Impact of Asset-as-a-Service (AaaS) on the Total Cost of Ownership (TCO) of industrial companies

In practice, the costs of Asset-as-a-Service (AaaS) solutions are often compared with the pure financing costs in industrial companies. This usually leads to AaaS being classified as "too expensive".

However, this limited cost comparison often falls short, as it neglects significant direct and indirect costs that only become visible when the total cost of ownership (TCO) of an asset is considered as a whole over its lifetime.

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The following key aspects are relevant for the impact of AaaS on TCO:

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1. reduced initial investment

Instead of making large upfront investments to purchase assets, with AaaS companies generally only pay for the use of the assets. This reduces capital commitment and improves cash flow. Off-balance sheet solutions in the IFRS 16 environment can also be realized through intelligent contract design.

2. maintenance and servicing

AaaS providers usually take over the maintenance and servicing of the systems. These costs are included in the AaaS price, usually including a spare parts tangent. This largely eliminates the operational costs for maintenance measures (in some cases, entire maintenance units can even be saved) as well as the risk of unplanned downtime, which in turn leads to more stable planning of operating costs.

3. scalability and flexibility

With AaaS, companies can react quickly to changing production requirements by adapting the use of assets to the respective demand and economic conditions. This reduces the costs of overcapacity or capacity fluctuations and enables better and more efficient resource allocation.

4. technological topicality

AaaS providers typically update their equipment on a regular basis to ensure the latest technological standards and to guarantee a secondary use of assets that is important to them ("the checkbook-maintained asset"). This means that companies always have access to the latest technologies without having to make additional investments, resulting in long-term cost savings and efficiency gains.

5. transfer of risk

With AaaS models, the risk of a system becoming obsolete or defective usually lies with the provider. The manufacturer of the system is usually also involved in such a model. This minimizes the financial risk for the company and can therefore reduce long-term costs.

6. better predictability of costs

By converting capital expenditure (CapEx) into operating expenditure (OpEx), the cost structure becomes more predictable and easier to plan. Regular, predictable payments replace unpredictable large expenditures. The existing financing framework in companies can be used more flexibly and "breathe" better.

7. efficiency and productivity

AaaS providers specialize in maximizing the efficiency of their systems in order to achieve competitive advantages. This can lead to higher productivity (OEE) and therefore lower production costs per unit produced.

8. reduction of idle capacity costs in management and administration

AaaS providers generally offer so-called "full service" variants. From a serious TCO perspective, the attractiveness of such a model also lies in reducing significant administrative costs in the medium and long term, which are associated with in-house procurement (purchasing, logistics) and in-house use (accounting, administration, controlling).

About cap-on

cap-on, a FinTech company founded in 2021, focuses on industrial asset-as-a-service solutions and innovative IoT solutions. Our end-to-end solution combines IoT, cloud and AI to provide seamless data collection and in-depth analytics. With our plug-and-play IoT gateways, experience shows that digitizing a pilot asset takes less than two hours, while onboarding new machines takes just a few minutes. At cap-on, we turn your data into success and help you optimize your processes and increase efficiency.

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Author: Rainer Dieck (CFO cap-on)

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