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How Medical Manufacturers Can Benefit from the On-Demand Trend

October 17, 2016





Businesses across a range of verticals are moving from one-time product sales to on-demand, usage-based models. Software companies were first to embrace this new model, and now other businesses – like medical device manufacturers – are waking up to the benefits of recurring revenue models.


“It’s all part of a trend called servitization,” notes Yana Persky, strategic analysis manager at Gemalto.

This new model is an attractive one to medical device manufacturers given the many challenges they face in today’s marketplace.

For example, their customers – doctors’ offices, hospitals, and imaging centers – are experiencing budget constraints, says Persky. Paying for the use of equipment as they need it rather than investing in medical equipment upfront enables them to preserve as much cash as possible, she notes.

Another market reality is that the lifecycle of medical equipment is getting shorter, Persky adds. That said, it’s increasingly difficult for hospitals and other health care entities to justify a large spend in such gear.

At the same time, the manufacturers of that gear need to differentiate themselves in what has become a commodity market. Indeed, they want to lock in their customers, lock out competitors, and enjoy more predictable revenue streams. Offering on-demand services, providing preventive maintenance, and leveraging the connected nature of their devices to better understand customer usage and behavior so they can more effectively design future products, can help manufactures do that, she says.

“To improve product design decisions, medical equipment manufacturers must gain insight into how products are deployed and which features are used most frequently,” says Pesky. “Using embedded software monetization technology will enable medical vendors to provide full visibility into their existing customer base from start to finish.”

As a result, she adds, manufacturers can better assess the value of a product and its various features, and can better understand how that should inform pricing.

Embedded software monetization technology can also enable manufacturers of medical equipment – or, for that matter, of any equipment – to more easily offer different versions of their products at different price points and for various audiences. For example, a manufacturer could ship a product with limited functionality at a lower price point and have the ability to add new revenue-generating capabilities to it remotely later on.

As for preventive maintenance, it can enable medical manufacturers to meld the worlds of single-product sales with recurring revenues. That would involve a company selling a product that has the ability to alert the manufacturer and/or customer when the device is due for maintenance. And, Persky notes, the manufacturer could stipulate that the (revenue-generating) maintenance service can only be provided by its own dedicated technicians.




Edited by Stefania Viscusi
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