Unlocking theSecrets of Physical
Product-As-A-Service
AUTHORS:MICHAEL MANSARD,
EMEA CHAIR OF THE SUBSCRIBED INSTITUTE AND PRINCIPLE
DIRECTOR OF SUBSCRIPTION STRATEGY, ZUORAYANN TOUTANT, CEO AND FOUNDER, BLACK WINCH

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Unlocking theSecrets of Physical
Product-As-A-Service:
THE 8 UNTAPPED FOCUS AREAS FINALLY REVEALED AND
DEMYSTIFIED BY SEASONED EXPERTS. EMBARK ON A JOURNEY
INTO THEIR “REAL-LIFE” METHODOLOGY.

Michael Mansard, EMEA Chair of the Subscribed Institute andPrinciple Director of Subscription Strategy, Zuora
Michael is a seasoned Subscription Economy business strategist. Since he joined Zuora
in 2015, he has been accompanying more than 350 companies globally and acrossindustries in their business model transformation.
Those companies range from fast-growing start-ups to large enterprises (Philips,
Siemens, Assa Abloy, Schneider Electric, St Gobain, Ubisoft, Doctolib, Renault-Nissan,and more).
Leveraging his 15-year experience at Deloitte Consulting, SAP, or as a start-up mentor, he
has developed an original multidisciplinary profile in Sales & Marketing, Finance, and IT.
He currently serves as Principal Director, Business Transformation & Subscription
Strategy within Zuora’s Chief Revenue Officer’s group, and is also the Subscribed
Institute’s EMEA Chair.
He recently authored several thought leadership pieces - such as Industry 4.0: an
executive playbook for business model transformation, Subscription Economy Maturity
Model, or A new formula for growth: The Financial Services Industry and the Subscription
Economy.
Alongside Professor Wolfgang Ulaga, he is the co-creator of the Subscription Economy
Bootcamp program at INSEAD.
As an investor and advisor, Michael is working very closely with 6 hyper-growth startups, in the fields of FinTech, FoodTech, MarTech, MedTech or PropTech—which are all
subscription-based businesses.

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Yann Toutant, CEO and founder, Black Winch
Yann Toutant has been implementing subscription-based models for hardware in the IT
industry for 25 years, 12 years of which as CEO of Econocom’s Dutch operations. Todaywith his own company, Black Winch, he helps CEOs and their teams to focus on the user
experience by incorporating all components of an As-A-Service offer into a single inhouse comprehensive, scalable subscription model.
Yann’s first Book, ‘As-A-Service’—How to turn your product based business into
a subscription model was published in early 2022 with the aim of spreading his
commitment to connect As-A-Service and circularity.
Yann is a passionate advocate for the circular economy and believes manufacturers
have the power to make steps towards preserving our earth’s precious resources. One
way to do this is to shift their business from being product-based to an “As-A-Service”
subscription model. As-A-Service allows manufacturers to remain owners of theirproducts, transferring “usership” instead of ownership to their customers. This means
being responsible for creating a good customer experience and service, as well as
reusing and recycling materials—something customers are increasingly requesting.
But how do you turn a product-based business into As-A-Service? How to navigate fromusing this buzzword to actually implementing a successful and scalable in-house ASA-Service business model? There is a large selection of books available about software
As-A-Service, but none of them addressed product-based businesses. This, along with
Yann’s years of experience both personally and within his career lead him to the decision
to write his first book.

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Table of Contents
YOUR PRACTICAL PRODUCT-AS-A-SERVICE GUIDE - TAILOREDFOR EXECUTIVES FROM THE “PHYSICAL PRODUCT WORLD’’

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THE INCREDIBLE POWER OF THE PRODUCT-AS-A-SERVICE INDUSTRY

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A JOURNEY THROUGH TIME: PRODUCT-AS-A-SERVICE IS THE
NATURAL EVOLUTION OF THE RENTAL INDUSTRY12IDENTIFYING AND CONVINCING C-SUITE EXECUTIVES FOR YOUR
AS-A-SERVICE PROGRAM

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THE JOURNEY TO AS-A-SERVICE: MAPPING OUT YOUR ROADMAPFOR SUCCESS

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1. STRATEGY
2. MARKETING
3. SALES
4. OPERATIONS
5. CIRCULARITY
6. FOCUS - THE ‘3-10-50’ FUNDING MODEL
7. FOCUS - PAYMENT
8. FOCUS - FINANCE & ACCOUNTING

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THE POWER OF SMALL CHANGES27

GET STARTED TODAY28

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One-of-its-Kind
Product-As-A-Service Guide
TAILORED FOR EXECUTIVES FROM THE“PHYSICAL PRODUCT WORLD’’
In the present economic climate characterized
by declining growth rates, inflation andpostponed investments from customers
and consumers, agile business models havebecome imperative for capturing untappeddemand. The phrase “As-A-Service” hasemerged as a popular buzzword, garnering
widespread interest and fascination amongindustry experts and business leaders alike.
This concept has captivated the attention andimagination of professionals across diverse
sectors.
As-A-Service entails delivering assets(Product, Software, Platform, Infrastructure,
Storage, etc.) through a subscription model,
with customer-centricity at its heart. The
As-A-Service model has taken the softwareand cloud industry by storm, becoming thedominant paradigm in those sectors. However,when it comes to physical products, true
As-A-Service offerings are still in their earlystages and face unique challenges. One key
challenge is the fact that unlike digital goods,
physical products involve tangible assets that
incur incremental costs with each additional
unit provided to a subscriber, thereby exertinga significant impact on a provider’s balance
sheet and cashflow. As a result, the creationof As-A-Service offerings for physicalproducts requires a thorough assessment offunding strategies, residual values, and theidentification of secondary markets.

models. Obviously, many learnings fromthe digital do apply. But the vast majorityof literature falls short when it comes to
explaining what to do from a funding, finance,
and accounting standpoint. As a result, we see
too many As-A-Service projects in the physicalproduct world being stalled or delayed, if notsimply canceled. That’s why we’ve made it our
mission to focus on these crucial aspects.
Despite the complexity and effort, the rewards
can be massive. Let’s take a concrete example:
Philips Enterprise Monitoring as a Service(EMaaS). EMaaS is a pay-per-use model thatstandardizes patient monitoring capabilities in
hospitals with a holistic view of performancedata to drive improvement. Philips owns thesystem and customers pay for what is used
(tied to patient volume). This transforms Philips
from a product seller to a service provider,increasing service-level expectations, adding
continuous engagement touchpoints, andrequiring quality adherence. For the endusers, such flexible pay-per-use models
mean predictable expenses, use of OPEX(Operating Expense) budget (as opposed to
CAPEX Capital Expenditure Budget), no financecharges, payment model tied to real usage,and end-to-end services included to support
full adoption (See Figure 1 on page 6).

