Leading Medical Technology Companies Are Using Servitization to Generate Revenue

Service revenue now accounts for up to 30% of total revenue in leading MedTech and life sciences companies. This shift marks a fundamental transformation in how medical device manufacturers think about their business models.

Gone are the days when equipment sales alone drove financial success. Today's most successful MedTech organizations build lasting relationships through comprehensive service offerings that extend far beyond the initial sale.

Here, we’ll explore how servitization has evolved into a business imperative in field service.

The Revenue Case for Service

Medical device companies face mounting pressure to diversify their revenue streams. Although equipment sales remain important, they're increasingly similar to other products in various markets, leading to reduced profit margins.

Service, and servitization in particular, provides an answer.

Servitization is a business strategy where companies shift from selling standalone products to offering integrated bundles of products and value-added services, creating recurring revenue streams and deepening customer relationships. Companies that master service delivery create predictable, recurring revenue that smooths out the volatility inherent in capital equipment purchases.

The New Key to Customer Retention

Customer retention depends heavily on service quality. Healthcare providers invest millions in medical equipment. They expect that equipment to perform reliably.

When devices fail, patients suffer and hospitals lose revenue. Service teams become the primary interface between manufacturers and customers after installation.

Jatin Thakkar, GM Global Services and Solutions at Carestream, explained the connection during a panel discussion at Field Service East 2025 called "Understanding and Aligning Service Revenue within your Organization.”

"Service now accounts for up to 30% of revenue, and 70-80% of our future sales are to existing customers. The way to get that is to make sure those customers are always afforded excellent services that are backed by good service propositions and delivery.”

This creates a virtuous cycle. Strong service performance leads to equipment repurchases, while equipment repurchases expand the installed base.

Finally, a larger installed base generates more service opportunities, and the cycle continues.

Servitization Models Transforming MedTech

Medical device companies deploy several distinct service models to capture revenue opportunities, and each addresses different customer needs and risk profiles. Here are some of the most common in the medical manufacturing industry.

Equipment-as-a-Service

Equipment-as-a-Service represents perhaps the most dramatic shift in service revenue models, but it is also a familiar one. Consumers often rent IT equipment for long-term use, sometimes over several months or even years.

This model applies the same concept to medical technologies. Rather than purchasing devices outright, healthcare providers pay recurring subscription fees to use products or, often, access extended cloud-based features.

These subscriptions typically bundle the equipment itself with maintenance, software updates, and consumables. Customers can shift spending from capital budgets to operating budgets.

This appeals particularly to smaller healthcare organizations with limited capital access.

Outcome-Based Contracts

Outcome-based contracts tie pricing to equipment performance rather than time-based or usage-based fees. Manufacturers guarantee specific uptime levels or availability metrics to customers in exchange for reliable revenue.

In this model, manufacturers have extra incentives to keep devices operable: If they underperform, manufacturers absorb the financial penalty.

This model requires sophisticated remote monitoring and predictive maintenance capabilities. It also demands tight integration between product engineering and field service teams.

Tiered Service Plans

Extended warranties and tiered service plans offer customers a choice. Basic plans might cover parts and labor during business hours.

Premium offerings add 24/7 support, loaner equipment, and priority response times. Comprehensive packages include everything from installation through end-of-life disposal.

Lifecycle Service Management

Lifecycle service management captures value at every stage of a device’s lifespan.

Installation and training represent the first touchpoint, providing service teams with a unique opportunity to demonstrate their expertise and even upsell. Preventive maintenance and calibration services follow, allowing the manufacturer to keep devices up and running longer.

Finally, software and hardware upgrades extend equipment life, while refurbishment and remarketing programs extract residual value from retired devices.

Technology Enabling Service Growth

Service models rely heavily on technology infrastructure. Connected devices provide the foundation for proactive service delivery.

