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How RaaS Can Cut Risk

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Bryan Arnold has 23 years of experience in technical sales, 16 of them in the material handling automation industry. That included two years at Daifuku Wynright, four years at Retrotech/Dematic, seven years at Honeywell Intelligrated, and three years at SencorpWhite. As director of sales at OSARO, Bryan applies his deep, integration-oriented knowledge of e-commerce automation technologies to identify client issues and business advantages to be gained based on revenue, cycle time, quality, compliance, or profitability improvements. He is a graduate of Texas A&M with a BS in Industrial Distribution.

RaaS can reduce the risks of cost and complexity

Increasingly, robotics automation companies are offering Robot-as-a-Service (RaaS) contracts as a payment option to reduce risk associated with cost and complexity. What is it and how does it work? Materials handling expert Bryan Arnold explains.

By Barbara Buell

Q: What is RaaS?

Arnold: RaaS is a Robot-as-a-Service contract plan. You have probably heard of SaaS, Software as a Service. SaaS is a longtime payment norm in the software industry through which vendors deliver cloud-based software over the internet in exchange for an annual license instead of installing and maintaining static local software at a customer’s facility.

Supply chain and manufacturing companies deal in heavy equipment which traditionally has involved costly upfront capital expenditures. As robotics automation has become a norm in many warehouse situations, vendors have started offering Robot-as-a-Service contracts. By operationalizing predictable costs, customers can lower the risk associated with CAPEX outlays, maintain equipment flexibility, and reduce concerns about Return on Investment in this complex and evolving automation sector.

Q: What are the purchase options under RaaS?

Arnold: You should know what your annual investment is. That is, whether it is a monthly or quarterly payment. And, how long a commitment is it: Yearly or multi-year?

Q: What are the pros and cons of a yearly renewal versus a multi-year contract?

Arnold: You don’t want to be penalized by inflation or escalation (annual vendor mark-up) by renewing a RaaS contract on an annual basis. And in robotics you are looking at a multi-year commitment anyway, so you may want to strongly consider a three- to five-year deal, which typically offers a lower annual investment incentive based on a long-term commitment with your solution vendor.

What does a RaaS contract include?

You shouldn’t have to budget for MRO (maintenance, repair, and operation) expenses, as these should be built into your RaaS contract.

You need to think about whether you want an absolute fixed expense that includes both 1) reactive support (phone, remote, and on-site help) and 2) scheduled preventative maintenance (PM), which is proactive and more predictive. The vendor will carry the burden to come out and do the preventative maintenance, plus provide all consumable spare parts. Travel expenses for scheduled maintenance intervals and repairs are baked into the annual fee. From an accounting standpoint, it’s nice because it’s a fixed number on your P&L; there are no unplanned expenses that would cause budget overruns.

Q: Is paying upfront for system support versus just preventative maintenance worth it?

Arnold: With a RaaS model, you should get remote phone support during normal business hours 8 am-5 pm. RaaS without support is less expensive upfront but may cost you more year over year.  While you might not buy an upfront service contract on a new flatscreen television – they are historically reliable – the variables on robotic equipment in a real-world environment are significant. It’s a no brainer to bake the support into the RaaS model. Preventative maintenance (scheduled PMs) and system support (phone/remote and on-site support) are two different services but are typically rolled into a single support program for a customer.

graphic Capex vs Opex
RaaS pricing models lower risk and increase flexibility by shifting cost from upfront capital outlays to operations.

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