Despite the fact that the As-A-Service
literature is quite vast, executives fromthe “physical product world” are often left
behind due to the lack of concrete guides
on deploying Product-As-A-Service (PaaS)

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SpendEMAAS IS TIED TO YOUR PATIENT VOLUME

Lease model
Pay per use

PATIENT VOLUME

Capital purchase

Time/years

Figure 1:
Source: Philips

Predictable and stable YoY spend
Part of OpEx budget
No finance charges
Tied to patient volume
Includes services to support full adoption

The example of Jackson Memorial Hospital’s
partnership with Philips under EMaaS
illustrates the value of this model. Jackson
had concerns about their aging monitoring
technology and desired access to state-ofthe-art equipment and services. The Philips
EMaaS solution addressed their challenges
by providing access to critical monitoring
capabilities, eliminating upfront costs, andoffering ongoing optimization, education, andasset management services. The impacts
included significant time savings (8 hours a day
saved for the central monitoring unit telemetry
technicians through automated measurement
and export), increased nurse satisfaction(90% satisfaction rate), and an integrated
approach involving Philips experts to addressorganizational needs beyond technology andfinancing, including baseline assessment with
monitoring methodologies and systems bestpractices to improve patient management andcare capabilities.

Pay-per-use
service

Capital purchase

Lease model

+
+
+
+
+

+
-

+
+
-

What shortcuts can we learn from this successstory? What are the best practices? Whatpitfalls should be avoided? We will see in thiswhitepaper that the Philips story is not a mere
exception, but the beginning of a businessmodel tidal wave! This whitepaper will offer
you the essential advice for effectively building
your own PaaS solution. And, unlike any other,
we’ll delve into the ‘3-10-50 funding strategy’
employed by industry leaders. Get ready tounlock the secrets of PaaS and revolutionize
your business.

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PHILIPS*!

HEALTH SYSTEM

1. CONDUCTBASELINE
ASSESSMENT
INCLUDINGMEASUREMENT

Baseline assessment

2. DEMONSTRATEIMMEDIATE
VALUE

3. EXECUTE FIRSTPERFORMANCEIMPROVEMENTPROJECT

4. EXECUTE SECONDPERFORMANCEIMPROVEMENT PROJECT

5. EXPAND TO OTHER AREAS

Automate andsimplify workflow

Expand tele-accessand efficiency

Reduce nonactionable alarms

Identify patient
deterioration
quickerStandardization

Increase IT
security anddevice safety

Ongoing Optimization

Ongoing tracking, management, reporting and measurable improvements

Figure 2*Source: Philips

The Incredible Power of the
Product-As-A-Service Industry
Curious to know who the big players are in theworld of Product-As-A-Service? Wondering
which industries they dominate? Feast youreyes on the visual below, which will shedlight on this entire model. Many sectors,
including IT, machinery, healthcare, energy,
and transport, are adopting the Product-As-AService trend.
When it comes to IT, Apple, ACER, Lenovo
and Panasonic are leading the charge with
their innovative As-A-Service programmes.
But there are other exciting solutions out

there too! Ever heard of Drilling-As-A-Service
from Atlas Copco? How about Light-As-AService with Signify? And let’s not forget about
Michelin, who’s revolutionizing the game with
their Tyres-As-A-Service concept.
Get ready to dive into the world of ProductAs-A-Service. It’s a thrilling ride filled withgroundbreaking ideas and industry leaders
who are reshaping the way we consume andexperience products.

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Product-As-A-Service
Top Players
IT

FURNITURE

MACHINERYHEALTHCAREENERGY

TRANSPORTBUILDING

AGRICULTURE

ROBOTS

FITNESS

Source: Black Winch - All rights reserved.

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When implemented effectively, ProductAs-A-Service models provide comparable
advantages in terms of flexibility and scalability
as Software-As-A-Service solutions. By
embracing these models, enterprises caneffortlessly adjust their usage in accordancewith demand, allowing them to promptly adapt
to evolving market dynamics. Alternatively, they
have the option to easily opt in or opt out froma solution as required.
Similarly, Product-As-A-Service undoubtedly
represents a significant step towards theimplementation of circular economy principles.
In fact, it can even be viewed as a strategic
approach that acts as a catalyst for achieving
circularity. Product-as-a-service models
inherently possess a high degree of flexibility,
allowing customers to choose to opt in orout, or pay based on usage. Consequently, it
becomes imperative to ensure that the same
product can be offered to other users when it

is no longer required by the previous customer.
This is an inherent consequence of theflexibility offered by these models and plays acrucial role in effectively managing associatedrisks. Therefore, Product-As-A-Service models
can be considered as circular in nature.
Furthermore, these Product-As-A-Service
models concentrate the risk of ownershipsolely on the manufacturers, rather thandispersing it among multiple users. As a result,manufacturers bear the responsibility of caring
for their products, extending their lifecycle, andimplementing appropriate circular models. Thisapproach serves as a gateway to achieving
circularity, as it encourages manufacturers to
adopt sustainable practices and embrace theprinciples of the circular economy.

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MARKET OVERLAP$1.5 Bn$1,000 Bn

49.9%
CAGR

18% CAGR

Subscription economy

Product-As-A-Service Market$1,600 Bn
10% CAGR

Leasing industry

Source: Black Winch - All rights reserved.

