Robotics as a service (RaaS) catching fire

Much of the excitement in warehouse robotics is about what robots will be able to do next, like trailer unloading, or parcel piece picking, or autonomous case handling. But plenty of enthusiasm is out there about the increasingly popular means of acquiring them: robotics-as-a-service (RaaS).

Like the established software-as-a-service (SaaS) model, RaaS bundles the costs of running a solution into a tidy regular fee. That moves investment in warehouse robotics into the realm of operational or “opex” expense, and the advantages cascade from there, from opening up solutions to a wider base of users, to making it easier to scale system size.

The model is catching on, with some vendors having focused on it for years. For example, autonomous mobile robot (AMR) provider Locus Robotics offers its solutions purely under RaaS. Other AMR vendors also lead with RaaS, and analysts predict strong growth. According to a report from Grandview Research, the RaaS market will grow from $1.33 billion in 2023 to $4.12 billion by 2030, expanding at a compound annual growth rate of 17.5%.

The RaaS trend involves more than mobile robots. Vendors of smart, robotic picking solutions may offer RaaS, as do some providers of robotic automated storage and retrieval system (AS/RS). In short, RaaS or lease-based opex models aren’t just for AMRs; it is a way to bring in other systems.

There are nuances to RaaS. Some vendors say flexible leasing can accomplish the same core benefit of removing upfront costs. Others point out that the ultimate evolution of RaaS will incorporate performance objectives that incentivize continuous improvement.

Opex appeal

The key to RaaS is that it provides access to solutions without capital outlay, says Joe Couto, executive vice president of robotics, 3PL at software provider Körber Business Area Supply Chain.

Couto says Körber saw this appeal with the RaaS success of its partner Locus Robotics, but that not all its robotics partners offered RaaS, so Körber launched an RaaS program of its own.

“We saw from observing the market and what Locus was doing that the model works well,” Couto says. “We felt why not create our own RaaS program and really open the door to a broader market that couldn’t necessarily afford or wanted to take the capex route to investing in flexible automation.”

The Körber program taps Locus’s RaaS, Cuoto says, but it also can provide RaaS for other partner solutions, or bundle multiple partner systems into a RaaS program for one customer, add in some software functionality from Körber, or even bundle in automation like put walls or voice.

Robotics are effective at achieving measurable productivity gains, adds Cuoto, so when you can move the costs into the opex bucket, it’s an enticing option for companies struggling to find enough people to stick with mostly manual operations. “You’re either going to deploy more people to do the work, or you can deploy some flexible automation to do the work, which you can do under RaaS,” says Cuoto. “That’s quite a bit different than asking someone to write a big check upfront.”

Locus Robotics was one of the pioneers in RaaS, says Karen Leavitt, the company’s chief marketing officer. She agrees that RaaS removes barriers to adoption, but it’s more than spreading out costs. Each of Locus’s engagements starts with a study called a “concept of operations” that establishes system goals and success metrics, with regular check-ups on progress.

The Locus Robotics AMR solution handles assistive picking, with multiple bots working alongside human pickers to make them more effective by enhancing pick density. With currently around 125 customers and more than 300 sites running AMRs from Locus, the software platform learns over time from all the work going on, while RaaS includes the support and checkups to ensure goals stay on track.

“We’re trying to solve problems our customers are having on the ground tied to the growing volumes of piece handling many operations have,” says Leavitt. “What we say is, ‘OK, you’ve got an opex problem—let’s make it an opex solution.’ You in effect pay a salary to our robots to make your human workers much more effective.”

RaaS appeal may depend on industry, says Yasin Guan, chief operating officer of AMR vendor ForwardX Robotics, which offers RaaS. In manufacturing sectors like automotive, she says, operational volumes tend to be a bit more predictable compared with e-commerce or 3PL warehouses, and there’s often capex budget for AMRs, Guan notes, so capital purchase remains popular in manufacturing. By contrast, e-commerce and 3PL fulfillment centers deal with volume peaks and valleys, and so many opt for RaaS.

“They’ll compare the RaaS cost [of AMRs and the productivity they can achieve with AMRs] with trying to hire more associates, and whichever is less costly and more effective, they will go with that,” says Guan.

Leasing as alternative

In some RaaS programs the vendor owns the robots, but another approach is leasing or third-party financial companies that offer leasing or “pay-per-pick” agreements that still avoid large upfront costs.

“Today’s leasing options are flexible and customizable,” says Bob Hoffman, senior director of consulting, e-commerce and retail for Swisslog Americas.

Leasing options extend well beyond traditional capital leasing arrangements, Hoffman explains, and can build in soft costs such as software, support and configuration. Additionally, it’s possible to structure a two-tier, pay-per-pick arrangement.

Under this model, a baseline cost for each pick is established based on the expected labor savings from the automation. The first tier covers a minimum yearly pick volume, while the second tier would offer a typically lower per-pick cost for volumes above the base tier, Hoffman explains.

Importantly, leasing can apply to many types of systems, says Hoffman, including robotic AS/RS like an AutoStore solution, or other types of proven materials handling automation.

For companies that want to preserve capital, but are struggling without the added efficiencies of warehouse automation, leasing can be a budget-friendly way of bringing in new systems that deliver the efficiencies and payback level the operation needs, Hoffman adds.

“Some companies may even be getting to the point of going out of business if they don’t buy automation, but they don’t want to consume capital due to concerns about the economy,” Hoffman says. “Leasing gives them an option that can meet their needs and keep them cash neutral or even cash positive.”

