Product as a Service (PaaS): Everything You Need to Know in 2026

Last updated: October 2026

What is Product as a Service (PaaS)?

Product as a Service (PaaS) is a business model in which customers pay for ongoing access to a physical product instead of buying it outright. The provider keeps ownership of the product, charges a recurring fee, and usually bundles services such as delivery, maintenance, repairs, upgrades or insurance. When the customer no longer needs the product, it comes back to the provider to be refurbished and used again.

Instead of paying to own a product, customers pay for what the product enables: mobility, a working coffee machine, a stroller that fits their child right now, or fitness insights from a wearable. The focus shifts from ownership to outcomes, and from one-off transactions to long-term customer relationships.

In simple terms: Product as a Service means paying for what a product does, not for owning it.

A note on the acronym: in this article, PaaS means Product as a Service. In software, PaaS usually stands for Platform as a Service, which is a cloud computing model and unrelated to physical products. Product as a Service is also part of a wider family of "as a service" models, often called anything as a service (XaaS).

How the PaaS business model works

Every Product as a Service model follows the same basic loop:

• The provider keeps ownership. The product stays on the provider's (or a financing partner's) balance sheet as an asset, and is tracked individually, usually by serial number.
• The customer pays for access. Instead of one purchase price, the customer pays a monthly fee, a fee per use, or a fee for a fixed period. Payments are collected automatically through the provider's payment service provider.
• Services are part of the package. Delivery, maintenance, repairs, swaps, upgrades and insurance are bundled into the fee, which is what makes the offer more attractive than buying.
• The product comes back. At the end of the contract, the customer returns the product, swaps it, extends, or buys it out.
• The product goes out again. Returned products are checked, refurbished and sent to the next customer. Each additional usage cycle earns revenue from the same asset.

That last step is where the economics of PaaS come from. A product sold once earns its margin once. A product that goes through three or four subscription cycles can earn its purchase price several times over, provided it is durable enough and the returns and refurbishment process is efficient.

Types of Product as a Service models

PaaS is an umbrella term. In practice, companies use one or more of these models:

• Product subscription: a recurring monthly fee with a minimum term but no fixed end date. Services are usually included, and customers can keep the product as long as they need it.
• Product rental: access for a fixed, agreed period, such as a weekend, a season or six months. The contract ends unless it is renewed.
• Subscribe to own (rent to own): the customer pays monthly and can take ownership at the end of the term, or buy the product out early. From 20 November 2026, many of these contracts fall under the EU's new Consumer Credit Directive (CCD2).
• Membership: a recurring fee that gives access to a pool of products or services, for example swapping equipment as needs change.
• Try before you buy: a short subscription that converts into a purchase if the customer decides to keep the product.
• Pay per use: the customer pays based on actual usage, which is common for connected B2B equipment.

Is Product as a Service the same as renting?

Yes and no. Rental is one form of PaaS, but most PaaS models go further. A classic rental gives access to a product for a fixed, agreed period, and the service stops when the contract ends. A product subscription bundles the product with services such as maintenance and repairs, has a minimum term but no fixed maximum, and is designed for a long-term customer relationship. For a full comparison, see subscription vs rental vs leasing.

Why companies are moving to Product as a Service

In our interview series on PaaS, Florian Andre, founder of the subscription consultancy P2S, and Scott Galvao, CEO of circuly, described the same handful of motivators again and again. From the manufacturer's side:

• Predictable, recurring revenue. One-off sales make revenue lumpy. Florian pointed to Hilti, which generates more than 80% of its business as recurring revenue.
• Monetising the full product lifecycle. In a sales model, the manufacturer sells and forgets. With PaaS, it keeps ownership and earns from the product across several customers and usage cycles.
• Escaping price competition. In saturated markets where products look interchangeable, bundling services such as maintenance, repairs and upgrades is a way to stand out on more than price.
• Faster sales cycles in B2B. Florian described a Swiss medical device manufacturer selling to large pharmaceutical companies. Budget wasn't the problem, approvals were. Offering the devices as a service simplified procurement and shortened the sales cycle significantly.
• Regulatory and sustainability pressure. Keeping ownership makes it possible to recover, repair, refurbish and reuse products instead of losing track of them after sale.

From the customer's side:

• Access without the upfront cost. Customers want premium products without paying the full price in one go. Scott described a client selling high-end e-bikes for up to 10,000 euros: a subscription lets customers try the bike, get attached to it, and then decide whether to buy.
• Flexibility. For products that are used seasonally, for a limited time, or that are quickly outgrown (skis, garden tools, strollers, kids' bikes), access over ownership simply makes more sense.
• Always the latest version. For fast-moving technology such as smartwatches, phones and laptops, a subscription means upgrading without buying a new device every year.
• Convenience. The provider handles maintenance, repairs and swaps, and usually does it better than the customer could.

