IoT Services: Hurdles to Overcome

After-sales service, maintenance, and repairs are attractive additional businesses with high margins for machine builders. A platform for IoT services that connects manufacturers, customers and machines enables additional services and the collection and analysis of operational data. The prerequisite: the machines must be connected to the Internet of Things.

Customer loyalty is separate from the core business for many machine builders. But in the face of growing competition, it should. If it succeeds in retaining customers, these after-sales services such as maintenance and repairs can be sold. Many manufacturers ignore sales here instead of offering machines and services as a package from a single source. This is possible with a software platform that connects manufacturers, operators and machines. It allows customer contact to be maintained without high additional costs and can implement IoT services, be it efficient maintenance planning, ordering options for spare parts, remote diagnosis or user-friendly communication in the event of a fault.

In the next step, machines can be connected via the Internet of Things (IoT) and connectivity. To collect operational data that can be put to good use. Such a good database allows companies to react quickly to operation problems and plan condition-based maintenance. This minimizes expensive downtimes and improves your products. Last, additional business can be generated for customers through fee-based data evaluations. So the future is also digital in mechanical engineering. But only some people are enthusiastic about these prospects. Here are three objections raised against IoT services – and how to counter them.

IoT services: Customers don’t want transparency

Machine builders have found that their customers, i.e. the buyers and users of the machines, could be more interested in transparency. This inevitably arises when the systems are connected to the Internet. Customers resist digital solutions because they feel they are being monitored by digital logging, operating data recording or the possibility of remote diagnosis. They fear that the data could be used to their detriment in the event of disputes about warranties and guarantees. For example, they show that a machine needs to be used properly or that maintenance has not been carried out.

Another objection is sales fatigue: buyers are concerned that the manufacturer will constantly offer them services and flood them with reminders, for example, to replace certain parts such as seals. This takes time and is perceived as annoying. Concerns about IT security and data protection compliance are also becoming louder. To counter this, machine builders must communicate that digitization is associated with a benefit that outweighs the loss of perceived privacy. The concrete advantages of IoT services and technologies are less damage to the machines because they are detected faster. In addition, this results in shorter or even completely avoided downtimes, which brings a considerable cost advantage. In addition, there are faster and better service calls, more convenience for users and less manual effort. And the opportunity to optimize the use of machines and systems.

A lack of transparency becomes more expensive for the customer.

Machine builders should also argue about the price: a lack of transparency must be more expensive for the customer than transparency. He can thus pass on his additional costs to the customer since the customer’s need for digitization increases the expenditure for the service. The technicians must go out more often; the diagnosis could be more challenging. Machine builders are left with many cost items such as extra journeys, unnecessarily long telephone calls or too-late reactions to imminent problems.

There is also hectic and escalation due to the need for more predictability. Machine builders can use higher prices to build up pressure and educate customers a bit. They are still too friendly across the board and are also inhibited by their own sales department. Here they can be more confident. Especially since many customers are interested in good service and demand it but are unwilling to connect the machines to the network to simplify the diagnosis. When service is required, it is no longer enough to send a trainee to the machine with the network cable to connect it to the network for diagnostics. In the future, the price for good service will be the visibility of the data.

Customers want to avoid paying for IoT services.

The main hurdle for digital business models is the expected costs. The initial expenses for a project for IoT services initially appear relatively high. The machine builder is still determining whether he can compensate with saved personnel costs or additional income. And he’s still determining if and how much his customers are willing to pay for this service. The solution is to wait to buy large packages and launch huge projects immediately. With a framework approach, the project can be designed individually, it becomes controllable. With the configuration approach of the large standard platforms, on the other hand, there is a huge block of costs at the beginning, which is rightly a deterrent and represents a financial risk.

A pragmatic approach in stages is more intelligent: Machine builders can then start with a manageable number of modules and offers for customers. They can use it to test acceptance, get feedback, and adjust their ideas. Based on this, the solution can be aligned and expanded. It is important to define clear milestones with measurable operational results. Questions such as “which function has which benefit for whom and how much can I charge for it” must be answered, and fixed budgets and timetables must be defined. The machine builder must insist on a structured approach and stringent project implementation with his IT service providers.

With the income from digitization, different ideas will follow.

Experience shows: If the first customers are convinced and income is generated from digitization, different ideas will explode, and the source of income will be expanded quickly. Mechanical engineers must stay on the ball and watch their competitiveness – the market has collapsed. However, many want to continue as before and do not face the changes.

World market leaders, hidden champions and large machine builders already only deliver their machines with connectivity. The midfield has to follow suit. Those who don’t do this will disappear from the market. Because the competition is there – today there are turning, milling and injection molding machines of comparable quality from China. Because of this, manufacturers need to find other differentiators and offerings that set them apart from the competition. Going on like this will no longer work in the long run.

IoT services: dependency on external service providers

Mechanical engineers fear dependence on external parties. In their perception, it arises when you use their products to create value or rely on external know-how that cannot be obtained quickly through knowledge transfer. People are suspicious of the performance of externals, have concerns that problems in their operations will affect their own, and fear dependency if partners raise prices or discontinue products and offers.

Now, dependency is not a compelling argument, as it always exists – from suppliers, as the current supply chain issue has shown, or from overburdened accountants. Every company is integrated into different networks and is therefore dependent in one way or another. Concerning a software solution, companies can mitigate this by providing for interchangeability of the external in their risk management. This means that they can export their data from systems and move it to other systems, but also that they understand and document exactly what the external services include. Technical documentation must be complete and understandable.

Transfer rights to the software to the users.

It is also important that the code of the programmed software becomes the property of the machine builder and that he receives the necessary rights to continue using the code himself or with the help of a third party in case of doubt. It goes without saying that when selecting business partners, we pay attention to their trustworthiness and carefully check their references. The implementation of a digital strategy is a meaningful collaboration that should take place on an equal footing and as a partnership.

Mechanical engineers must be aware that there is no realistic alternative to external partners if they want to build digital business models and the know-how is only available in some places. Its construction is time-consuming, costly, and difficult for machine builders, not originally IT companies. Even if qualified staff is found and hired, they can quit again. A good relationship with an experienced partner represents a much more resilient approach.

Stay competitive with IoT services.

Mechanical engineers who need to recognize the potential of digitization and use it for themselves will sooner or later disappear from the market sooner or later because no one can afford to ignore sales and additional business in the medium term simply. For new business models, such as those offered by IoT services, it may be necessary to convince customers and your company. But there are convincing arguments for this.