Asset Lifecycle Servitization: The new business revenue model for the construction sector
This white paper explores the shift in the construction industry towards a full asset lifecycle business model, examining the role of servitization, digital transformation, and modular manufacturing in securing long-term profitability.
More and more asset owners are seeking to outsource maintenance for their assets over the whole lifecycle. Facing diminishing margins for capital projects, COVID pandemic disruptions, and sporadic revenues, the new 'Servitization' business model offers construction firms a lifeline. However, 'contracting for outcomes' arrangements require a complete change in mindset: firms must now manage complex, performance-based contracts and accurately model whole-life costs.
This white paper looks at the opportunities presented by delivering the full asset lifecycle business model, the transformative digital journey required, and the enterprise software capabilities firms must embrace to be able to compete test.
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Traditionally, construction and operation were handled by different companies. Increasingly, general contractors are realising they are walking away from significant revenue once an asset is complete. By moving to a total package spanning integrated project and lifecycle management, constructors can significantly grow their business with long-term revenue streams.
Digitalisation and industry-honed enterprise software play a pivotal role in realising this servitised offer. Real-time data and full visibility sit at the heart of delivering new capabilities such as service-level agreements (SLAs) and field service scheduling. Software solutions like IFS Cloud allow companies to manage the maintenance phase to establish the visibility and control required to monetise this new model test.
The Benefits of Off-site Manufacturing
Increased Efficiency: Factory-made modules shipped to sites offer predictable costs and eliminate weather-related delays.
Sustainability: Construction is faster, less wasteful, and demands minimal specialist skills.
Quality Control: Use of modern methods of construction, such as those used by BoKlok, ensures high-quality wood-based homes with fittings already in place.
Business Growth: Embracing modular construction allows traditional contractors to radically improve supply chain management and inventory tracking.
Understanding Risk and ROI
Two of the biggest barriers to bidding for fixed-price maintenance contracts are accurately understanding and quantifying cost and risk. Building Information Modelling (BIM) and digital twins provide the solution:
Lifecycle Analysis: BIM models allow for a cradle-to-grave assessment of the environmental impact and maintenance requirements of an asset.
Accurate Tendering: Integrating BIM data directly into an ERP allows operation, maintenance, and refurbishment elements to be calculated from model data during the tender phase.
Revenue Longevity: Maintenance contracts can be worth 120-200 per cent more than the original cost of the build over the asset's lifespan.
Becoming a sector disrupter does not necessitate a disruptive transition. By embracing a best-of-breed enterprise software approach, such as IFS Cloud, traditional construction companies can rapidly evolve. Required management and operational capabilities can be added via seamlessly integrated modules, delivering sustainable business value through profitable and diversified new asset lifecycle revenue streams.
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