And on profitability, Scott shared that some circuly customers earn three to five times more over a product's life by offering it on subscription than by selling it once. For more on the business case, see the top benefits of a subscription model.

Product as a Service examples by industry

Product as a Service is not limited to one sector. It already works across a wide range of durable, physical products, especially where upfront cost, maintenance, short-term use or fast upgrades matter. Here are examples by industry.

Bikes, e-bikes and micromobility

Bikes are one of the most established PaaS categories. Swapfiets built a business around a monthly bike subscription with repairs included. Manufacturers and retailers including Riese & Müller, Decathlon, Tenways and Nearbyk offer bike subscriptions, and kids' bike subscriptions such as Bike Club and Loopz let families swap bikes as children grow. See what a bike subscription is and how it works, the leading bike subscription companies, and bike and scooter subscriptions.

Cars and mobility

Car subscriptions such as FINN bundle the car, insurance, maintenance and registration into one monthly fee. Carmakers have followed, from Volkswagen to smaller providers like Moover. Read more in mobility subscriptions: everything you need to know and car subscriptions.

Consumer electronics and devices (device as a service)

Phones, laptops, wearables and other tech lose value fast and are upgraded often, which makes them a natural fit for device as a service (DaaS). Grover and Raylo rent consumer tech, Refurbly and Swapphone offer refurbished phones on subscription, and HP offers laptops and printers as a service to businesses. Two of the best-known hardware-as-a-service models are covered in our case studies on WHOOP's business model and how Peloton built a hardware-as-a-service business. For more examples, see the tech companies piloting device as a service and consumer electronics subscriptions.

Furniture

Furniture subscriptions serve people who move often, furnish temporary homes or offices, or want to change their interior without buying new. Examples include Homebound in the UK, Poppy with rent-to-own furniture, and Bloom & Wolf for home furnishings. Read the full guide to furniture as a service or see furniture subscriptions.

Baby and kids' products

Children outgrow strollers, car seats, cots, clothes and bikes within months, which makes buying new each time expensive and wasteful. Brands such as Bugaboo and Stokke have launched subscriptions, alongside specialists like StrollMe, Axkid for car seats, Loopi, Nomadi and Tribu Box for toys. See baby goods subscription companies and baby equipment subscriptions.

Home appliances

Coffee machines, water filters, washing machines and air purifiers need regular maintenance and consumables, so customers value having the provider take care of them. Examples include Captn Coffee, HydrateMe and LG's appliance subscription in Asia. Read our guide to home appliance as a service and the interview with Miele on its subscription offer.

Medical equipment

Hospitals, clinics, care providers and patients increasingly rent or subscribe to medical devices instead of buying them, from mobility aids to lab equipment and defibrillators. Providers such as med4rent and pulse4all run this model, and Philips offers medical equipment as a service to hospitals. See medical device as a service, our guide on how to start a medical equipment rental business, and medical equipment subscriptions.

Equipment, tools and machinery (equipment as a service)

In B2B, Hilti's fleet management service is one of the best-known PaaS models: construction companies pay a monthly fee for tools, including repairs and replacements. Industrial manufacturers offer compressors, dishwashers, HVAC systems and production equipment on a pay-per-use or subscription basis, often with sensors to monitor usage and plan maintenance. Read more about equipment as a service (EaaS) and machinery subscriptions.

Sports, outdoor and seasonal equipment

Skis, kites, surfboards, camping gear and fitness equipment are often used for a season or a single trip. Subscriptions from providers such as Eddy's Adventure, Line Up, Paceheads and Antelope by Beurer give access without the storage and resale hassle.

Eyewear

Prescription glasses are a newer PaaS category. Mister Spex launched an eyewear subscription in Germany, and Synsam offers one in the Nordics. See eyewear as a service and eyewear subscriptions.

Music equipment, energy and more

Musical instruments and studio gear (for example soundoo), solar panels, heat pumps and batteries are also offered as a service. Energy companies such as Enpal in Germany rent solar systems to homeowners for a monthly fee, with installation and maintenance included. For the full overview of sectors, see industries using subscriptions for physical products, and for detailed lessons from companies that made the shift, read PaaS case studies from Philips, Riese & Müller and more.

Does Product as a Service make sense for your product?

In more than six years of helping companies move to PaaS, we've seen that it doesn't work for every product. The key question is simple: does access to the product create more value for the customer than owning it? When access solves a real problem (a high upfront cost, short-term use, maintenance hassle or fast obsolescence), PaaS is a strong fit. When it doesn't, the model struggles.

