Case study: Sharing economy & product-as-a-service — an enterprise equipment leasing transformation

Why It Matters

The global product-as-a-service (PaaS) market reached $71.4 billion in 2025 and is projected to grow at a compound annual rate of 29.1 percent through 2030, according to Grand View Research (2025). For enterprise equipment manufacturers, this shift from selling capital goods to delivering outcomes represents both an existential challenge and a significant opportunity. Traditional ownership models incentivize planned obsolescence, maximize unit sales, and externalize disposal costs. PaaS reverses these incentives: manufacturers retain ownership, earn revenue through utilization, and profit from longevity, repairability, and reuse. The environmental stakes are considerable. Industrial equipment manufacturing accounts for roughly 11 percent of global greenhouse gas emissions when factoring in raw material extraction, production energy, and end-of-life disposal (Ellen MacArthur Foundation, 2024). Studies show that PaaS models can reduce lifecycle emissions per unit of service delivered by 30 to 50 percent through higher utilization rates, extended product lifespans, and closed-loop material recovery (Accenture, 2025). Yet the transition is far from straightforward. It demands new financial structures, digital infrastructure, organizational capabilities, and customer relationships. This case study examines how leading manufacturers have executed this transformation, what results they have achieved, and where the model has fallen short.

Key Concepts

Product-as-a-service vs. traditional leasing. PaaS differs from conventional equipment leasing in a critical way: the manufacturer retains not just ownership but also responsibility for maintenance, performance, and end-of-life management. The customer pays for outcomes, such as hours of operation, units produced, or compressed air delivered, rather than for the asset itself. This structure aligns the manufacturer's financial incentives with durability, efficiency, and serviceability.

Total cost of ownership transparency. PaaS models make previously hidden costs visible. When a customer owns equipment, costs related to unplanned downtime, spare parts inventory, technician training, and disposal are fragmented across departments and often underestimated. PaaS bundles these costs into a predictable monthly fee, enabling accurate total cost of ownership comparisons. Research from Deloitte (2025) shows that enterprise customers adopting PaaS for industrial equipment reduce total cost of ownership by 15 to 25 percent compared with traditional ownership, primarily through higher uptime and lower maintenance expenses.

Circular design feedback loops. When a manufacturer retains ownership across multiple product lifecycles, design engineers receive direct feedback on failure modes, wear patterns, and material degradation. This data drives design improvements that extend product lifespan, reduce material intensity, and simplify disassembly for refurbishment. Philips has documented that its lighting-as-a-service products are now designed for four lifecycle loops compared with one under the traditional sales model (Philips, 2024).

Digital enablement. PaaS depends on real-time asset monitoring through IoT sensors, connectivity platforms, and predictive analytics. Without granular usage data, manufacturers cannot price services accurately, schedule preventive maintenance, or optimize fleet utilization. The cost of IoT enablement has dropped 63 percent since 2020 according to IoT Analytics (2025), making digital infrastructure economically viable even for mid-range industrial equipment.

Revenue recognition and financial reporting. Transitioning from product sales to service revenue creates a temporary dip in reported revenue because income is recognized over the contract period rather than at point of sale. This "revenue valley" typically lasts two to four years before recurring service revenues exceed previous product sale levels. CFOs must manage investor expectations and potentially restructure balance sheets to accommodate the shift from inventory to service assets.

What's Working and What Isn't

Higher utilization rates are delivering real environmental gains. Caterpillar's Cat Product Link connected equipment fleet exceeded 1.5 million assets in 2025, enabling usage-based service models across construction and mining. Connected PaaS customers achieved average equipment utilization rates of 68 percent compared with 42 percent for traditionally owned equipment (Caterpillar, 2025). Higher utilization means fewer total machines are manufactured to deliver the same amount of work, directly reducing embodied carbon and raw material demand.

Customer retention rates are significantly higher. Hilti's Fleet Management program, one of the longest-running PaaS models in industrial equipment, reports a 93 percent customer retention rate compared with 65 percent for traditional tool sales. Customers pay a fixed monthly fee per tool and receive unlimited repairs, replacements, and upgrades. Hilti recovers and refurbishes over 250,000 tools annually through the program, diverting an estimated 4,500 tonnes of electronic waste from landfill per year (Hilti, 2025). The model now accounts for more than 60 percent of Hilti's revenue in European markets.

