Robots as a Service is the Future of Automation
The business model for buying and selling industrial equipment is rapidly evolving. The convergence of cloud-based solutions for IT infrastructure and the success of Software-as-a-Service (SaaS) enterprise software licensing is now influencing how Autonomous Mobile Robot companies are selling their solutions.
Autonomous Mobile Robot companies such as inVia Robotics, Savioke, Cobalt Robotics and Knightscope have demonstrated success in delivering solutions with business models which enable customers to pay-as-they-go in a subscription or metric-based financing model. Let’s look at how you should evaluate a Robots-as-a-Service (RaaS) offering from a potential robot supplier.
This article introduces the business model for deploying robotic-based solutions as a service or as a subscription model. For the buyer of Autonomous Mobile Robot (AMR) solutions, this white paper will outline how the concept of subscription based pricing and service delivery is different from the classic capital equipment sales and support model. This will prepare you to conduct an educated proposal process and acquire the right solution for your automation needs.
For more than 30 years, the robotics market has operated on the “classic” capital equipment product design and sales business model. Under this sales strategy, new products are developed to meet a market need and then marketed and sold to target customers as a capital asset purchase. As a customer, you own the equipment, depreciate it as a capital asset over its working life and are responsible for the maintenance and repair of the equipment over its lifetime. At the end of the product life, you are responsible for disposal of the obsolete equipment. RaaS changes all of that.
In a Robots-as-a-Service contract, you only pay for what you consume and all of the deployment, integration, support and equipment maintenance costs are included in the service level contract. Like any subscription business model, you will get better rates by signing a longer term contract with the RaaS vendor.
Are you a robot manufacturer?
This article is focused on the RaaS story from the perspective of the automation buyer, and you should finish reading it. However, we've produced a separate article which helps robotic automation vendors design, build and optimize a RaaS-based automation business.
The Capital Asset Approval Cycle
The annual nature of the capital asset purchasing cycle imposes a purchasing cycle which can vary anywhere from 3 to 18 months. Depending upon your organization, you might be subject to an annual budgeting process in which you need to submit capital budget requests months ahead of when you anticipate you might need the equipment in your facility. Building the business case for expensive, fixed asset, capital equipment often requires many layers of management approval.
A subscription model such as Robots-as-a-Service changes the entire purchasing process, often simplifying and shortening it. With a RaaS contract, you can pay for the automation out of your operating budget, a budget that you likely control without having to seek a capital approval within your organization.
Finally, to manage the pace of innovation and hyper growth within some business segments (such as ecommerce), you may be faced with short planning horizons to predict automation needs. It can be impossible to accurately predict your warehouse throughput requirements twelve to eighteen months down the road. The promise of RaaS is that it provides an opportunity to better utilize your capital while shortening the window required to acquire and deploy an automation solution which meets your needs.
Key Takeaway: The buying process for RaaS is often shortened because the budget is controlled at the operational manager/director level.
Pay For What You Consume
A RaaS model allows you to scale up and scale down your consumption as your automation needs change. You are purchasing a complete end-to-end service rather than a good, in the same way that you might sell your lawn mower and outsource your lawn care: ordering twice weekly service during peak season and canceling the service in the dead of winter. Not every automation application is a good fit for RaaS. Target applications for Robots-as-a-Service will have similar hallmarks to the lawn care example. Look for applications where you can leverage additional robot usage during peak periods and idle or halt service during slow periods, with a variable rate of payment based on consumption. Robots-as-a-Service is like hiring a temp agency for your robotic workforce.
Key Takeaway: With RaaS, you can easily get out of the relationship if the solution isn't working for your business. This adds additional incentive to your vendor to go the extra mile to success.
RaaS Advantages for the buyer:
Robots as a Service is emerging as a dominate method for financing automation projects. Here's a list of the Pros and Cons for RaaS:
For the right automation applications, Robots as a Service can be the simplest and fastest way to procure and deploy an autonomous mobile robot.
A More Intimate Vendor Relationship
As you evaluate the viability of RaaS for your business, the first step is to understand the organizational changes that a RaaS business model imposes on your vendor. Some vendors are committed to a 100% RaaS business model, while others are offering RaaS as just one of the ways in which you can acquire their solution. Let’s look as some elements which are different in a RaaS vendor relationship.