Product characteristics that make PaaS viable

• High quality and durability. The product has to survive several usage cycles. Florian noted that all of P2S's clients offering subscriptions sell premium products in their niche.
• A high purchase price. Spreading a large upfront cost into manageable monthly payments is one of the strongest reasons to subscribe.
• Maintenance needs. Products that need regular servicing are easier to subscribe to than to own, because the provider handles the upkeep.
• Frequent upgrades. Products that improve quickly, like phones and wearables, let customers always have the latest version.
• Seasonal, temporary or hobby use. If customers only need the product for a season, a trip or a phase of life, owning it makes little sense.
• Resale value. If your product sells well on second-hand marketplaces, there is demand for it beyond the first owner, and you can earn from the second and third use yourself.
• Connectivity (for B2B). For equipment, sensors that report usage and condition make pay-per-use pricing and predictive maintenance possible.

Signs your customers are ready

• Competitors already offer subscriptions or rentals for similar products.
• Customers hesitate at checkout because of the price, or ask about instalments and flexible plans.
• You have a stock of high-quality returns or open-box products that are hard to sell as new. Scott described a company that turned a warehouse of returned products into a profitable subscription business.
• Your customers tell you so. Florian's advice is to run customer interviews before investing, to test whether the subscription solves a real problem or is just a hypothesis.

For a detailed checklist with examples, see our resource on determining whether a subscription model suits your business and which products are perfect for a subscription business.

How PaaS affects cash flow and financing

Moving from one-off sales (large upfront payments) to recurring revenue (smaller monthly payments) changes your cash flow. Florian explains it with the "fish model": at the start, costs rise while revenue dips, creating a fish-belly shape in the cash flow curve. Once enough subscriptions are running, revenue becomes predictable and grows with every new customer.

Companies typically bridge the dip in one of these ways:

• Gradual self-financing: funding the subscription fleet from existing cash and sales, and growing it step by step. This works best for larger companies with an existing sales business.
• Sale and leaseback: selling the products to a financing partner for immediate cash and leasing them back to offer as a service. This keeps assets off the balance sheet.
• Special purpose vehicles (SPVs): financing the product fleet in a separate legal entity, often by market or product type. Grover uses this approach to fund its consumer electronics subscriptions.
• Revenue-based financing or asset-backed lending: borrowing against future subscription revenue or against the products themselves.

For a full overview, read financing a subscription business for durable products and financing vs subscription.

How to launch a Product as a Service model

P2S uses a three-phase approach with manufacturers:

Phase 1: Concept

Find concept-market fit. Interview customers to understand what they want, which services matter, and what they are willing to pay each month. Decide on the model (subscription, rental, rent to own, pay per use), minimum terms, and what happens at the end of a contract. Our guide to pricing models for physical product subscriptions helps with the numbers.

Phase 2: Infrastructure

Set up the systems, financing and contracts. That means software for checkout, recurring billing, asset tracking and customer self-service; a financing setup for the product fleet; and clear contracts that cover damage, loss, returns and buyouts. Florian also recommends checking accounting rules early, for example how IFRS 16 treats leased assets.

Phase 3: Go to market

Design the customer journey from sign-up to renewal, and make it easy for customers to pause, swap, upgrade or downgrade. Train your sales team, since commissions are often the "elephant in the room" when a company moves from sales to subscriptions. Our marketing to-dos for new subscription businesses cover the launch.

Early warning signs to watch for

• No executive buy-in. If leadership isn't fully committed, the cultural and operational changes PaaS requires won't happen.
• Weak data and IT infrastructure. Most ERP systems aren't built for recurring revenue or for tracking individual products across customers.
• Sales team resistance. Unaddressed concerns about commissions and bonuses can quietly block the shift.
• Overpromising. Marketing that promises more than the service delivers leads to dissatisfaction and churn.
• No cash flow plan. Smaller companies in particular need a financing strategy before the fish-belly dip hits.
• No customer validation. Assuming customers want subscriptions without asking them is one of the most common mistakes.

For more, see the top challenges that stop a subscription business from scaling.

Technology you need to run a PaaS model

Spreadsheets work for the first few dozen subscriptions. Beyond that, manual tracking of contracts, payments and products breaks down. A PaaS business typically needs:

• A subscription checkout that connects to your existing online shop and handles plan selection, deposits, and credit checks and fraud prevention.
• Recurring billing and invoicing connected to your payment service provider, such as Stripe, Adyen or Mollie.
• Dunning and failed payment handling, so that missed payments are retried and escalated automatically. See failed payment recovery for product subscriptions.
• Asset tracking by serial number, so you always know which product is with which customer, in what condition, and how many cycles it has completed.
• A customer self-service portal where customers can pause, swap, extend, cancel or buy out without contacting support.
• Reporting and analytics on recurring revenue, churn, utilisation and asset performance.
• Integrations with your shop system, ERP, CRM, logistics and refurbishment partners, so that returns, repairs and redeployments are triggered automatically.

circuly is subscription management software built for physical products. It connects to your existing shop (including Shopify, WooCommerce, Magento and headless setups), your payment service provider, and your logistics and ERP systems, and runs the subscription lifecycle from checkout to return. See the full feature overview.