E-commerce and 3PL operations tend to find that RaaS suits the need to scale AMR use around peak seasons.

RaaS and leasing agreements are available and getting used for AutoStore solutions, agrees Robert Humphry, vice president of business development and sales for AutoStore integrator SDI Element Logic. He agrees there are multiple ways to get automation into the opex realm, including RaaS, leasing or hybrid approaches.

For instance, it’s possible to pay for the storage grid for an AutoStore system as either capital purchase or a fair market value lease, but do a RaaS arrangement for the robotics, software and support; or put all the solution elements—infrastructure, robotics, software and support­—under a pay-per-pick, RaaS agreement.

“There is definitely a ton of interest in RaaS,” says Humphry. “It’s something we’re discussing within every single opportunity we’re working on right now. But RaaS is just one [financing] scenario among others we can offer.”

The capex model for acquiring AutoStore solutions remains dominant, says Humphry, but RaaS and leasing hold appeal to smaller enterprises that may have figured robotic AS/RS was too big of a leap.

“RaaS essentially democratizes access to these advanced automation systems,” Humphry adds. “The pay-per-pick nature of that RaaS structure may also better align with the growth and business model changes that end-user organizations are forecasting.”

According to Bendik Førre, chief strategy officer at AutoStore, its pay-per-pick model has drawn strong interest, as have other opex-based models available in its partner ecosystem. While traditional capital purchase remains the prevalent means for acquiring AutoStore solutions, he says, the pay-per-pick model offers multiple advantages, starting with opening access without a big capital budget layout.

Flexible leasing options exist to move many types of warehouse robotics and automation into the opex expense realm.

“Additionally, companies can scale their usage up or down as needed, aligning costs with actual performance requirements,” Førre says. “Lastly, I would say one of the key benefits of such a model is that it encourages a closer alignment of incentives between AutoStore, its distributors and its customers. All parties benefit from system efficiency, maximum uptime and optimal performance.”

Lease arrangements can be made for RightHand Robotics’ intelligent piece picking solutions, says David Schwebel, RightHand’s head of sales and strategic business development, with much of the interest coming from smaller organizations and some large enterprises who lease key aspects of their supply chains.

“In general, you’re seeing more and more customers asking to see the options side by side—what a capital purchase would look like with all ongoing costs like maintenance fees, and they’re comparing that to different RaaS offerings, or other pure or hybrid opex models.”

Schwebel says an RaaS trend to watch is the emergence of models that take a shared benefits approach to the fee structure. These arrangements would closely track the throughput of a system, and when the system is exceeding the agreed upon performance, the user company and vendor share the benefits.

You can structure a shared performance model in multiple ways, adds Schwebel. “The companies could agree to share in improvement beyond a minimum threshold, at whatever split they agree to—it doesn’t have to be 50/50,” says Schwebel. “The idea is that as the system improves over time, both companies should share in the value of that system improving.”

Schwebel says the shared performance twist on RaaS is still in its infancy, but is well suited to warehouse robotics that use AI. “Solution providers employing AI and machine learning have the strongest opportunity ever in the world of materials handling to keep improving on system efficiency because these platforms are always learning how to do things better,” he says.

RaaS directions

The RaaS trend already shows variety, including pay-per-pick models and leasing, as well as pure RaaS programs where the vendor owns the robots.

Now with the July 2023 announcement from warehouse automation provider Symbotic that it is partnering with SoftBank on a joint venture called GreenBox to build out a network of automated, multi-tenant DCs running on Symbotic’s technology, we have the concept of “warehouse-as-a-service,” which is more than RaaS in that GreenBox would manage and run these automated DCs for multiple clients as a service.

While many vendors see growing momentum for RaaS, traditional capital purchase has by no means gone away.

“RaaS is definitely emerging, but the majority [of new customer wins] have continued to be capex deals,” says Noah Maynard, vice president of solutions architects at robotics automation company Berkshire Grey.

However, adds Maynard, for companies just stepping into advanced solutions, RaaS is attractive because it bundles in support and services, even onsite support if desired. “With RaaS, there’s no scary new world the user company is entering where they’re going to have to worry about maintaining equipment they haven’t been used to maintaining in the past,” says Maynard. “Remember that the ‘S’ in RaaS stands for service, so those bundled services should be all encompassing.”

The transition to RaaS has been dramatic for some vendors. Josh Kivenko, chief marketing officer of Vecna Robotics, whose large-format AMRs function as autonomous lift trucks and tow tractors, says that when he joined Vecna a couple of years ago, very little of its sales were under RaaS, but that’s changed in a major way, with more than 90% of the company’s sales in the past 12 months being RaaS.

“Robotics as a service isn’t just what we offer—it’s who we are as a company,” says Kivenko.

An underlying benefit of RaaS is tight mission alignment between vendors and users as to how the automation performs, adds Kivenko. Often specific throughput goals are built into agreements, like pallet drops per hour, adds Kivenko, while Vecna’s team does a dashboard review with clients every couple of weeks to ensure goals stay on track.

All this means RaaS isn’t just a different way to acquire automation, it shapes up as a different way to manage the automation.

“With RaaS, I’ve got to constantly be earning the customer’s business,” Kivenko says. “With RaaS, it’s not a transaction; it’s a relationship. And when that happens, you talk about more workflows, and throughput attainment, and how well the system is functioning.”