According to UBS, the Subscription Economy
market, which encompasses both Product-AsA-Service (PaaS) and Software-as-a-Service(SaaS), is poised for significant growth, withprojections indicating an increase from USD
650 billion in 2020 to USD 1,500 billion in 2025.
Currently, PaaS represents a small portion of
the overall Subscription Economy market, with
SaaS comprising the extreme majority. This
presents a significant growth opportunity for
manufacturers.

Let’s look at the bigger picture: the traditional
leasing market is valued at USD 1,674 billion in
2023 and is projected to grow to USD 2,424
billion in 2027 at a CAGR of 9.7%, according
to Research and Markets. The natural overlap
between the two markets could result in PaaS
becoming a substantial segment within the
Subscription Economy.

If we focus solely on the global Equipmentas-a-Service (EaaS) market, also referred toas Product-as-a-Service (PaaS), it is currently
valued at USD 1.5 billion in 2023 and is
expected to expand at a compound annual
growth rate (CAGR) of 49.9% from 2023 to2030, reaching USD 27.8 billion, as reported byGrand View Research.

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Furthermore, the Subscription Economy
Index (SEI) reveals that subscription-based
companies within the SEI have demonstrated
a growth rate 3.7 times faster than companies
listed in the S&P 500 over the past 11 years,
according to Zuora’s Subscribed Institute.
What’s more: subscription businesses havedemonstrated impressive resilience in times ofcrises, with 4 out of 5 businesses continuing togrow in 2020 during the COVID-19 pandemic
as a striking proof point. This data suggests
a promising opportunity for growth within the
PaaS market.

it brings make it well worth the effort. We see
many companies freezing or fleeing in front of
this intimidating task. While there are certain
pitfalls to avoid, the advantages of adopting an
As-A-Service approach far outweigh any
initial challenges.
So, what are the concrete steps to make
Product-As-A-Service happen within yourorganization? What plan to follow? Whatchallenges can occur along the way and how
can they be overcome?

Switching to Product-As-A-Service models
can be a complex endeavor, but the benefits

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A Journey Through TimePRODUCT-AS-A-SERVICE IS THE NATURAL EVOLUTION OF
THE RENTAL INDUSTRY•

In the 80’s, the first rental solutions were
provided by financial institutions (Equipment
Finance organizations).

•

In the early 90’s, independent players (e.g.
Econocom, CHG, Leaseplan for cars, Xerox
for copy machines etc.) entered the market
with their capacity to invest in residual
values (e.g. estimated value of a fixed asset
at the end of its lease term or useful life).

•

Then, captive entities - which areessentially a wholly-owned financing
subsidiary of an organization that provides
financial services to its customers, suchas. Cisco Finance, Dell Finance or Apple
Financial services, entered or reentered themarket. Why?
1. They wanted to address theircustomers’ needs for financing in a
simpler way and act as a
one-stop-shop.
2. They wanted to retain some levelof relationship with their customer,
instead of handing it over to anindependent financing
3. They wanted to create a strong margin
lever, i.e. up to 15% margin expected by
the captive instead as compared to 5%
on average in traditional product sales.

•

In the year 2000, in order to answer market
demand for complete rental and faster time
to value solutions, managed services wereadded to the existing rental models creating
a full service offering (e.g. IBM IT Managed
Services including Helpdesk support,
authentication, system management, data
backup, cloud transformation etc.).

Let’s pause for a moment and reflect: wasall the hard work put into this evolution truly
worth it? By shifting away from the rental
options provided by financial institutions
and bundling their top-notch products withexceptional services, manufacturers have not
only offered more value to their customers but
also witnessed a staggering 15-25% increase inrevenue and 5%-8% boost in their profit margins
on average and depending on the industry.
•

Nowadays, the next natural evolution taking
place consists in adding full flexibility to theexisting rental solutions via Pay-Per-Use
and/or Opt-In/Opt-Out offerings, instead offlat inflexible contracts where customers
are locked-in and where value captureand delivery are disconnected. (Ex. Signify(formerly Philips lighting) offers a pay-peruse offering (called “Pay-Per-Lux”) providing
the exact amount of light for workspaces
based on the customer’s specific needs.
The offering includes a full lighting service design, equipment, installation, maintenanceand upgrades, and clients only pay for thelight they consume.

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PRODUCT-AS-A-SERVICE:
NATURAL EVOLUTION OF THE RENTAL INDUSTRY

5. PRODUCT AS A SERVICE
Customer-centric and data-driven sales model that prioritizes
full flexibility through pay-per-use and opt-in.opt-out solutions
Ex. Share Now Car-as-a-Service, Michelin Tires-as-a-service,
Philips Monitoring-as-a-service, BASF price per gallon, Steelcase
Furniture-as-a-service

4. MANAGED SERVICES
Rental models with full service offerings.
Ex. IBM IT Managed Services, ATOS managed services etc.

3. CAPTIVE ENTITIES
Wholly-owned financing subsidiary of OEMs.
Ex. HP Finance, Dell Finance etc.

2. LEASING
Leasing by independent players.
Ex. CHG, Econocom etc.

1. EQUIPMENT FINANCE
Equipment finance byfinancial institutions.
Ex. BNP, DLL,
Societe Generale etc.

Margin capture uplift %Source: Black Winch - All rights reserved.

As organizations strive to innovate andoutperform their peers, embracing the As-AService model becomes a bold but necessary
move. This transformative approach requires
a complete shift in mindset, as it places anenormous emphasis on being client-centricthroughout the entire journey.

If you are reading this whitepaper, it means
you possess the right mindset and have a clear
vision in mind. However, embarking on such atransformative journey cannot be done alone.
It requires convincing key stakeholders withinyour organization and presenting them with adetailed action plan.

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Identifying and Convincing
C-Suite Executives for Your
As-A-Service Programme
Implementing a transformative As-A-Service
model is a challenging task. Of course, you
can’t convince everyone. But you need to andmost likely shouldn’t - at least to get started in
the journey, or else you might get stuck
trying to!
Often, CCO/CMO/CTOs are the mostenthusiastic about such models, especiallywhen looking for new growth platforms inatonic markets or for their latest innovation.
Alongside these leaders, the key allies
you need when building an As-A-Service
programme are typically the Regional / Country
leaders, the Chief Financial Officer (CFO),
the Chief Operations Officer (COO) and yourinvestors. At first, CFOs and COOs may be
the biggest opponents to such models. Yet,they can turn into the strongest promotersonce convinced. For good reason: they are the“guardians of the temple” when it comes tomargin discipline and compliance.
•

Convincing the Regional / Country Leadersof the benefits of the As-A-Service model iscrucial. They can help align resources andpriorities accordingly and their support canhelp rally other employees behind your AsA-Service programme.

