Paying for Performance

In February 2020, Robex, an automation and robotics integrator for the food, beverage, building, and container industries, rolled out a unique offering that delivers its custom-made robots in a use-based finance model. This Machine-as-a-Service (MaaS) offering is a flexible way to install automation on the factory floor without having to invest capital upfront. Instead, the customer pays for a successful outcome based on a predetermined agreement around productivity.

The service, called Robex Flexx, is powered by Steamchain, a blockchain-based software used to measure a variety of critical machine productivity parameters in real-time which then calculates transactional payments based on a machine’s overall performance. Robex also throws preventative maintenance into the contract. “If we see a robot is not performing or part of the solution is not working, we are on it right away,” said Craig Francisco, vice president of automation at Robex. “Probably before a customer even picks up the phone, we know there’s an issue and we will fix it immediately.”

Robex is both an OEM and a system integrator. Its history of providing products and services to manufacturers helped the company recognize the need to build out new aftermarket offerings to help its customers deal with industry obstacles—ranging from a skills shortage to the need to improve machine uptime during a pandemic.

“We took action pre-pandemic but I think the concept will gain more traction now as people are open to new ideas and ways of trying to automate,” said Francisco. “The customer is limiting their risk using the Flexx program because we are taking on responsibility.”

And while the risk shifts to Robex, the rewards will be a great, new revenue stream—if they deliver on what is promised.

According to a report from Deloitte called “Aftermarket Services Transforming Manufacturing in the Wake of the COVID-19 Pandemic,” changes in customer demands, increasing market maturity, cyclical fluctuations in new equipment sales, and pressure on pricing are among the major factors driving many manufacturers to seek new aftermarket services revenue opportunities. This shift is taking place because customers are emphasizing service level agreements (SLAs) that guarantee product uptime. These customers are also looking for partners who can proactively support their equipment before it is out of service. In return, the customers are willing to pay a price premium.

For this new business model to work, new kinds of partnerships between machine builders and technology suppliers are emerging. “In many cases, the most significant competitor within the aftermarket business is the customer who may handle maintenance and repairs,” said Joe Zale, principal with Deloitte Consulting LLP. “Addressing this requires an ecosystem to work cooperatively and collaboratively with all the players, including hardware and software technology providers, more traditional channel partners, and customers.”

Robex, for example, partnered with Steamchain—a company founded in 2017 by engineers from Rockwell Automation who experienced the need to align relationships between OEMs and end users through accountability. By partnering with Steamchain, a ripple effect was created, putting Robex in a position to form closer relationships with its customers.

“Robex offers Machine-as-a-Service and includes onsite service, so it’s like contract manufacturing under your own roof,” said Michael Cromheecke, co-founder and CEO of Steamchain. “And in this market, it’s not so much about when a machine breaks, but what happens if a machine can run at 200 [parts] per minute and an end user is only achieving 100 per minute, who is responsible for that?”

Many times, it’s not the machine that’s to blame, but the operators, and therefore education becomes an important aspect of aftermarket service. And OEMs are uniquely capable of educating people on their equipment. “The end user wants more support from OEMs, but there’s no model in place today that creates the right linkage, other than to block off time or pay by the hour. We solved that by making it easier to bring automation into play.”

In addition, Steamchain does its part to support its OEM customer, whether it’s having a conversation with the manufacturer’s finance and procurement teams, designing the terms and conditions of the MaaS, or educating the sales and marketing teams to help create awareness, or offering financial services—which is brand new. “When we sign on a new OEM partner, we are partners for life,” Cromheecke said. “Our interest is the same as theirs—to sell more machines on MaaS terms.”

Within the ecosystem of partners, industrial control system (ICS) suppliers offer a lot of value to OEMs and end users alike when it comes to delivering aftermarket services.

The power of partners
If you take a quick glance around the ICS landscape, you’ll notice some unique partnerships emerging. There’s Rockwell Automation and PTC, for example, where Rockwell made a $1 billion equity investment in PTC to have a seat on the board of directors and to create a joint technology road map. In addition, Rockwell recently acquired Kalypso, a software delivery and consulting firm specializing in the digital evolution of industrial companies, as well as Italy-based ASEM S.p.A., a provider of digital automation technologies including industrial PCs, human-machine interface (HMI) hardware and software, remote access capabilities, and secure Industrial Internet of Things (IIoT) gateways. And, earlier this year Rockwell announced it will acquire Avnet Data Security, an Israeli-based cybersecurity provider.

