Robotics look to expand as a service during the coronavirus pandemic

The robotics industry is looking to copy the successful software-as-a-service (SaaS) model as use of robots accelerates during the COVID-19 pandemic.

Why it matters: A major challenge to the spread of industrial robots has been their high initial cost. A model that charges companies regularly for robots based on use can offer better returns for robotics companies and widen their potential customer base.

What's happening: Due to concerns over vulnerable supply chains and the potential for infection of human workers, the COVID-19 pandemic has spurred growth in the robotics sector.

• 41% of executives surveyed by Ernst & Young say they expect to accelerate automation because of the pandemic.
• Since mid-April, the performance of the ROBO index fund, which tracks companies in the automation sector, has outperformed the S&P 500.

Yes, but: There are still plenty of obstacles holding back the automation wave.

• Traditionally, industrial robots have been sold or leased to companies. That requires a potentially large one-time capital expenditure that could discourage some customers.
• It also discourages VCs, since hardware companies rarely enjoy the revenue multiples that SaaS startups do.

In response, robotics companies are pursuing a robotics as a service (RaaS) model, where customers essentially subscribe to industrial robots as they might a cloud service like AWS.

• New customers find it easier to employ an industrial robot if they know they can pay for it over the course of months or longer based on use, says Austin Badger, the director of Silicon Valley Bank's frontier tech program and the author of a new report on robotics.

• "This leads to smaller and more mobile and specialized robots" that can service a number of industries," he says.

What to watch: Better financing models help, but ultimately we'll only see the robopocalypse if robots really can effectively replace human workers.

• We're not quite there yet, as an Information story about Apple's struggles to expand the use of manufacturing robots in China demonstrates.

The bottom line: Everyone wants to be in the subscription business — including the bots.