The New OEM Playbook: Selling Experiences, Not Hardware
As the definition of value has changed, often without much notice, today’s leading OEMs no longer judge success by what leaves their factories. Instead, they focus on what their products enable from the moment they are used: uptime, throughput, distance covered, energy saved, prints completed, and hours of reliable service. The product itself is no longer the main deliverable – it’s the experience that matters.
This is the biggest change in the industrial economy right now. For decades, OEMs competed based on what they made. Now, leaders stand out by what their products enable customers to do and by making things so smooth that customers do not have to worry about them. The focus on hardware is ending. The experience era has begun, and those who adapt early are gaining the most.
The quiet collapse of the box
If you look past the big numbers, the signs of change are clear. Hardware-only profit margins have dropped by about 250 to 400 basis points in the last ten years. At the same time, industrial buyers, from hospital CFOs to large tech procurement teams, now make nearly 60% of new spending decisions using OpEx-friendly models. By 2027, over half of the top manufacturers are expected to get more than 20% of their revenue from software and services linked to their products.
This change has a clear impact on the boardroom. OEMs that still focus on units shipped are falling behind those that measure value by hours delivered to customers. Products with connected services earn 30 – 50% higher lifetime margins than those sold as one-time transactions. That extra value comes not from the hardware, but from the service and reliability that comes with it.
Four tectonic shifts reshaping the OEM operating model
Moving from selling products to selling experiences is not simply a marketing change. It requires a complete change in how OEMs design, sell, deliver, and monetize their offerings. As a result, four major changes are happening at the same time:
From SKUs to subscriptions: PCs are now offered as Device-as-a-Service. Network equipment is sold as Network-as-a-Service. Turbines are sold based on Thrust-Hours. Revenue is shifting from one-time sales to long-term, data-driven subscriptions.
From specs to stories: Buyers now care more about simplicity, reliability, sustainability, and the assurance that their equipment will keep working rather than technical details alone.
From warranties to wellness: Predictive service, proactive uptime, and ongoing support are replacing the old model of fixing things after they break. Now, the main measure is how long it takes for a problem to be noticed (MTBI), not just how quickly it gets fixed (MTTR).
From distribution to direct engagement: Channels still matter but owning customer data is crucial. OEMs that do not connect directly with end customers risk losing relevance.
The experience-OEM maturity curve
Leaders need a clear framework to guide this transition. To help, global OEMs are following a five-stage path:
Stage 1. Product-centric: Revenue comes from one-time sales. The customer relationship ends once the product is delivered. Any data collected is kept separate and not used widely.
Stage 2, Connected: Telemetry is added to products. Dashboards are available, but insights are rarely used to improve products or services. About 70% of OEMs are at this stage today.
Stage 3. Service-wrapped: Maintenance, financing, and software are bundled with the product, which increases margins. Still, customers often see this as nothing but a product with extra services, not the full experience.
Stage 4. Outcome-as-a-Service: OEMs make agreements based on results such as uptime, throughput, energy saved, prints completed, or distance covered. The seller takes on more risk but also captures more value.
Stage 5. Ecosystem orchestrator: The OEM becomes a platform, earning revenue from third-party services, developer APIs, marketplaces, and data products. Companies such as Apple, Tesla, and Siemens Xcelerator are examples. Future leaders could come from surprising sectors.
Moving from Stage 2 to Stage 4 will determine where most enterprise value is gained or lost in the next three years. That is why the shift is most visible today in a few key sectors.
Where the shift is most visible today
Hi-tech leads the way. Device-as-a-Service has gone from a niche option to a main business model. Top OEMs now see two to three times higher customer lifetime values from customers who use subscriptions.
Telecom equipment vendors are now very competitive. As service providers move to cloud-native, software-driven systems, OEMs that offer AI-managed network experiences will outperform those that only focus on hardware.
Manufacturing OEMs face the biggest changes. Industrial equipment is becoming smarter, more automated, and able to optimize itself. The edge is moving from mechanical skills to data expertise.
Utilities and energy are creating the most ambitious experience-focused services, such as grid-as-a-service and EV charging systems. Here, the product is a complete journey, not just a single device.
The technology spine beneath the experience
To make this transformation, companies need a digital core built around AI. That core requires five key capabilities: a unified data system that connects asset data, customer feedback, and business systems; an AI layer for automated decisions; an easy-to-use experience layer for industrial products; a flexible commerce system to support subscriptions and usage-based models; and a trust framework to ensure security, data control, and sustainability. These help enterprise buyers feel confident moving forward.
Most OEMs have some of these abilities, but few have a fully integrated digital core.
A diagnostic for the honest boardroom
Three important questions separate organizations that are ready for the future from those that are not. Use them to challenge your thinking.
If your product vanishes tomorrow, what would your customers really miss? The answer shows where your real value lies, and it is rarely just the physical product.
What share of your revenue is recurring, and how much of your future plans does it support? If recurring revenue is under 15%, your business is still focused on hardware. If it is over 30%, you are moving toward experience-led growth.
Who in your company is responsible for customer experience after the sale? If the answer is just “service” or “support,” your organization has not fully embraced the experience economy.
Where this goes next
By 2028, the top 25% of global OEMs are expected to earn over 40% of their revenue and more than half their profit from experience-driven, AI-powered services. Those in the bottom 25% will likely be bought, restructured, or merged into other platforms.
This shift benefits partners who bring deep industry knowledge in hi-tech, telecom, manufacturing, and utilities, along with strong AI engineering and design skills. Zensar brings these strengths, working with enterprises as a co-architect for future change, not simply as a technology supplier.
In the next decade, the most successful OEMs will not be those with the best hardware, but those who turn hardware into a service and a must-have experience for their customers.
The industry's rules have changed. Has your organization kept up?
Further Reading
1. Harvard Business Review — Rolls-Royce and the Servitization of Manufacturing
2. Gartner — Manufacturing Industry Research and Insights
3. McKinsey & Company — Industrial Aftermarket Services: Growing the Core
4. Deloitte Insights — Servitization: From Product to Outcome-as-a-Service
5. World Economic Forum — Industry 4.0 and the Future of Manufacturing
6. Boston Consulting Group — Digital Products and Connected Experiences