•

Demonstrating to your CFO how the AsA-Service model can lead to recurring
revenue, increased margin, or improved
shareholder value, is table stakes to getthings in motion. However, you will alsoneed to anticipate discussions and be
prepared to collaborate around cash
flow and balance sheet impact, financing
strategies, accounting principles or risk
and fraud management to fully win theirendorsement (cf. points 6,7 and 8 of
the whitepaper).

•When launching your As-A-Service
programme internally, it is crucial togain the support and confidence of yourinvestors. This holds true for both private
and public equity scenarios, and becomeseven more challenging when covenants
are involved. However, it is important torecognize that adopting the Product-AsA-Service model is a strategic approachto drive business growth and expansion.
This understanding should aid in effectively
persuading investors and demonstrating apromising return on investment.

When it comes to translating your vision into
reality, having a clear roadmap is essential.
This roadmap should encompass various
focus areas that need to be reviewed in orderto successfully make Product-As-A-Service
part of your DNA. The top 8 focus areas
are: strategy, marketing, sales, operations,circularity, funding, payment and finance& accounting.

14THE 8 PRODUCT-AS-A-SERVICE FOCUS AREAS
STRATEGYSALES

CIRCULARITY

PAYMENT

Vision, culture shocks,
offering design, KPIs

Pitch, onboarding, training,
reward scheme, recruitment

Eco design, supplies,
extension, recovery, KPIs

Monetization, community,
suppliers, co-branding

MARKETING

OPERATIONSFUNDING

Persona, value proposition,
content, materials

Contracts, processes,
workflows, data

The ‘3-10-50’ model,
selection, negotiation,agreements

FINANCE &ACCOUNTING
Financial engineering,
EBITDA impact

Source: Black Winch - All rights reserved.

This whitepaper will delve into each focus area,with a deliberate emphasis placed on the ‘3-1050 funding strategy’, as well as accounting andpayment facets. This emphasis is justified dueto the evident lack of comprehensive literatureon these subjects.

If you’re already at ease with typical As-AService transformation, we recommend you toproceed directly to points 6, 7 and 8. There,
you will find very specific andpragmatic recommendations.

EXCLUSIVE FOCUS ON FUNDING, PAYMENT &FINANCE ACCOUNTINGSTRATEGYSALES

CIRCULARITY

PAYMENT

Vision, culture shocks,
offering design, KPIs

Pitch, onboarding, training,
reward scheme, recruitment

Eco design, supplies,
extension, recovery, KPIs

Monetization, community,
suppliers, co-branding

MARKETING

OPERATIONSFUNDING

Persona, value proposition,
content, materials

Contracts, processes,
workflows, data

The ‘3-10-50’ model,
selection, negotiation,agreements

FINANCE &ACCOUNTING
Financial engineering,
EBITDA impact

Source: Black Winch - All rights reserved.

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The Journey to
Product-As-A-Service
MAPPING OUT YOUR ROADMAP FOR SUCCESS
1. STRATEGY
In order to successfully incorporate As-AService into the overarching vision of yourorganization and to guarantee its contribution toshareholder value, it is imperative to undertakea thorough evaluation and adjustment of yourbusiness strategy. This involves evaluating yourcurrent offerings and identifying areas wherean As-A-Service model can be implemented.
Consider the scalability of your products,
customer demand for subscription-basedmodels, and potential revenue streams that canbe generated through this approach.
Defining your ambitions is essential when
integrating As-A-Service into your company
vision. Clearly articulate what you aim to achievethrough this new business model – whether it’ssecuring recurring revenue streams, boostingmargin, improving customer stickiness etc.
Following the evaluation of your Product-AsA-Service solution and analysis of historical
data, you should be able to determine your
As-A-Service penetration rate objective, which
outlines the proportion of your annual revenue
generated through the As-A-Service model,such as 10%, 20%, 50% etc.)?
It is also imperative to engage in strategic
discussions with your Chief Financial Officer(CFO) in order to meticulously plan various
scenarios that evaluate the consequencesof transforming key performance indicators(KPIs) such as Cash Flow, Revenue Recognition
and Net Financial Debt. This comprehensive
assessment will play a pivotal role in determining
the direction and speed at which the As-AService transformation should proceed.

‘’OUR OBJECTIVE WAS TO SWITCH FROM
A 10% AS-A-SERVICE PENETRATION RATE
TO 40% IN 2 YEARS. IT’S ONLY AFTERCAREFULLY ADAPTING OUR ENTIRE
BUSINESS STRATEGY AND DEFININGRELEVANT KPIS THAT WE MANAGED
TO CONFIDENTLY WORK TOWARDSTHIS GOAL.’’
Managing Director - European Solar
Panel Manufacturer.

2. MARKETING
Marketing faces numerous considerations when
launching a new As-A-Service value proposition.
One of the primary responsibilities entails acomplete reevaluation of segmentation and theidentification of a fresh persona with an entirely
new promise. Subsequently, the following
considerations must be taken into account:•

How will the new value proposition beeffectively communicated to the intended
target audience? When you make the switch
to a PaaS model, it’s not just a simple change
in how you offer your product. It’s a whole
new way of designing, pricing and packaging
your offering. The new PaaS solution can’t
simply be seen as a principal and an interest
rate. You are not just offering a product, but
a whole new way of doing things. So, when it
comes to marketing your new offering, yourmessaging should ca pture the essence of
this paradigm shift and showcasing the value
you bring.

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•Will the creation of a new business nameaccompanied by a new logo be necessary,or will it be integrated into theexisting branding?

•

Is a separate website / dedicated sales
channel required?

•

What marketing materials will be compellingfor your new persona? How will they bedesigned and disseminated?

