Stairway to heaven - offering management product as a service

Offering Management is re-imagining what and how you can sell, produce and provide services for your offerings. Offering Management manages the full product life cycle of an offering, including the validated requirements; the defined business model; and configuration capabilities for mass-customization, marketing, sales, production, services and support.

Configurable products have been supplied to fulfill wider demand of customers with the same product or product family. Today, many companies adore long relationships with customer and product as a service offering. However, many companies still struggle with basic product information principles:

How to ensure that offering is beneficial for the company?

How hand-over process from sales-to-manufacturing works? Or from manufacturing to maintenance and after-sales?

How to share product data to subcontractors?

How to open product to ecosystem and get recent product updates?

Could we offer new services for existing products?

To get readiness to handle product information in related organizations and processes, Variantum has developed steps to reach product as a service capability and to answer questions above. Here are the steps towards todays Offering Management – from traditional product delivery to product as a service.

Picture. Offering management evolution steps to the End-to-End offering management as a service.

Picture. Offering management evolution steps to the End-to-End offering management as a service.

In Evolution One companies have configurable product (physical product, software or service) capabilities in engineering, sales and production. This means that company’s product model is designed and implemented for sales and production use.

Typically, this means that company starts using CPQ (Configure-Price-Quote) with PDM (Product Data Management) or at least their engineering has specified product behaviour. Existing PDM systems are good for standard design, but when you need to start building product model, you probably need offering management for it. PDM and offering management can be integrated as a bi-modal architecture to make basic design in PDM and build product model in offering management. In sales, sales model is created with sellable options that effects on price but are pre-designed. Unfortunately, many companies still work with spreadsheets when configuring offers to customers which leads to errors in later phases.

Offering management support different variations of product complexity with the product pricing models. For some companies’ flat options and feature-based pricing is enough and for some other companies need more advanced rule-based pricing rules or cost-based pricing with complex structural product model.

In the first step from sales-to-production tackles how offers are turned to orders, and how they are moved to production. Production configurator determines the product individual’s creation based on order information as items and Bill-of-Material (BOM) for manufacturing. Product individual must include individual modules or components that belongs to same product and this is handled with creating manufacturing BOM. Practically, individual means that each individual item will have own identification or serial number. Components and modules which are standard or fixed, can be used as they are in version control, unless they include order-based logic or software or there are other reasons why they should be separately identified. In system level, this means that production configuration must be on place and manufacturing BOM is generated to ERP (Enterprise Resource Planning) or MRP (Manufacturing Resource Planning).

Typical challenges, why companies struggle in this phase, is that sales model and production model does not support each other, and sales can sell products that manufacturing cannot manufacture. This leads to production errors, losses and with a lot of confusing in product delivery and in worst case, customer will get product that does not fulfil the order.

The evolution step one is prerequisite for the further evolution, evolution two full fills the need of data management of service and maintain with product individuals.

Production configurator end-result with individuals are the key for installed base management. Still manufactured product individual’s product data must be modified for maintenance organization use to support their needs. Spare-parts, classifications, service structures (sBOM), modernizations, field letters and current service information are typical information that are beneficial for maintenance organization, but any changes should be updated whenever product in the field changes or offered spare parts changes. The installed base must be designed from their perspective and to support maintenance organization with easy-to-search and easy-to-maintain data entries. Without active and current installed base, decent service business with configurable products is not just possible.

Companies that have their own ecosystem(s) and evolution three is meant to open collaboration with customers, resellers and/or partners. Connectivity to ecosystems is enabled by using APIs for sales configurator for resellers, production configurator and manufacturing documents for subcontractors or maintenance data for service partners. Even offering management could handle sharing this data with user rights, views and functionalities etc., company policies typically require the use of integrations. E.g. IoT (Internet of Things), FSM (Field service maintenance) and other systems are easy to connect to database using modern APIs.

It’s essential to own product data in all steps; product itself might be designed, sold, manufactured, delivered and serviced by 3rd parties, but the company who owns and knows the current up to date product data that Customer is actually using today, will be mastering the business. This enable companies to start cross-selling in their ecosystem when they own product and business data. It also gives flexibility to ecosystem management and lowers the risk, because data is usable for all, both searching and specially updating product individual data.

For example, car maintenance transaction: serial number and register plate will provide access to spare part data. Status regarding software updates etc. for possible home call-campaigns.

As the trends continues moving towards service-oriented business, evolution four enables companies to offer products as a service. Today, you can buy a car with the monthly payment via financial company, but you cannot buy a car as a service from the car manufacturer yet today. Tomorrow the larger share of products will be provided as a service in b-to-c as well as b-to-b markets.

Focus on Offering Lifecycle Value highlight importance of customer retention:

  • Traditionally via customer acquisition
  • Increasing focus to customer retention: renewal and purchase more products and services possible with each renewal
  • The renewal process and upselling customers is still cheaper than acquire new customers
  • Understanding customer retention is critical
  • The challenge in many companies is that the relevant data is scattered across the organisation, what lead to invisibility of cross-functional information

Customer Capital will be no longer used once as one-time invest and then worry about everything else independently; today’s offering includes also automatic service and minimum down-time as a product feature. During this transition, customer pricing can be offered based on product usage or additional periodical features, not based on one-time costs or target pricing. Examples exists today - car as a service price is different for end-user based on driving behaviour or with extra cost, driver can purchase extra power for the engine for weekend and smart connected product can configure it behaviour remotely. These are only possible if company has data about product individual, it’s upgradeability features and remote connection with usage information.

Data management perspective this changes product pricing in sales and in maintenance: one time invest changes to continuous cash flow and service parts are not separately purchased – they include to e.g. monthly payment. Customer might have constantly upgrade possibility e.g. power addition to car for a weekend, but also monthly price reduction based on car usage.

Even product as a service Is a major goal for companies, step to evolution four Is not possible, without previous evolution steps. Variantum will help you to go thru these steps one-by-one. All the steps require a mass of work and decisions. There's not shortcut to the product as a service heaven - you have to get there step-by-step.

"Yes, there are two paths you can go by, but in the long run There's still time to change the road you're on.” – Led Zeppelin

Written by Teemu Kaattari Head of Products, 19/05/2020


About Variantum

Variantum will guide you to build these steps inside your company. With our advisory team, we can make feasibility studies thru steps for more efficient business systems and processes.

Variantum Oy is Finnish privately held company which helps companies to become customer-centric through smart process automation and true offering configurability. Respond to a wider demand faster with high precision and profitability through Variantum Offering Management software suite. Offering Management is a set of tools and methods that improve business performance through automated collaboration of Sales, Production, R&D and Maintenance in any organization. Our software suite drives benefits across your delivery chain from R&D and Sales to Production and Maintenance. VariSuite is a modular product family that supports efficient integrations to most ERP, CRM, MES and CAD systems or can be used as your core PDM system.

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“Variantum’s comprehensive approach ensures that a company’s configurable product definitions are understood, compatible, and available to sales, engineering, production, and throughout the maintenance lifecycle"
—Peter Bilello, President & Chief Executive Officer, CIMdata, Inc.