also provides a range of self-service options, so your customers can easily help themselves—getting the answers and information they need in a manner that best suits their needs.

The IOT Service of Oracle's Service Cloud is a complete customer service center solution for all IoT-enabled assets, devices, and subcomponents. This allows for remote monitoring, preventive maintenance, automatic incident creation based on data collected from connected devices, and proactive support provided by the contact center. This service feature lends an edge to the Oracle Service Cloud application and results in higher customer satisfaction.

Oracle.com defines Oracle Field Service as a "cloud-based field service management solution that helps businesses schedule, route, and equip mobile workers to complete service activities at a customer's home, office, or installed asset location." It maximizes field technician utilization with intelligent job assignment, scheduling, and routing. Oracle Field Service Cloud is a mature Field Service application product celebrated as a leader in Gartner's magic quadrant for the past ten years.

Besides ensuring that Field service runs smoothly and efficiently, it works proactively for IOT and connected devices. It can minimize downtime by optimizing asset availability and utilization through continuous remote tracking with the ability to create work orders and schedule field service activities automatically.

Gain a new source of revenue with "as-a-service" subscription offerings. Adopting service-based business models like Oracle Subscription Cloud enables organizations to seamlessly transition to a new business model because Oracle's subscription management tool is organized and error-free.

Oracle.com describes Oracle Subscription Management as "the only fully integrated, cloud-based subscription management system for product- and service-based companies that simplifies the management of contracts, billing, and revenue." Having been built on a machine learning foundation, Oracle Subscription Management helps organizations "Manage new subscriptions, renewals, and upgrades by connecting your CRM and back-office and providing a complete view of customers' purchasing behavior."

More and more organizations are adopting modern technology, changing their business model, and embracing digital transformation. To ensure you don’t get left behind, you can talk to one of our expert consultants about how your organization can move from a product-based to a service-based model. We will guide you through your options and recommend the right Oracle Cloud solutions to help your organization resolve problems, meet unique business needs, streamline business processes, and, perhaps most importantly - improve your customers’ experience. For more information about this burgeoning trend, check out The Vision for Service Transformation in Manufacturing, a joint Oracle and Frost & Sullivan Executive brief.