Vendor Owned Equipment
First, the vendor will continue to own the equipment. Therefore, the vendor will have the expectation and functionality to remotely monitor the solution in production. This will require remote access to the equipment through your corporate network. The benefit to your organization is that you don’t need to train and maintain in-house robot experts. The vendor will also carry the burden of 24/7 support. If a robot breaks down, the vendor will likely know before you do, through the remote monitoring system. The vendor will likely be able to remotely troubleshoot the equipment and schedule onsite repair, often without any interaction on your part.
Key Takeaway: If the equipment breaks, you don't have to fix it. Often the vendor will simply ship a replacement machine, or enable an additional machine stored on site.
Second, because the vendor owns the equipment, they will be able to update it as needed to keep it in prime operational condition. In fact, the vendor has all of the right incentives to design, build and maintain the best software and hardware, since they are designing for long term operation and supportability. The vendor might even redeploy robotic equipment across multiple customers, as the need arises. This financial incentive helps the vendor to optimize their investment. Vendors who offer their solution only in a RaaS model, will likely have higher quality equipment and service than a vendor who is reactively offering RaaS as an option to a capital equipment purchase.
Key Takeaway: Your vendor is incented to improve the software functionality over time. The more efficient it operates, the fewer machines required to solve your needs.
Leasing is NOT Robots-as-a-Service!
A simple solution to the financing issue might appear to be the use of a leasing agent as a financing intermediary with the customer. However, a leasing contract alone is not a RaaS solution and you should be wary of a supplier attempting to sell a leasing option disguised as RaaS solution. While leveraging a leasing contract to acquire a piece of capital equipment may be an option to consider, don’t be fooled that it is a RaaS business relationship.
Key Takeaway: A leasing contract may be one way to fund the equipment, but it doesn't tie your vendor to the net positive outcome like a RaaS model does.
Three Requirements of a RaaS Solution
There are specific application requirements which must exist for a RaaS-based solution to be viable. Let’s look at a few of these.
1. The Automation Problem Must Be Scalable
Your problem must be measurable by some key performance indicator (KPI). As the saying goes, “if you can’t measure it, you can’t manage it”. There must be some immutable way to measure the KPI’s and consumption rate for the RaaS solution to be viable. This KPI measurement must in turn be effectively reported on and invoiced by the supplier.
For example, a simple measure would be hours of operation. In this case you would pay for every hour that the AMR is operating (i.e. not turned off or charging). Another measure might be “per pick”. In this example, you might pay for every package moved through the facility.
2. Chargeable to an Operating Expense
The second requirement of a RaaS solution is that the operation in question must be funded by an operating expense (OpEx) since the hardware won’t be capitalized. OpEx dollars are typically discretionary for the purchasing manager, without the need to seek high level approval. Executive approvals can be a deal killer in a capital expenditure buying process. So, if you have OpEx budget to spend on automation, RaaS may be the perfect solution.
3. Guaranteed Throughput
Two of the key metrics that every production manager cares about are: production throughput and production quality. Automation tools leveraged in the manufacturing process are measured by this requirement. Production spikes are inevitable, and enabling your production team to smooth production spikes is advantageous to your production metrics.
In service robot applications, the solution is more task or demand driven in its application as opposed to the process centric needs of manufacturing. In this situation, the robot may spend time idle, as it waits for the next request or job to come in. Likewise, in a service application, there are likely to be periods of over consumption or periods in which there are more tasks to do, than robots to do it. RaaS can help solve consumption bottlenecks in the application, as you’ll be able to arrange for additional capacity as production demands increase. InVia Robotics is one RaaS vendor who offers customers the ability to scale up throughput by delivering additional robots to your facility during peak periods, for ecommerce vendors this might be during the holiday season.
Three things define a robots-as-a-service solution: (1) the problem must be scalable; (2) chargable to an Operating Expense; (3) Guaranteed throughput. Learn more at @therobotguide #mobilerobots #robotics
What To Ask a Vendor When Considering a RaaS Solution
Do you offer remote monitoring of the solution in production? If so, what are your IT security considerations and certifications?
How do you measure the throughput of the RaaS solution, and how will I be billed for that service? Can I see my consumption report on a daily basis? Is there a minimal charge for usage each month/quarter?
Can I scale up or scale down the number of autonomous mobile robots which are deployed in my facility during the contract?
Is there an upfront charge for integration of the solution in my facility?
Can I customize the payload of the autonomous mobile robot for my unique needs?
