Light as a Service can improve company finances

    More efficient building operations, better cash flow—and beyond


    The pandemic has dealt a blow to businesses across the world—and could continue to work its damaging effects for the foreseeable future.


    Among the uncertainties of the pandemic era, one thing is clear: it pays to have cash. In troubled times, cash-rich companies can batten down their hatches while the winds batter their competitors. There’s good reason why 85% of small- and medium-sized businesses estimate that they will run out of cash within months if the crisis continues.


    Increasingly, decision-makers trying to maximize cash flow are looking to anything-as-a-service (XaaS) models to obtain the solutions, tools, and products they need. Those things range from software to data storage to computing infrastructure to platforms to even jet engines, to name just a few examples on a growing list.


    The XaaS model is straightforward. Companies get what they need—say, computing services. But they get it without having to buy assets they don’t want—say, scores of expensive computers that start depreciating the moment they emerge from the box, and that represent a significant capex liability on a budget, one that can inhibit cash management. The computers the company uses belong to the service provider, which assumes responsibility for maintenance and for technical upgrades.


    As with leasing, XaaS offers predictable regular opex payments that are often easier to budget for than a single big upfront payment. But XaaS is even more flexible than a typical asset lease. Its flexibility comes from contract durations that match the usage patterns and lifetimes of the products, and which may be longer than typical leasing contracts, thus making the agreements cash-flow positive. Flexibility also comes from avoiding complicated asset collateral structures and instead focusing service contracts on payment streams as the main value driver, rather than on the residual value of assets.


    It’s worth pointing out that XaaS makes even more sense now, given recent accounting changes.

    IFRS 16, an International Financial Reporting Standard which took effect in early 2019, mandates putting operating leases on a company balance sheet, but it lets services payments stay off. The upshot is that, under the new accounting regime, XaaS can help keep a company’s balance sheet light. That will make it easier for the company to raise cash, among other benefits.”

    The core advantages of XaaS are:


    • Flexibility

    The old model of providing solutions offered insufficient flexibility. XaaS maximizes flexibility, allowing customers to keep up to date with the latest technology and upgrade to the most efficient applications. A company never finds itself stuck with an expensive white elephant.


    • Commitment

    Performance is guaranteed in XaaS. Flexibility helps make this true, establishing the conditions in which a customer’s needs can be met.


    • Reactivity

    An in-house support team isn’t typically on duty around the clock. An XaaS provider often is, delivering the performance that represents its core value.


    Given these advantages, it’s no surprise that the XaaS market is growing rapidly. The market reached the $93.8 billion mark in 2018 and should hit $344.3 billion by 2024. Forecasts foresee it growing by a CAGR of 24% in the period from 2019 to 2024.


    It’s also no surprise that executives are excited by XaaS.

    Research indicates that 75% of senior decision-makers believe that XaaS has had a “positive influence” on “their industry, business model, products and services.”

    What’s more, XaaS is a force multiplier for smaller businesses. Smaller businesses benefit from the efficiencies that XaaS drives, as well as from the access to new solutions, tools, applications, and technologies that they previously might not have been able to afford.


    Here’s another solution that’s now available as a service, and with game-changing results: lighting.


    Lighting as a service, or LaaS, gives a company the light it needs to fulfill its core purpose while optimizing the health and well-being of its employees—without requiring a sizable capex payment. It also relieves the company of the responsibility of maintaining lighting hardware and systems.

    Delivering Light as a Service at ArcelorMittal Sagunto, Spain

    LaaS also ensures that a company can take advantage of new tech breakthroughs without having to perform continual research—the provider does that. That’s an important point in the new age of connected lighting systems. Such systems, like Interact from Signify, provide more than top-quality LED lighting: they also serve as sensor-bearing platforms for the collection and analysis of actionable data, and for the deployment of the Internet of Things in general. Systems like Interact—whether in offices, in manufacturing facilities, in warehouses, across cityscapes, in municipal buildings, or elsewhere—will increasingly serve as ubiquitous, already-there, already-electrified platforms for sensor-enabled and data-driven IoT applications that support the new ways in which we live and work.


    It’s worth mentioning here that because LED lighting is dramatically more efficient than conventional lighting, a well-designed digital LaaS system can even pay for itself, month to month. What’s more, LaaS implementations are typically cash-flow positive. Conventional-lighting electricity plus maintenance costs are typically higher than LaaS electricity costs plus the LaaS fee. This overall reduction in lighting-related costs generates free cash flow for the company.

    The benefits extend beyond the purely financial as well, to include sustainability and carbon neutrality benefits. LED technology frequently represents “low-hanging fruit” for companies on their way to CO2- neutral operations. Some researchers, in fact, identify smart systems like LED-based LaaS as a requirement for corporate real estate owners who want to make their buildings carbon zero.


    Finally, XaaS implementations like LaaS are easy for businesses to adopt, as there is no need for investment budgets, approvals, or bank loan procedures. This clears the path for scaling up lighting investments and rapidly moving along the road to carbon neutrality.


    XaaS is a model whose time has come. It’s now moving beyond the cloud-delivered solutions where it originated, offering lighting solutions and more. XaaS is a flexible model that makes both practical and financial sense—a model that makes business easier to do.

    About the author:

    Marc Salvany

    Marc Salvany

    Head of Global Services at Signify

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