•

Which lead generation strategies will be
adopted? Etc.

Product-As-A-Service offers a whole newlevel of experience for your customers, andconsequently, for your own company as well.
It’s time to step out of the box and market
this game-changing concept in a way that
captivates and entices your target audience.

‘’OUR MARKETING DEPARTMENT WAS
INSTRUMENTAL IN TAKING OUR CIRCULARVALUE PROPOSITION TO THE MARKET.
THEY WENT WAY BEYOND SIMPLY ADDINGRENTAL PRICES TO OUR EXISTING SALES
MATERIALS. THEY DEFINED A NEW SETOF PERSONA INCLUDING THE CFO, CTO
AND CSO AND CARRIED OUT THOROUGHRESEARCH TO UNDERSTAND THEIRDRIVERS AND PAIN POINTS. THEN, THEY
REDESIGNED AN ENTIRE NEW NARRATIVEWITH SUPPORTING MESSAGING FOR EACHOF OUR TARGET GROUP.’’
Chief Transformation Director - Leading
specialist in workplace and office fit-out

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3 - SALES
The As-A-Service sales journey is very different
from a traditional one-off transactional one.
Converting a customer who is used to buying
to a renting model requires specific skills anda different pitch. The focus should be on thecustomer experience instead of price andspecifications. Similarly, refreshing contractsof existing As-A-Service customers requires
another skill-set. The expertise, the pitch andthe team members required are different
for each.
It is essential to select As-A-Service sales
champions within your organization and offer
them personalized As-A-Service training
programmes to help them navigate the As-AService sales methodology with confidence.
Setting up appropriate reward schemes will
incentivize your sales team to prioritize As-AService offerings over traditional transactionalsales. Therefore, we strongly advise you toassess your commission plans and incorporate
both positive and negative incentives. Despite
being frequently disregarded, this is, in fact, oneof the most crucial impediments to achieving
optimal As-A-Service performance.

When it comes to selling As-A-Service offerings,
salespeople must always keep their eye on theend goal. One crucial tip for achieving successin this field is to collect maximum data points
throughout the customer’s journey. By doing so,salespeople can be proactive when it comestime for renewal.
Using the monthly price paid by customers as
a starting point for building renewal offers is
crucial. This approach ensures that the renewal
offer is aligned with the customer’s budget andexpectations and secures you a profitable sale.

‘’GIVING SALESPEOPLE A GOAL TO STRIVETOWARDS IS NOT SUFFICIENT (I.E. 30%
OF YOUR ANNUAL SALES SHOULD BE
DONE VIA AS-A-SERVICE) ; THEY ALSO
NEED HIGH-QUALITY RAINING AND THE
RIGHT BONUS SCHEME TO ACHIEVE
THAT GOAL.FOR EXAMPLE, BY ADDING
AN ACCELERATED BONUS PLAN FOR OUR
SALES, WE INCREASED OUR AS-A-SERVICE
TRANSACTION NUMBERS BY 50% AND OUR
DEAL SIZE BY 30%.‘’
XaaS Director - Global IT manufacturer.

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4. OPERATIONSThe As-A-Service Operations department
takes care of a wide range of tasks, including
handling customer requests, coordinating legal
documents, managing assets, handling funding,billing and collections, as well as dealing withasset disposals. These back-office operations
play a crucial role in delivering a seamless andefficient As-A-Service experience to customers.
Some of these tasks are specific to As-AService programmes and not done in traditionaltransactional models. Defining these newprocesses and workflows will set the grounds
for an organized Back Office structure, key tocreating a scalable As-A-Service solution.
The focus is of course on the customer
experience, but don’t forget the impact of the
As-A-Service model on the experience of yoursales force. Selling services means additional
requirements from the Operations department,
so it’s crucial that processes are adapted anddesigned to improve the experience of thesales force.

’OUR AS-A-SERVICE OPERATIONS TEAM
HAS BECOME FULLY INTEGRATED IN
OUR SUSTAINABILITY & CIRCULARITY
DEPARTMENT. WHEN ASSETS REACH
THEIR END-OF-LIFE OR ARE NO LONGER
NEEDED, OUR OPERATIONS DEPARTMENTENSURES THEIR PROPER DISPOSAL OR
RECYCLING. THIS INCLUDES ADHERINGTO ENVIRONMENTAL REGULATIONS ANDMINIMIZING WASTE.’’

5. CIRCULAR ECONOMY ANDSUSTAINABLE DEVELOPMENT
The concept of the circular economy is all about
doing more, creating more value while using lessresources. When moving to As-A-Service, youremain the owner of the assets and can offer
access to them in combination with customized
value adding services. As the perpetual owner
you can make money from the products aslong as they can fulfill your customers’ needs,
then the parts can be used as spare partsand ultimately the materials can be sold forrecycling. By controlling the entire lifecycle ofthe equipment, you can secure that they are
managed responsibly, and this is of increasing
importance to many customers relating totheir efforts to support a more sustainable
development and their ESG reporting. All thisgoes way beyond the only ‘end-of-life’ services
since a As-A-Service model allows for a systemwide sustainability approach. This includes theopportunities to•

Rethink all stages of the product life cycle ina resource efficient more sustainable way.

•

Use of more sustainable supplies: using
renewable energy, bio-based or potentiallycompletely recyclable materials.

•

Product life extension: extending thelife cycle through repair, maintenance,
upgrading, re-manufacturing and if
necessary resale.

•

Recovery and recycling: recovering usable
resources or energy from waste or byproducts.

Head of Europe - Japanese multinational
electronics company.

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By illustrating the circular essence of your
Product-As-A-Service solution and establishingwell-defined key performance indicators (KPIs)
in alignment with it, you possess the potential
to solicit green bonds. Undoubtedly, green
bonds hold significant allure for investors as
they provide a means to attain transparency
regarding their investment portfolio, enablingthem to discern the environmental, social,and governance (ESG) impact of their funds.
Furthermore, green bonds present an effective
avenue for diminishing the carbon footprint
associated with a portfolio.