Predictive maintenance is reducing waste and downtime. Atlas Copco's compressed air-as-a-service offering guarantees customers a specific volume of compressed air at a defined pressure and quality level. IoT sensors on compressors feed data to Atlas Copco's monitoring center, which schedules maintenance before failures occur. The company reports a 97.5 percent uptime guarantee, with average customer energy consumption for compressed air reduced by 30 percent through continuous optimization (Atlas Copco, 2025). Equipment lifespan under the service model averages 15 years compared with 10 years under traditional ownership.

The revenue transition remains painful for manufacturers. Komatsu's Smart Construction initiative, which combines autonomous equipment leasing with drone surveying and AI-driven earthwork planning, required four years of below-historical revenue growth before recurring service income compensated for declining unit sales. During this period, Komatsu's construction equipment division reported operating margins 3.2 percentage points below pre-transition levels (Komatsu, 2025). Smaller manufacturers without diversified revenue streams may not survive this valley.

End-of-life recovery logistics are more complex than anticipated. Collecting, transporting, and sorting used equipment at scale requires reverse logistics infrastructure that most manufacturers have not built. Philips discovered that recovering lighting fixtures from commercial buildings required coordination with facility managers, electricians, and waste haulers across dozens of countries. Recovery rates for its lighting-as-a-service program reached 82 percent in the Netherlands but dropped to 54 percent in markets without dedicated collection infrastructure (Philips, 2024). Scaling reverse logistics is capital-intensive and operationally complex.

Customer resistance to "not owning" persists in some segments. Despite demonstrated cost savings, some enterprise buyers, particularly in construction and agriculture, resist PaaS models due to concerns about flexibility, data privacy, and the psychological value of asset ownership. A 2025 survey by McKinsey found that 38 percent of B2B equipment buyers cited "loss of control" as a primary objection to PaaS, even when presented with favorable total cost of ownership comparisons (McKinsey, 2025).

Financing structures are still evolving. Traditional equipment finance and leasing companies are adapting slowly. PaaS contracts do not fit neatly into existing lease accounting frameworks under IFRS 16 or ASC 842, creating friction with auditors and lenders. Several manufacturers have established captive finance subsidiaries or partnered with specialty lenders to bridge this gap, but standardized PaaS financial products remain underdeveloped.

Key Players

Established Leaders

• Hilti — Pioneer of fleet management PaaS in professional tools, with 93 percent customer retention and 250,000+ tools refurbished annually across 120 countries.
• Atlas Copco — Delivers compressed air, vacuum, and gas as a service with IoT-enabled predictive maintenance and 30 percent average energy savings for customers.
• Caterpillar — Operates a 1.5 million-asset connected fleet enabling usage-based PaaS models for construction and mining equipment with documented utilization gains.
• Philips — Lighting-as-a-service model serving 2,000+ commercial buildings, designed for four lifecycle loops and targeting full circularity by 2030.
• Rolls-Royce — "Power by the Hour" model for aircraft engines, the original industrial PaaS concept, now in its sixth decade with over 13,000 engines under service agreements.

Emerging Startups

• Rheaply — Chicago-based asset exchange platform enabling enterprises to share and redistribute underutilized equipment internally and across organizations.
• Grover — Berlin-based consumer and enterprise electronics subscription platform with 500,000+ active subscriptions and a 95 percent refurbishment rate on returned devices.
• Floow2 — Dutch B2B sharing marketplace connecting companies to share idle equipment, facilities, and personnel across industries.
• LOXO — Swiss autonomous vehicle PaaS startup offering self-driving delivery vehicles as a service to logistics operators.

Key Investors/Funders

• Ellen MacArthur Foundation — Leading circular economy advocacy organization providing frameworks, research, and corporate network support for PaaS transitions.
• European Investment Bank — Largest multilateral lender globally, actively financing circular business model transitions including PaaS infrastructure.
• Closed Loop Partners — New York-based investment firm deploying capital into circular economy businesses including product recovery and reuse infrastructure.