Remote Diagnostics and IoT

Remote diagnostics transform how service teams respond to equipment issues as sensors continuously monitor device health and send data back to the service provider. When parameters drift outside normal ranges, systems alert service teams automatically.

Technicians often resolve issues remotely without dispatching teams to customer sites. This reduces response times and eliminates travel costs.

Algorithms and Machine Learning

The connectivity of the devices makes this possible, but it’s often up to algorithms and machine learning to identify failure patterns in recorded data. Ideally, service teams can intervene before breakdowns occur.

In this way, hospitals avoid unexpected downtime, while manufacturers reduce costly emergency service calls.

Research shows these capabilities deliver measurable results.

According to a 2025 Field Service Next Insights Research Report on the state of AI in North American field service, 53% of field service leaders say their AI predictive maintenance capabilities are very effective.

Digital Service Platforms

Digital service platforms can coordinate complex service delivery operations across extensive customer accounts. This empowers field service management systems to optimize technician scheduling and routing, often automatically.

These capabilities are extended to the customer as well. Customer portals provide self-service options for basic troubleshooting and parts ordering.

When data flows into these systems, data analytics can identify opportunities to improve service efficiency and quality.

AI and Automation

Finally, medical technology manufacturers are leveraging AI and automation to amplify human capabilities. Intelligent systems match service requests with the best-qualified technicians based on skills, location, and availability.

AI can be connected to knowledge bases and knowledge management platforms, which capture institutional expertise and make it accessible to field personnel. Automated workflows handle parts ordering, inventory management, and warranty administration.

Organizing for Service Success

Technology alone doesn't guarantee service revenue growth. Organizational alignment matters just as much.

Service must function as its own profit center with dedicated P&L responsibility. When service operates as a cost center buried within manufacturing or sales, it lacks the autonomy and resources needed to grow. Service leaders need direct access to executive decision-making.

Cross-functional alignment prevents service from becoming siloed. Sales teams must understand how to sell service contracts, not just equipment. Finance needs visibility into service economics. Product development should incorporate field intelligence about equipment reliability and customer workflows.

Metrics and KPIs provide a common language across departments. Revenue and margin targets establish financial accountability. First-time fix rates and response times measure operational performance. Customer satisfaction scores track relationship quality. Lifetime customer value quantifies the long-term impact of service investments.

Breaking down internal barriers accelerates service growth. Product engineers benefit from field data about failure modes and usage patterns. Manufacturing teams learn how design choices affect serviceability. Service organizations gain earlier visibility into new product launches.

Navigating Implementation Challenges

Organizations face several predictable challenges when transforming their service business models. Success requires anticipating and proactively addressing these obstacles.

Cultural Resistance

Sales teams often struggle to shift from traditional transactional approaches to relationship-based service selling. Customers may question paying for services they previously received for free under warranty, and technicians sometimes resist new administrative requirements linked to outcome-based contracts.

Infrastructure Gaps

Legacy systems often lack the necessary data integration for remote diagnostics. Technician skill sets may not align with the demands of software-intensive equipment, and parts inventory processes might not support the guaranteed response times expected under newer service models.

Resource Constraints

Building service capabilities demands significant investment in technology, training, and talent. Returns on these investments usually take months or years, while finance teams often seek faster paybacks.

Here are some best practices for overcoming these challenges:

• Develop clear customer value propositions that address real needs.
• Pilot new service models with friendly customers before wider rollout.
• Invest in both technology platforms and workforce development.
• Rigorously measure results and communicate successes internally.
• Secure executive sponsorship to provide political cover and support during transition.

Using Servitization as a Revenue Strategy

Servitization represents more than an incremental revenue opportunity for MedTech companies. It fundamentally reshapes business strategy and market position.

Medical device manufacturers must treat service transformation as a strategic priority, not an operational afterthought. Those who invest in service capabilities, align their organizations appropriately, and execute with discipline will capture disproportionate value in the years ahead.

Those who don't risk becoming mere commodity suppliers risk competing solely on equipment prices.