In November 2019, Rockwell announced its Digital Partner Program designed to streamline IIoT implementations and connect manufacturers to a variety of digital expertise from companies including Accenture, Microsoft, PTC, Ansys, and Eplan. For example, Accenture can work with companies to create a business plan and develop use cases with return on investment (ROI). Microsoft can help manufacturers access high-quality data from an intelligent edge to the cloud to drive better companywide decisions. PTC can help connect devices and systems from the edge to the cloud and provide augmented reality (AR) technology to solve problems in new ways. And Ansys and Eplan can solve complex challenges related to creating a digital thread, which helps in design, operations, and maintenance activities.

“We are going through our own transformation as a company,” said Tom O’Reilly, vice president of global business development at Rockwell Automation. “Different partnerships will play a bigger role as we transform ourselves in order to help our customers transform themselves. We don’t say [we are an] industrial software company, we now say we are an industrial productivity company.”

And new services that Rockwell rolls out will be valuable to both OEMs and end users. “We believe there is benefit to both, and we are working on doing things with Microsoft later this year that will enable machine builders and others to participate in a broader way to provide value,” O’Reilly said.

One such offering that has already rolled out is Factory Insights as a Service, a turnkey cloud offering from Rockwell powered by PTC and Microsoft, that delivers real-time production performance monitoring, asset monitoring and utilization, connected work cells, and digital and augmented work instructions.

At your service
The industry is seeing similar offerings from other industrial technology suppliers, like Hilscher, which launched a new way for OEMs to service and monitor equipment at customer installations.

Hilscher makes edge gateways, and the recurring theme from the OEM market and large end users has been how to maintain these devices, how to upgrade when a new release comes out, and how to change what they do with the applications that run on them. “It became evident that having devices in the field only maintained locally—as in walking up to the device and using a USB stick to load firmware to get another level of features—required another way of doing it,” said Craig Lentzkow, business development manager for Hilscher’s IoT solutions. The Hilscher platform, called netField, brings intelligence to field devices, providing the ability to update firmware from a remote location via a container-based management system. Hilscher created an IIoT operating system, called netField OS, that runs containers in a Docker runtime environment (Docker is an open source software platform; a Docker container is a lightweight, standalone, executable package of software that includes everything needed to run an application, including code, runtime, system tools, system libraries, and settings.) To that end, netField OS also includes a self-service management portal, called netField Portal, as an interface for local or remote set up. And then there’s the edge gateway.

The edge gateways are set up to be information-gathering devices, not controlling devices, and, for security protections, the customer does not get access to the programmable logic controller (PLC) via the edge gateway. The device sits on a machine and monitors the controller and, in some instances, the I/O to gather the status of the machine. The goal of the edge gateway is to stream data in real time to where that data needs to be acted upon. Data can be streamed from the edge gateway to cloud-based AI applications, such as prescriptive maintenance software that predicts device failures, or the data can be acted on in the edge gateway by containerized applications—often referred to as edge computing.

“We call it ‘no touch’ because you don’t have to be physically present, just physically connected to the device,” Lentzkow said. “The goal of the open environment is that it is highly customizable by the customer. We provide 85% of the necessary software framework so the customer can focus on applications and what they want to run. Millions of devices can be monitored on a system like this.”

Similarly, Siemens recently rolled out its new Manage MyMachines, a cloud-based Platform-as-a-Service (PaaS) that, combined with edge technology, enables data tracking of machine kinematics as well as production data.

As a MindApp within the Mindsphere portfolio, Manage MyMachines is integrated in the cloud-based, open Internet of Things (IoT) operating system and it allows access to all critical machine tool information, from bearing temperature to production by shift or job, all in a selectable priority scale based on user needs. Unexpected line downtimes and off-normal machine kinematic conditions can be quickly identified and corrected. Predictive maintenance can be programmed, so an upcoming failure can be anticipated, with alerts sent to a local distributor, for example, to deliver the needed components.