‘’WHEN CREATING OUR OWN AS-ASERVICE SOLUTION, WE PLANNEDFOR THE END-OF-LIFE SCENARIOS BY
BUILDING IN PROGRAMMES FOR DATAWIPING, REFURBISHING, AND RECYCLING..
BY DOING SO, WE ENSURED THAT THE
VALUABLE MATERIALS AND COMPONENTS
USED IN OUR PRODUCTS ARE NOT LOST,
BUT RATHER, ARE KEPT IN CIRCULATIONAND GENERATING CUSTOMER BENEFITSFOR AS LONG AS POSSIBLE.’’

By considering all these factors from the start,businesses can design service offerings that are
more sustainable and easier to manage
over time.

CEO - European Commercial Refrigeration
Division - Multinational heating, ventilation, andair conditioning corporation

20

6. FOCUS - THE ‘3-10-50’
FUNDING MODEL

initiating discussions with potential externalfunding partners, and may be offered for sale tosuch partners initially.

Funding is a critical enabler of Product-As-AService, allowing for a scalable business model.

3M€ - 10M€ = SINGLE FUNDER STRATEGY

As your As-a-Service business takes off, it’s
important to keep up with the changing times
and adapt your funding strategy accordingly.
That’s where our ‘3-10-50 funding’ model comesin - it’s the ultimate guide to navigating thefunding journey for As-a-Service. This model isdesigned to help you find the perfect solution as
you move up the ladder and generate more AsA-Service revenue each year. So whether you’rejust starting out or you’re a seasoned pro, our‘3-10-50’ model will help you stay ahead of thegame and keep your business thriving.

Now that your model has reached some levelof materiality and you start being comfortablewith the associated unit economics, the next
logical step is to scale your funding model.
By selecting an asset financing pathway andsecuring an external funding resource, you caneffectively unburden your balance sheet andenhance your working capital. This is a crucial
step towards expanding your business model
without compromising your company’s metrics
and financial ratios. This step involves selecting
the right funding partner and establishingpartnership with them.

Depending on the As-A-Service yearly businessvolume generated (here we take into accountthe yearly net production funded (i.e. the Annual
Recurring Revenue of your contracts: valueof recurring revenues from the subscription
contracts signed for a calendar year), there are
4 main funding milestones:

Asset financing, a long-standing practice
employed by Equipment & Vendor Financing
entities (referred to as Funders), particularlyin the realm of IT assets, can be replicated forvarious equipment types and tailored to suitthe unique requirements of the As-A-Service
business model.

0 - 3M€ = START WITH YOUR OWN FUNDS

The most commonly seen funding schemes
proposed by the equipment funding industry are
the Sales & Lease back, the Operating lease, theassignment of Receivables, the sub contracting.
.

This means that your organization uses its
own funds to finance the assets used byyour customers. This is a first step to test
the market, allocating a maximum envelopeand starting building a portfolio and co-build
the product with your core customers. The
objective is to establish a suitable envelope that
accommodates both your acceptance of cash
investments and the risk of customer insolvency.
This is doable at first, however as your AsA-Service business grows it will limit you as
you can’t have your balance-sheet full of yourcustomers assets on a mid to long term basis.
If you want to address a wider end-customer
base, diversify your funding sources and reduce
the risks of exposure, you will need to findexternal sources of funding. This “ownbooked”
portfolio may serve as a solid foundation for

The primary focus of funding lies in evaluating
the precise requirements of a vendor/customer,
while concurrently comprehending the various
forms of funding that are accessible. It isimperative to direct efforts towards identifying
the most appropriate funder and establishing adurable relationship that is founded not only on
the legal obligations of both parties but also on
trust. A shared comprehension of expectations
at every phase of the funding procedure is ofutmost importance for the effective execution ofa scaled As-A-Service proposition.

21

A funder mapping analysis should be conducted
to select the most relevant funder. Some points
to consider for your selection include approval
process performance, geography, contract typeavailable, pricing, legal support etc.
When you have identified the most appropriate
funder, a funding communication pack should
be carefully prepared. The objective of such apack is to provide reassurance to the funder andto demonstrate that the potential performancerisk of working with you is minimal and that large
As-A-Service business volumes are likely tohappen.
Then, you will need to sign a Vendor Programme/ Cooperation Agreement with your selected
funder. A thorough analysis and review of theirclauses by experts is recommended at thisstage as these agreements will govern therelationship in the long term.

10M€ - 50M€ = MULTI-FUNDER STRATEGY
When the total value of current deals becomessignificant, it becomes necessary to diversify
funding sources to avoid relying on a single
entity. This diversification provides more
flexibility in allocating deals and reduces
interdependent relationships.
A multi-funder approach allows a company
to implement an asset financing programthat offers a wider range of coverage acrossdifferent types of funding and financial
institutions. This approach prevents companies

from being solely dependent on the risk
tolerance of a single financial institution or theirlarge corporate customers.
However, it is not advisable to onboard
numerous partners with insufficient businessvolume. If the available resources are limited,
it becomes impossible to satisfy all partners ornone of them when distributing the resources.

50M€+ = OWN CAPTIVE
Creating a captive is the ultimate step in your
As-A-Service funding strategy. It consists increating your own financing entity and acting as
a complete one-stop shop for your customers.
When opting for such a strategy, here are somepoints to define:•

The type of Captive Finance scheme
according to your strategy.

•

The strategy of the Captive in terms of
Circularity compliance.

•

The geographical coverage.

•

The margin sharing between theorganization and the Captive.

•

The Business Plan for the Captive Investors
with profitability scenarios.

•

The strategy on portfolio refinancing, with
the investors’ funds at first and adding
external portfolio funding.