Examples

Hilti Fleet Management (Global). Hilti launched its Fleet Management program in 2000 and has refined the model continuously for over 25 years. Customers pay a flat monthly fee per tool, covering the tool itself, all repairs, replacements, theft coverage, and periodic upgrades to newer models. By 2025, the program covered over 2.5 million tools globally and generated more than 60 percent of Hilti's revenue in its mature European markets. The environmental impact is significant: each tool in the fleet is used by an average of three successive customers over its lifetime compared with one owner under traditional sales. Hilti's Schaan, Liechtenstein refurbishment center processes 700 tools per day, achieving a 92 percent refurbishment success rate. Tools that cannot be refurbished are disassembled and their materials recycled, with a documented 97 percent material recovery rate (Hilti, 2025).

Atlas Copco Compressed Air as a Service (Europe and North America). Atlas Copco's AIRplan offering provides customers with guaranteed compressed air delivery, measured in cubic meters per minute at specified pressure and quality, without equipment ownership. The company installs, maintains, and monitors compressor stations at customer sites, using IoT connectivity to optimize performance continuously. A 2025 deployment at a German automotive parts manufacturer demonstrated a 33 percent reduction in energy consumption for compressed air compared with the customer's previous owned compressor fleet, equivalent to 1,200 tonnes of CO₂ per year. The compressor equipment under the service model has an average operational lifespan of 15 years, with major components remanufactured up to three times before recycling (Atlas Copco, 2025).

Caterpillar Cat Reman and PaaS Integration (Global). Caterpillar's remanufacturing division, Cat Reman, recovers and rebuilds over 2 million components annually, returning them to like-new condition at 40 to 60 percent of the cost of a new part. In 2024, Caterpillar began integrating Cat Reman with its connected fleet PaaS offerings, creating a closed-loop system where usage data from connected machines triggers proactive component replacement with remanufactured parts. A pilot with a large Australian mining operator showed that integrating remanufactured components into PaaS agreements reduced per-hour operating costs by 18 percent and total lifecycle CO₂ emissions by 42 percent compared with traditional ownership with new-parts-only maintenance. The pilot covered 120 large mining trucks over a 30-month period (Caterpillar, 2025).

Philips Lighting as a Service, Schiphol Airport (Netherlands). Philips installed 3,700 LED luminaires at Amsterdam's Schiphol Airport under a pay-per-lux model in which the airport pays for light output rather than lighting hardware. Philips retains ownership of all fixtures and is responsible for installation, maintenance, energy optimization, and end-of-life recovery. The contract has delivered a 50 percent reduction in energy consumption compared with the previous lighting system and reduced lighting-related waste by 75 percent. All fixtures are designed for disassembly, with 85 percent of components by weight eligible for reuse in future installations (Philips, 2024).

Action Checklist

• Conduct a product portfolio analysis to identify equipment categories with high utilization variability, high maintenance costs, and long useful lives, as these are the strongest candidates for PaaS transition.
• Install IoT sensors and connectivity on existing product lines to build the usage data foundation required for pricing and predictive maintenance before launching PaaS offers.
• Model the revenue valley explicitly: project quarterly revenue, margin, and cash flow impacts over a five-year transition period and secure board-level commitment to sustain investment through the trough.
• Establish or partner with a remanufacturing and refurbishment operation capable of processing returned equipment at scale, with clear quality standards and material recovery targets.
• Design products for multiple lifecycle loops by prioritizing modularity, standardized fasteners, accessible wear components, and material passports that track composition through each lifecycle.
• Build reverse logistics capability incrementally, starting in markets with high customer density and favorable regulatory environments before expanding to more challenging geographies.
• Develop PaaS-specific sales compensation structures that reward recurring revenue growth and customer retention rather than unit volume.
• Create transparent total cost of ownership calculators that allow prospective customers to compare PaaS with traditional ownership using their own operational data.
• Engage with IFRS and industry groups to develop standardized financial reporting frameworks for PaaS revenue recognition, lease classification, and asset valuation.
• Track and report environmental metrics including utilization rates, product lifespan extension, remanufacturing volumes, material recovery rates, and lifecycle emissions per unit of service delivered.

