The last 5 years have seen the generalisation of SaaS (Software as a Service) models, fuelled by the ever-increasing bandwidth of digital networks and decreasing storage costs in the cloud. No initial investment, no risk of obsolescence, flexibility to add or remove users, services, or options easily, and the assurance of having a permanently up-to-date system have guaranteed the popularity of this model.
The lighting industry is currently seeing a similar shift, borne likewise out of a seismic technology shift. The cost of LED lighting equipment has decreased by 94% since 2008, while the light output per Watt is at least 5 times better than that of incandescent lighting. LEDs used to be that little red dot that told you your TV was in sleep mode. Now they might make up the actual screen of your TV, and possibly provide most of the lighting in your home.
The attraction of LED lighting compared to incandescent or fluorescent lighting is simple : great longevity, low energy consumption, and fantastic colour rendering. Up to now the only hurdle to its widespread adoption was initial investment. Tearing down the complete lighting set-up in a supermarket or factory to replace it with LED systems can easily represent hundreds of thousands of euros of investment.
From owning assets to acquiring a service
However the use of alternative funding structures has opened up new ways for companies to access lighting upgrades without stumping up the initial capital or taking on additional debt. An increasing number of suppliers offer customers the ability to lease the lighting assets for a fixed monthly fee, which includes supply and installation.
As LEDs offer such impressive energy savings – coupled with the reduction in maintenance costs – this structure is essentially self-funding, enabling customers to start making savings straight away. Even after financing, end users often benefit from net positive cash flows.
While this model has certainly made it possible for more organisations to access lighting upgrades, many of which may not have had the means to do so otherwise, the speed of LED evolution means that lighting partners need to re-evaluate what constitutes best value for their customers. In many cases, that means establishing a truly adaptable and upgradable funding mechanism that enables customers to keep pace with the next generation of lighting solutions.
In this model customers pay a fee for the lighting service, rather than taking on a traditional operating lease. The key benefit for the end user is that it removes the hassle and the risk – the supplier is obligated to ensure the lighting performs as required and the customer simply gets a guarantee that it’s going to work. Ownership and responsibility for the performance of the system passes from the customer to its supplier.
What’s more, the lighting partner provides just one point of contact for the customer with the system management all taking place behind the scenes. Offering a full turnkey solution, this type of service partner can supply the design, financing, installation, maintenance, monitoring and responsive performance adjustments (such as colour tuning and dimming.)
Lighting as a business performance enhancer
Perhaps the most significant aspect of this type of arrangement, however, is that it allows the service provider to bring upgradeability to the lighting, potentially enabling performance improvements to be made across the contract term. Therefore, as technology continues to develop, add-ons such as embedded Li-Fi (Light Fidelity, a wireless communication technology similar to Wi-Fi but carried by light), data gathering technology and smart software upgrades can be incorporated into the lighting provision as required.
In this way, the lighting begins to offer much more than simply energy and financial savings. It becomes a vehicle through which organisations can grow and develop their very core business through the application of smart services. For example, retailers can implement intelligent positioning systems to provide better customer service in-store and improve their data intelligence. Hotels can begin to offer seamless WiFi throughout their premises and achieve next-level monitoring of facilities and services.
Tremendous technological innovation is continuously reshaping and redefining the possibilities lighting can offer. The old structures are no longer applicable and new business models and relationships are required. To learn more about how Enabling Procurement helps its clients select the best technology and finance partners to implement LaaS, feel free to contact Greg Wanlin on +33 (0)6 11 91 34 77.