227. FOCUS - PAYMENT
Compared to traditional business, with their
one-off transactions, As-A-Service recurring
subscriptions generate both : more volume per
customer given the higher frequency of invoicing
and more complex invoices per customer given
associated rules such as consumption/usage
rating or proration when a subscription changes.
This makes the whole process a lot trickier
for two reasons: first, invoicing and payments
are a source of overhead costs if not properly
automated, and second, if you don’t do it right,
customers will be dissatisfied.
Because of lower price points, digital consumer
subscription businesses had to tackle recurring
invoicing and payment automation a long timeago (or at least the successful ones did!).
Without doing so, there is no way to scale abusiness, as most, if not all, margins would be
eaten by back-office processes. As a result,highest-converting consumer subscription
offerings have seamless digital invoicing andpayment processes that let their customers
select their favorite recurring payment methods
against which to collect automatically.
By comparison, it is not uncommon in theB2B space for the cost of invoicing to clockin at around $10 per invoice (and as a matterof fact, very often a multiple of that!). Suchnumbers can be tolerable for “classic” one-off
invoices of amounts large enough to make $10/
invoice a negligible cost, but as the volume of
invoices and payments per customer grows in arecurring subscription business, this cost would
be a real problem. Beyond undesired overhead
costs, non-automated processes are also often
linked to later payment, weaker collection, and,
consequently, higher write-offs and as a matterof fact even lower customer conversion rate!
Even though there is a popular belief that
digital invoicing and digital payments methods
aren’t really mainstream in B2B, the Subscribed
Institute’s data show the exact opposite. In fact,

almost 90% of high-growth B2B companies areleveraging digital invoicing and very close to
50% are doing recurring digital payments, versus
respectively less than 80% and less than 22%
for low-growth companies. Here are a selectionof key reasons proving the point:•

Glitches in invoicing and payment processes
often represent 20% to 40% of all involuntarychurn, which can silently, but surely, kill asubscription business.

•

Invoicing and payment errors directlytranslate into revenue leakage, that canaverage around 3% of total revenue.

•

Inspired by consumer-like practices, highgrowth subscription B2B companies tend
to leverage practices that make renewal a
non-event as much as possible. For example,
56% of customer contracts are on automatic
renewal, which certainly impacts churnpositively with a significant 13-point positive
difference versus lower-growth subscription
businesses.

More important: beyond operations, catering tocustomer payment preference is crucial, making
payments an integral part of the subscriber
experience. This means your As-a-Service shiftneeds to treat this dimension as an important
FACTOR, and not simply as a back-office“necessary evil task”. Again, research from
Zuora’s Subscribed Institute shows that choiceof payment methods and currencies have direct
correlations with business growth:•Businesses that accept more payment
methods grow their revenue 4 points fasterthrough both better acquisition and retention•

Businesses that accept more payment
methods have 4 to 5 point more effective
invoice payment rate (i.e. defined as thepercentage of total invoices being paid 90
days after due date)23

•Business that accept more currencies growtheir revenue 8 points faster•

There are significant differences in terms
of preferred recurring payment methods
preferences depending on geographies,
industries, services offered, invoice amountbands, etc. For instance, card payments area lot more frequent in the US as comparedto Germany.

Finally, we can’t talk about recurring payments
without addressing the issue of fraud. Fraudsof course can happen, as in any other payment
models, but can easily be mitigated with theright strategy. In the As-A-Service industry it
can take several forms, such as:
•
•
•
•
•
•
•

Document falsification
Fictitious asset
Overestimation of equipment worth
Double Financing of the same piece ofequipment
Fraudulent financial statements
Kickbacks
Theft of one’s identity

Fraudulent activities often occur due toinadequate verification procedures of theapplicant company. Nevertheless, theimplementation of detection technology caneffectively reduce the incidence of fraud.
Furthermore, equipment finance entities canserve as a reliable mitigation strategy against
fraudulent activities, given their professional
approach to customer screening.
All these reasons combined make it clear as
to why best-in-class As-A-Service businesses
digitize early on their invoicing and payment
to be able to scale properly even, both in B2C
and B2B. A strong capability in these fields isthus required to support your As-A-Service
offering. Customers want end-to-end solutions
for simplicity purposes. Therefore, teaming
up with best-in-class partners will ensure
your customers access to the best platforms,
software and services for a superior user
experience.

24

8. FOCUS - FINANCE &ACCOUNTING
As-A-Service models will have a strong
impact on your financial statements, KPIs andaccounting procedures driving tremendous
changes in the Office of the CFO. When
deploying As-A-Service programmes, here
are some of the top financing and accounting
considerations to discuss:

FINANCIAL COMMUNICATIONThe revenue recognition rule associatedwith the new revenue streams can be quite
different compared to business-as-usual. Thisis especially true for revenues coming from coreservices priced using brand new models andeven more so for services beyond traditional
financial services, including subscription
bundles that, from an accounting perspective,
are complex.
Depending on the specification of your offer
and the way you fund it (which risks you keep
or externalize), you may have to apply IFRS 9(Financial instruments), or IFRS 16(Lease accounting).
There is even a strong chance that the revenues
may actually fall into accounting standards suchas IFRS 15/ ASC 606 (similarly to commissions,advisory contracts, bundled products, credit
cards and loyalty schemes, but with potentiallydifferent rules). This could mean substantial
challenges from both a process and a workload
perspective for a company’s finance team.

KPIS DEFINITION AND IMPLEMENTATION:
As-A-Service has revolutionized the financial
game, and the KPIs are no exception! Gone
are the days of dwelling on past events andbudgeting. Instead, the focus is on creating abrand new business model thatprioritizes predictability.

COMMON KPIS USED IN THE AS-A-SERVICE
BUSINESS MODEL (SOURCE ZUORA):
1.

Annual Recurring Revenue (ARR):
ARR is the amount of revenue a company
expects to repeat in a year, which provides
a holistic view of a company’s health. With
ARR as the foundational metric, companies
can forecast revenue, set realistic goals, andmake informed decisions tomaximize growth.

2. Churn Rate (Attrition Rate):
Churn rate is the rate at which a businessloses subscribers, and something that
becomes critical as you grow yoursubscriber base. It is 5x more expensive toacquire a new customer than to maintainan existing one. As one digital innovation
exec at an IoT company notes: “customer
retention, at a very eye-level, is paramount.
If you spend money to acquire customers
but you lose them as fast as you acquirethem because you don’t provide the rightexperience, then its an economic businessmodel that will not scale at all.”
3. Customer Lifetime Value (CLV):
CLV may be a novel concept for many
manufacturers. It’s the expected netpresent value of profit across the entire
customer lifecycle, taking into account thecost to acquire, serve and maintain. It is a
critical indicator to model across different
dimensions and cohorts in order to assess
for example : go-to-market resources
allocation, acquisition and retention
strategies etc.
4. Net Revenue Retention (NRR):
NRR calculates total revenue (including
expansion revenue) minus revenue churn(contract expirations, cancellations, or
downgrades). NRR measures your ability toretain and expand customers. It can be seenin short as your customer baseorganic growth.