“Simply stated, this concept will be a gateway to the digital factory for all of our associates in the machine tool world, including builders, integrators, and end users,” said Sascha Fisher, head of the machine tool systems group at Siemens in the U.S.

The industry is currently seeing a surge in “as a service” offerings due in large part to COVID-19, which has disrupted business.

“It has become challenging to dispatch field service technicians, and advanced remote diagnostics and assistance capabilities have helped to ensure business continuity,” said Deloitte’s Zale. Nevertheless, “the move to pay-for-performance designs has been long anticipated in manufacturing, but has had a mixed record of conversion, with most companies’ business models moving slowly from capital to solution-based, outside of a few, unique segments. Like many trends that have seen massive acceleration in this crisis, the conversion to more creative contract designs that balance risk between equipment/service providers and customers could quickly become the norm in a broader set of use cases and segments.”

But it’s not only the coronavirus that is acting as a catalyst for technology suppliers to deliver more creative aftermarket services. There are industry initiatives like the Open Process Automation Forum (OPAF), which is focused on developing a standards-based, open, secure, and interoperable process control architecture that allows integration of different control systems and components.

And that means ICS suppliers must build a new business model that is not reliant on “vendor lock-in” associated with proprietary control architectures.

The impact of OPAF
In the summer of 2020, the Open Process Automation Standard (O-PAS) version 2.1 went into final review and is expected to become available in October 2020. It builds on O-PAS 2.0 which focuses on configuration portability—the first steps toward the ultimate goal of plug-and-play of control equipment. Version 2.1 adds in function block definitions and includes the process automation device information model (PA-DIM) from FieldComm and the OPC Foundation.

“It’s bringing together the data models from all the different field networks for a unified information model,” said Dave Emerson, vice president of the U.S. Technology Center at Yokogawa and co-chair of the OPAF enterprise architecture working group. “This has plagued the industry for a long time…everyone did the same thing but called it something different. We are working on a common set of terminology, data fields, and data links. In some ways this is small, which is why it’s 2.1, but it will give us a unified platform to build on.”

In the long term, this means that a manufacturer could use control function blocks from different suppliers, and they would work together. In the short term, this means process control suppliers will need to differentiate product offerings in new ways.

“Going forward, as a supplier, we realize with open technology coming from the IT (information technology) world it is inevitable that we will need to change where we are going to add value and where we can help the customer the most,” said Emerson.

Yokogawa, for example, offers lifecycle services, which are currently helping businesses impacted by COVID-19 through remote support for operations and maintenance via the company’s Cloud Enabled Execution infrastructure and SensPlus tool, which uses AR and video communication to connect with subject matter experts. In the future, Yokogawa could use its lifecycle services to act as the main service provider for an Open Process Automation (OPA) system. Acting as a partner to the end user, its role could be to layer innovative technology on top of the system as needed. “Advanced control is still productive but has reached a saturation level for users. Now, with machine learning and artificial intelligence, people want to explore what these can do,” Emerson said.

To that end, Yokogawa recently acquired a Danish startup called Grazper Technologies that has developed advanced artificial intelligence (AI) for analyzing images. The company aims to use this technology to improve recognition accuracy for moving imagery as a way to open up new security applications related to image analysis on production lines.

Machine builders are also looking at building more functionality into machines—like AI—but only turning it on as needed. “This feature management allows the end user to buy a [basic] machine, but there are features built-in that can be turned on later, which creates more revenue [for the OEM],” said Steamchain’s Cromheecke. 

Of course, all of this requires a new mindset around machine automation as it relates to buying a service rather than a product. “We are careful with our customers,” Robex’s Francisco said. “We want someone who sees the value and wants us to be a partner. This is a win/win if we can be open and honest and grow together.” 

The good news is, manufacturers are waking up to the possibilities, especially as more factories lack the level of in-house technician expertise they had a decade ago, Francisco said.  “We believe for us to reach our goals and bring as much value as we can to the market and to customers, we have to do something different. And this to me is a phenomenal way to offer a flexible solution to our customers. And it’s limitless what we can do with it.”