In our connected world, software isn’t just an accessory—it’s a vital component. With the rise of software-centric solutions, original equipment manufacturers (OEMs) have a golden opportunity to boost recurring revenues. Yet, as with every opportunity, there come challenges.

In the first installment of our three-part series, we delved into some key challenges that emerge as OEMs increasingly intertwine software with their product offerings. Now, in this second post, we’re shifting gears from identifying challenges to mapping out solutions. We’ll guide you through strategies to conquer alignment obstacles and successfully implement changes. Stay tuned for the third entry, where we’ll zone in on the art of software monetization.

Let’s embark on this transformative journey together!

Challenges: Software Solutions for Original Equipment Manufacturers

When working to transform into a software-centric model, OEMs face various challenges, requiring careful strategy formulation, execution, and constant monitoring.

Challenge 1: Aligning for Holistic Software-Centric Solutions

The key here is to place the value creation of software and analytics at the same level as product feature development. Software should no longer be an afterthought—it needs to be integrated from the conception of a product.

Challenge 2: Aligning Software Management with Digital Transformation

OEMs must grasp the environment in which their products function. Customers aren’t just aiming for small improvements; they’re looking for transformative productivity boosts. The environment is continuously becoming more digitized and connected, leading to a unique ecosystem tailored for each customer.

Keysight Technologies stands out as a sterling example of this, executing an extraordinarily successful digital and service transformation, thereby experiencing a services revenue surge surpassing its industry peers. Their secret to success? Strategic alignment at the top, focusing on enhancing customer outcomes. They viewed software-centric solutions as integrated offers—comprising products, software, and services. As the CEO of Keysight puts it, they followed a “value capture strategy".

For companies formulating their strategic alignment, it’s essential to be wary of pitfalls. Here are four reasons why strategic plans stumble (and the solutions to these challenges):

• Employees don’t understand the strategy: Solution? Simplify. Employees should understand why the solution encompasses product, software, analytics, and services.
• Infrequent strategy discussions: Like Keysight, the organization’s top brass should consistently discuss—and openly champion—the strategy.
• Budget misalignment: Prioritizing tactics and aligning budgets with those tactics is crucial.
• Mismatched employee incentives: Reassess incentives to promote behavior aligned with the strategic vision.

Challenge 3: Software and Asset Life Cycle Management Alignment

While OEMs are adept at managing the product life cycle, syncing this with the software’s life cycle is complex. The alignment should consider product-software development and release/update timelines.

Two prevalent options to achieve this are:

1. Steering committee
2. Central digital unit

However, the crux lies in aligning teams and ensuring the digital strategy is cohesive.

Software life cycle management needs close coordination with product development. It’s not just about creating software—it’s about enhancing equipment with smart features, understanding customer needs, and tapping into profitable revenue streams.

Challenge 4: Continuous Connectivity with Installed Base

68% of our poll respondents are unaware of more than half of the software versions being used by their installed base. Companies must improve telemetry—it’s pivotal for profitable service growth and software management. Organizations should aim for holistic connectivity to mitigate gaps in knowledge. Telemetry aids in gathering essential data without undue effort. Even in secure environments, the connectivity push has accelerated.

Both internal and external stakeholders must recognize telemetry’s importance. Internally, infrastructure and sales pitches should highlight its value. Externally, it’s about conveying tangible value and ensuring adherence to security standards.

Challenge 5: Building an Integrated Ecosystem

OEMs’ digital ecosystems are intricate, comprising multiple tools and systems. The goal? An integrated platform to facilitate both hardware and software service.

Interestingly, 61% of case causals link back to “how-to” and “installation and configuration” issues. Simplifying software usage and enhancing its intuitiveness can drastically reduce these challenges.

A key to successful digital transformation is a strong feedback loop. This loop should factor in product quality, serviceability, and enhancement. However, for feedback loops to have any real impact, they need strategic alignment.

As OEMs journey toward becoming software-centric, challenges will arise. But with a strategic roadmap, clear vision, and unwavering commitment, they can navigate these challenges successfully.

Navigating Software-Driven Solutions for OEMs

The world of software support for OEMs offers unique challenges and immense opportunities. Reflecting on the complex landscape we’ve traversed, let’s examine some core takeaways:

• Alignment and management: At the foundation of every successful software strategy lies effective alignment and robust management. Understanding the importance of these elements and prioritizing them is the bedrock for future actions.
• Tool mastery: With many software versions scattered across a diverse landscape, it’s pivotal to have an accurate software inventory. Establishing centralized repositories that link software versions with product statuses is a necessity. It not only streamlines issue identification but also opens doors to proactive customer support.
• The challenge of updates: Across the board, from our discussions within and outside of TSIA, one recurring theme emerged: the challenge posed by customers not updating software. The strategy to combat this includes communicating the undeniable value of regular updates and strategically curbing the lifetime of support for outdated versions.
• Knowledge management: When software intertwines with hardware, the consequent knowledge matrix becomes intricate. Efficient knowledge management, which accounts for the nuances between software versions, hardware configurations, and process issues, is imperative. Such a system prevents the disruptive ping-pong between different stakeholders, ensuring swift issue resolution and enhancing customer satisfaction.
• Limited scalability: With the link of the software to the equipment and to the customers’ Industrial Internet of Things (IIoT) platform, each update requires close customer collaboration.
• Security is non-negotiable: In our increasingly interconnected world, security isn’t just a feature but a promise. Adhering to standards isn’t an added bonus but a minimum requirement.

Transparency emerges as a pivotal theme in software support. The distinction between monitoring and controlling is vital. Allowing customers to retain complete control over their actions builds trust.

Lastly, it’s worth noting that sometimes the answer lies in shifting the narrative. Reminding customers of the pre-existing connectivity within their setups can often expedite discussions.

The journey of software support for OEMs is intricate and multifaceted. However, with a clear understanding of challenges, a focus on alignment, and an unwavering commitment to security and transparency, OEMs can not only navigate this terrain but also harness it for unparalleled growth.

Stay tuned for the third and final blog in our OEM series to learn about monetization in this industry!