Robotics as a Service is the Key to Unlocking The Next Phase of Market Development

RaaS has the potential to significantly accelerate the rate of adoption of robotic solutions across a range of market verticals. RaaS has a number of advantages over a simple product-selling model. The capital burden is taken off customers, allowing them to enjoy better solutions for a competitive price. For producers, the income is initially less but is steady and predictable over time, allowing for more strategic planning and investment. As the solutions are often cloud-enabled, the burden of IT infrastructure is taken off customers as well. What is more, services companies will succeed or fail on their ability to deploy their solutions fast, reducing the time it takes to set up robotics across a range in market verticals. This in turn will accelerate adoption and quicken the pace of innovation across the robotics industry, as more sophisticated and expensive platforms get deployed at greater speed.

Why is the shift of business practice to a service-based model for some of the most innovative robotic providers consequential? Quite simply, it affects the producer, the customer, and all the markets that require robotics. In the long term, they open up the robotics industry to faster deployment, innovation, and profitability. In this section, ABI Research evaluates the advantages for the producer, the customer, and the robotics industry at large. The combination of less capital responsibility and the ability to deploy more sophisticated services creates a win-win situation for the customer.

For robotics manufacturers, the move to a service model is an enormous opportunity, with real long-term benefits and the chance to increase the scale of the business in a much shorter space of time. That being said, there are risks entailed with taking on more capital responsibility and having to run a more complex and distributed services company.

Combined venture capital and private sector funding of robotics has accelerated in the last 3 years. Based on our research, FY 2015 saw more than US$1,482 million in funding for 100 investments. This was a huge jump in investment, up from the US$1,006 million that had been investment from FY 2011 to FY 2014. In 2016, the increase in investment was less pronounced but still grew by 48% to US$2,208 million spread out over 169 investments.

The service model entails risk for the producer, and so their perception of whether that risk is worthwhile is determined in large part by what VCs and investors think. What is more, most of the service companies need some substantial capital investment to get off the ground. Higher investment activity will thus translate into companies with more ambitious business models.

While the jump in investment has provided robotics companies with the necessary capital in conduct more ambitious operations through services, there is a larger macroeconomic trend underlying this—a tightening labor market. According to the U.S. Bureau of Labor Statistics, the American civilian labor force increased by 13.1% between 1996 and 2006. In the time between 2006 and 2016, that increase dropped to 5.1%, with less than half the number of workers added than the previous decade. The situation is more pronounced in Europe and developed East Asian economies like Japan and South Korea. While there are serious concerns about what robotics will mean for employment in the comparatively young global south, developed economies with incremental or non-existent population increases depend on robotic deployment to improve and maintain current levels of productivity.

To deploy the necessary solutions in a reasonably short space of time, RaaS is preferable to individual companies buying platforms and incorporating them independently. It also helps to use licensed cloud-based platforms rather than investing in your own IT infrastructure. When labor is short, robots are not just necessary to markets like warehousing, but they need to be introduced quickly.  

The biggest opportunity for RaaS is likely to occur in warehousing, particularly that related to e-commerce. The rise of the Internet, and more specifically of e-commerce, has squeezed retail and in many cases shortened the supply chain from manufacturer to distributor to ultimate customer. This is challenging for e-commerce companies because the logistics of shipping individual products to customers can be very expensive. While it is comparatively cheap to ship products in bulk to retailers, it is a much more expensive and complex endeavor to deliver to customers on a unit-by-unit basis.

Additional shipping costs are a problem because customers want their products for the same price as they would get them in the supermarket but with the added convenience of having it shipped to their door. For this reason, e-commerce companies need to reduce running costs and increase productivity. While technology websites are replete with concerns about companies replacing humans with machines, in large part the shift is occurring in contexts where companies have very little choice but to increase productivity through automation. In the case of warehousing in particular, there is a tight labor market and many distributors cannot employ enough people in the local area, hence they choose companies like Locus Robotics.

A reason for the tight labor market is that the location of warehouses is optimized for the vertical markets they are catering to, the shortest possible distance to their customers, and the cost. As a result, they will often locate in cities or areas that don’t necessarily have the largest labor markets.

RaaS companies hoping to provide solutions to this sector include Locus Robotics and 6 River Systems. Both manufacture mobile robots that can interact with human workers, are packed with advanced sensors, and can carry payloads to provide logistics support. Both of these companies were conceived in the aftermath of Amazon’s purchase of Kiva Systems (a mobile robotics product now used exclusively in Amazon’s warehouses). In 6 River’s case, the founders were former executives of Kiva, and in Locus’s case, the founders previously used Kiva robots, and upon Amazon’s purchase, found themselves in need of an alternative.

E-commerce is just one of many markets where RaaS is becoming more common. There are initial efforts to deploy robots as part of farming-as-a-service (FaaS), exemplified by the Small Robot Company in the United Kingdom. In hospitality, Savioke is deploying mobile robots for use in hotels, and Aethon is targeting the health sector. Sarcos Robotics, a robotics manufacturer that was formerly part of U.S. defense giant Raytheon, is deploying advanced robotic platforms for use in mining, manufacturing, construction, and other markets, and hopes to make a lasting change to those same sectors with the development of an exoskeleton, slated to be deployed for 2019.

In conclusion, following the acceleration in interest toward robotics in 2015, RaaS is the central development in the next strategic phase of the robotics industry. Through its adoption, robots will stop being confined to a limited number of manufacturing-related use cases and will become ubiquitous across a greater range of markets.