Want a RFP template to use for your vendor review process?
We've created a RaaS vendor review template that you can use to jump start your evaluation process. It's available for purchase in the Mobile Robot Guide Store. This document includes questions that you should ask each vendor during the evaluation process.
Here's the list of RaaS enabled vendors that we are currently tracking.
Aethon is the leading provider of autonomous delivery vehicles designed specifically for hospital operations. The AMRs are managed remotely by Aethon and can easily be integrated to operate the hospital elevators.
Badger Technologies provides retail inventory management solutions. The Marty autonomous mobile robot continually scans retail shelves to monitor inventory and deliver planogram compliance.
Bossa Nova RoboticsHeadquarters: San Francisco, CA, USAPublic: NOWebsite: http://bossanova.com/Products: Bossa Nova RobotApplications: Retail Inventory Retail Planogram ManagementBackgroundThe Bossa Nova mobile robot operates in retail stores, where it continuously scans the store shelves tracking inventory. By imaging the store shelves with an array of cameras, and then processing the images with a artificial intelligence model, the
Fetch RoboticsHeadquarters: San Jose, CA USAPublic: NOWebsite: https://fetchrobotics.com/Products: FetchCore Cloud Robotics Platform Fetch VirtualConveyor Fetch HMIShelf Fetch CartConnect Fetch RollerTop Fetch Freight500 Fetch Freight1500 Fetch TagSurveyor Fetch CartConnect500Applications: Warehouse Automated Material Transport Automated Data Collection Research and DevelopmentBackgroundHeadquartered in San Jose, California, Fetch Robotics is the pioneer of On-Demand Automation — the only solution that
InVia RoboticsHeadquarters: Westlake Village, CA, USAPublic: NOWebsite: https://www.inviarobotics.com/Products: InVia Picker InVia LogicApplications: Goods-to-Person Person-to-Goods Dynamic AS/RS Goods-to-boxBackgroundThe inVia Picker effortlessly picks anything in a tote under forty pounds (40 lbs), whether your bins are filled with packs of gum to a bunch of yoga class weights. Pickers operate as an automated storage and retrieval solution
KnightscopeHeadquarters: Mountain View, CA, USAPublic: NOWebsite: https://www.knightscope.comProducts: K1 K3 K5 K7Applications: Indoor Security Outdoor SecurityBackgroundKnightscope’s long-term vision is to predict and prevent crime utilizing autonomous robots, analytics and engagement. Crime has a $1+ trillion negative economic impact on the U.S. economy every year and Knightscope is on a mission to cut it in half. Founded
Locus RoboticsHeadquarters: Wilmington, MA, USAPublic: NOWebsite: http://www.locusrobotics.com/Products: LocusBotsApplications: Warehousing Person to Goods LogisticsBackgroundLocusBots deliver 3x to 5x more productivity. That translates to substantially more tasks with less labor in the same workspace. You see a significant reduction in your labor costs, including costs associated with “task interleaving” and overtime. It also minimizes the impact of
Magazino RoboticsHeadquarters: Munich, GermanyPublic: NOWebsite: https://www.magazino.euProducts: Toru Hako SotoApplications: Goods-to-Person Goods-to-boxBackgroundMagazino is one of several mobile robot vendors offering a autonomous machine capable of picking up and dropping off boxes and totes. The machines are designed primarily for goods to person logistics applications and they operate in the warehouse. Magazino has expanded their product line
SaviokeHeadquarters: San Jose, CA, USAPublic: NOWebsite: http://www.savioke.com/Products: RelayApplications: Hospitality (Hotel Delivery) Logistics HospitalsBackgroundSavioke Relay was one of the first delivery robots to come to market. Savioke launched the Relay robot focusing on the hospitality and hotel delivery market. Savioke has made a name for itself as a pioneer in the hotel delivery market. The Savioke
Simbe RoboticsHeadquarters: San Francisco, CA, USAPublic: NOWebsite: http://www.simberobotics.com/Products: TallyApplications: In store inventoryBackgroundTally performs the repetitive and laborious tasks of auditing shelves for out-of-stock items, low stock items, misplaced items, and pricing errors. Tally operates safely during normal store hours alongside shoppers and employees.The solution consists of one or more mobile robots that can autonomously traverse
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KnightScope announced today that they are going public under Regulation A. Learn more about this announcement and what it means for the future of KnightScope.