25

FINANCIAL PROCEDURES DESIGN:SHAREHOLDER’S VALUE INCREASE

Setting up an As-A-Service is going to introduce
a whole new set of financial and operational
dynamics that require some adjustments invarious financial procedures. The shift from a
traditional one-time purchase model to an As-AService model is a game-changer that impacts
revenue recognition, customer management,
billing cycles, and more. So, let’s dive intosome of the key changes and important things
to consider when it comes to the financial
procedures when adopting an
As-A-Service model:

The notion of shareholder value encompasses
the financial benefits, such as capital gain anddividends, that shareholders derive from theirinvestment in a company. In the context of AsA-Service business model, we are confronted
with a recurring revenue stream that has thepotential to impact shareholder value in multiple
ways. It is important to acknowledge, however,that the actual effect will be contingent upon
the successful implementation and managementof the model. Presented below are several ways
in which the As-A-Service model can potentiallyaugment shareholder value:

•
•
•
•
•
•

Revenue recognition
Billing management
Expense management
Financial forecasting
Pricing strategy
Compliance and reporting

•
•
•
•
•

•

Predictable Revenue Stream
Customer Lifetime Value enhancement
Scalability
Customer relationship improvement
Market valuation is higher thanks to therecurring revenue model (predictability andstability boosting market valuation)
Competitive edge

26

All the above considerations will have atremendous impact on the type of As-A-Service
solutions you will create, so they should betreated with high importance. Additionally, boththe specific implementation and the mannerin which these financial concepts are utilized
will be influenced by the company’s ownership
structure, whether it’s private-equity owned,
publicly traded, or venture-backed.

9. THE POWER OF
SMALL CHANGESIn any organization, it’s crucial to have aforward-thinking approach when it comesto restructuring departments. While it’sunderstandable that not all departments canundergo simultaneous transformation, it’s
imperative to keep the big long-term picture insight when building As-A-Service models. The
key lies in having a well-defined roadmap that
ensures the scalability of the model.
However, being pragmatic is equally important.
While it’s essential to be ambitious and futuristic,
blindly implementing sweeping changes all at
once can lead to chaos and resistance within

the organization. Instead, the implementationof changes should be approached in an
incremental manner. By breaking down the
As-A-Service transformation into manageable
phases, departments can adapt steadily,
ensuring smooth transitions and position
themselves for sustainable As-A-Service
success in the long run.

“DURING THE DEVELOPMENT OF OUR ASA-SERVICE SOLUTION, WE RECOGNIZEDTHE SIGNIFICANCE OF TESTING AND
LEARNING. BY IMPLEMENTING AS-ASERVICE BEST PRACTICES AND REAL-LIFE
METHODOLOGY OF EXPERTS LIKE BLACK
WINCH, WE SUCCESSFULLY EXPEDITED
THE MARKET LAUNCH OF OUR SOLUTION.
REMARKABLY, WITHIN A MERE 6-MONTHPERIOD, OUR AS-A-SERVICE SOLUTION
GENERATED AN IMPRESSIVE REVENUE OF
5 MILLION EUROS.’’
XaaS Director - Global IT manufacturer

27Get Started Today
Ready to take on the challenge of implementing As-A-Service models? Use this roadmap
to overcome bottlenecks and rally others to your cause.
Psychology teaches us that when faced with stressful situations, we can either ‘Fight’,‘Flight’, or ‘Freeze’. Implementing As-A-Service is a major shift that challenges the statusquo, which can cause teams to resist, avoid, or become overwhelmed. That’s why somany attempts fail to take off.
But with this guide, you’ll be fully equipped to avoid these counterproductive reactions
and help your team ‘Flourish’ by navigating change with confidence, eagerness, and ease.
Get started today!
Contact Black Winch blackwinch.eu or Zuora zuora.com for more information.

Subscribed InstituteBlack Winch

Zuora’s Subscribed Institute is a dedicatedthink tank focused on the Subscription
Economy. The Institute supports its 1500+
business executives across 600+ global
companies with critical data, thought
leadership, and connections. Research
provided by the Institute helps businessleaders and their organizations to maximize
the opportunities of the Subscription Economy.

Black Winch is the world’s exclusive authority in
Product-As-A-Service solutions. They engage,inspire and empower intrapreneurs to achieve
their Product-As-A-Service ambitions bybuilding and scaling their in-house recurring
revenue models.
More at www.blackwinch.eu

More atwww.zuora.com/about/subscribed-institute/28

Looking To Explore Some
Topics Further?
Did the content of this whitepaper leave you wanting more? Are you eager to explore the topics
discussed in greater detail We’ve compiled a list of additional resources that will take you on a deep
dive into these fascinating subjects. Check out the links below and expand your knowledge today.
•

Philips Enterprise Monitoring as a Service (EMaaS): link and more info here on its use case atJackson Memorial Hospital.

•

The most commonly seen funding schemes in the equipment funding industry (e.g. Sales & Leaseback, the Operating lease, the assignment of Receivables, the sub contracting): link•

Research from Zuora’s Subscribed Institute showing that choice of payment methods andcurrencies have direct correlations with business growth: link•

Common KPIs used in the As-A-Service business model: link•

Article on Net Revenue Retention NRR: link

Next White Papers In The
MakingExciting news! We’re thrilled to announce that our next whitepaper series is currently in the works.
Our dedicated teams at Black Winch and Zuora are hard at work, preparing a collection of insightful
resources just for you. Get ready to dive deep into the world of Product-As-A-Service and gain expert
knowledge that will make you a pro in no time. Stay tuned and get ready to unlock a whole new levelof understanding on:•‘Overcoming Fraud Bottlenecks in the As-A-Service Economy’•‘Product-As-A-Service: How To Create Your Own Captive’

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