FAQ

How long does it take for a manufacturer to break even on a PaaS transition? Most manufacturers report a three to five year timeline before recurring PaaS revenue exceeds previous product sale levels. Hilti, which began its transition in 2000, did not reach revenue parity until approximately 2005, but then experienced consistently higher margins and more predictable cash flows. The timeline depends heavily on the product category, contract length, customer acquisition costs, and the manufacturer's ability to extend product lifespans through design improvements and remanufacturing. Companies with strong service organizations and existing customer relationships tend to transition faster.

What environmental benefits does PaaS actually deliver compared with traditional ownership? The primary environmental benefits come from three mechanisms. First, higher utilization rates mean fewer units need to be manufactured to deliver the same total service output. Caterpillar data shows utilization increases from 42 to 68 percent, implying that roughly 38 percent fewer machines are needed. Second, manufacturer-retained ownership creates strong incentives for durability and repairability, extending product lifespans by 40 to 60 percent in documented cases. Third, closed-loop recovery ensures materials are recaptured at end of life. Combined, these mechanisms can reduce lifecycle emissions per unit of service by 30 to 50 percent according to Accenture (2025).

What are the biggest risks for companies transitioning to PaaS? The largest risk is the revenue valley: the period of reduced revenue and margins during the transition from upfront sales to recurring service income. Companies with limited cash reserves or impatient investors may face pressure to abandon the transition prematurely. Other significant risks include the capital intensity of building reverse logistics and remanufacturing infrastructure, the complexity of pricing services accurately before sufficient usage data is available, and customer resistance in segments where asset ownership carries cultural or strategic importance. Cybersecurity risks also increase as IoT connectivity expands the attack surface of connected equipment fleets.

Does PaaS work for all types of industrial equipment? PaaS works best for equipment with high capital costs, significant maintenance requirements, and variable utilization across customers. Compressors, professional tools, lighting systems, and heavy machinery are strong candidates. Products that are low-cost, disposable, or highly customized to individual users are poor candidates because the economics of recovery, refurbishment, and redeployment do not scale. Similarly, equipment in extremely remote or harsh environments where IoT connectivity is unreliable may not support the data-driven maintenance and monitoring that PaaS requires.

How do companies handle data privacy concerns with IoT-connected equipment? Manufacturers must establish clear data governance policies specifying what data is collected, how it is used, who has access, and how long it is retained. Best practices include anonymizing operational data before aggregation, providing customers with dashboards showing exactly what is being monitored, and offering tiered data sharing options. Atlas Copco, for example, allows customers to choose between basic connectivity for maintenance scheduling and full data sharing for advanced optimization services. Contracts should explicitly address data ownership, portability, and deletion rights.

Sources

• Grand View Research. (2025). Product-as-a-Service Market Size, Share, and Trends Analysis Report 2025-2030. Grand View Research, San Francisco.
• Ellen MacArthur Foundation. (2024). The Circular Economy Opportunity: Industrial Equipment and Machinery. Ellen MacArthur Foundation, Cowes, UK.
• Accenture. (2025). Circular Advantage: How Leading Companies Successfully Transition to Product-as-a-Service Models. Accenture Strategy.
• Deloitte. (2025). Total Cost of Ownership in Industrial PaaS: A Cross-Sector Analysis of 200 Enterprise Deployments. Deloitte Insights.
• Hilti. (2025). Fleet Management Sustainability Report: 25 Years of Circular Tool Management. Hilti Group, Schaan, Liechtenstein.
• Atlas Copco. (2025). Compressed Air as a Service: Performance, Sustainability, and Customer Impact Report. Atlas Copco AB, Stockholm.
• Caterpillar. (2025). Connected Fleet and Remanufacturing Integration: PaaS Pilot Results and Environmental Impact Assessment. Caterpillar Inc., Peoria, IL.
• Philips. (2024). Lighting as a Service: Circular Design, Recovery Rates, and Environmental Performance. Koninklijke Philips N.V., Amsterdam.
• IoT Analytics. (2025). State of IoT: Enterprise Adoption, Cost Trends, and Industrial Applications. IoT Analytics, Hamburg.
• McKinsey & Company. (2025). B2B Equipment as a Service: Customer Adoption Barriers and Growth Strategies. McKinsey & Company.
• Komatsu. (2025). Smart Construction Annual Report: Autonomous Equipment PaaS Revenue Transition and Margin Recovery. Komatsu Ltd., Tokyo.