Is Product as a Service growing?

Headline statistics about the "subscription economy" usually lump together very different models, from streaming services to meal kits. Physical product subscriptions are different: products have to be delivered, returned, maintained and reused.

So we looked at our own platform data, from businesses across many industries using circuly to manage their product subscriptions:

• 62% year-on-year increase in subscription gross merchandise value (GMV). More customers are subscribing, which shows growing demand for PaaS among end customers.
• 90% increase in average revenue per merchant. Businesses aren't only adding subscribers, they are earning significantly more from their subscription business.

Looking ahead, Florian and Scott expect PaaS to keep spreading into new categories such as construction tools and industrial equipment; connected products and usage data to become standard; and the question for manufacturers to shift from "why subscriptions?" to "how do we run them efficiently?".

Product as a Service and the circular economy

Because the provider keeps ownership, PaaS gives companies a direct financial reason to build durable, repairable products and to keep them in use as long as possible. Every extra usage cycle is extra revenue, and every product that comes back can be refurbished, its parts reused, or recycled properly. That is why organisations such as the Ellen MacArthur Foundation see product as a service as a key circular business model.

Regulation is pushing in the same direction, especially in Europe:

• The Ecodesign for Sustainable Products Regulation (EU) 2024/1781 sets requirements for durability and repairability and introduces a digital product passport for many product groups.
• The Right to Repair Directive (EU) 2024/1799 had to be transposed into national law by 31 July 2026. It strengthens consumers' right to have products repaired. Read more on why access-based business models matter under the right to repair.
• The Consumer Credit Directive (CCD2) applies from 20 November 2026 and covers rental and leasing contracts that include an option to buy. See what CCD2 means for subscription and rental businesses and consumer protection laws for subscription businesses.

Running a circular model also means getting the operations right: reverse logistics, inspection, refurbishment and redeployment. For background, see what the circular economy is and why to act now.

Watch the discussion on Product as a Service

Florian Andre (P2S) and Scott Galvao (circuly) break down the key elements of launching and scaling a Product as a Service model.

Frequently asked questions about Product as a Service

What is product as a service in simple terms?

Product as a Service means paying for what a product does instead of owning it. The customer pays a recurring fee for access to a physical product, usually with services like maintenance included, and the provider keeps ownership and takes the product back at the end.

What is an example of product as a service?

Well-known examples include Swapfiets (bikes with repairs included), Hilti's fleet management for construction tools, WHOOP (a wearable included in a membership), car subscriptions such as FINN, and baby gear subscriptions from Bugaboo and Stokke. See the industry examples above for more.

What is the difference between product as a service and platform as a service?

Both are abbreviated PaaS, but they are unrelated. Product as a Service is a business model for physical products offered through subscription, rental or pay per use. Platform as a Service is a cloud computing model that gives developers a platform to build and run software.

Is product as a service the same as renting or leasing?

Rental and leasing are forms of PaaS, but most PaaS offers go further by bundling services and allowing flexible terms. A rental has a fixed end date; a subscription has a minimum term but can continue as long as the customer needs it; leasing is usually a financing arrangement over a fixed term. See subscription vs rental vs lease.

Which industries are best suited to product as a service?

In B2C: bikes and mobility, kids' and baby products, consumer electronics, furniture, home appliances, sports and seasonal equipment, and eyewear. In B2B: tools and machinery, HVAC and energy equipment, medical devices, and connected industrial equipment.

What are the benefits of product as a service?

For providers: recurring and predictable revenue, earning from the same product several times, closer customer relationships, and differentiation beyond price. For customers: no large upfront cost, flexibility, maintenance included, and access to the latest version.

What are the risks of product as a service?

The main risks are the initial cash flow dip, the cost of owning and financing the product fleet, damage and loss, payment defaults, and operational complexity around returns and refurbishment. Good pricing, financing, credit checks and software reduce these risks.

How does product as a service affect a company's finances?

Revenue shifts from large one-off payments to smaller recurring ones, which causes a temporary cash flow dip before recurring revenue builds up. Companies bridge it with self-financing, sale and leaseback, SPVs or revenue-based financing.

What technology do you need for product as a service?

At minimum: a subscription checkout, recurring billing connected to your payment provider, asset tracking, a customer self-service portal, dunning, and reporting, all integrated with your shop, ERP and logistics. Subscription management software built for physical products covers these in one system.

How do I start a product as a service business?

Validate demand with customer interviews, choose the model and pricing, set up financing and contracts, put the right software in place, and launch with a small range before scaling. For a step-by-step guide, read how to launch lean and scale intentionally.

Conclusion

Product as a Service turns a one-time sale into a long-term customer relationship. Customers get access, flexibility and convenience; providers get recurring revenue, several earning cycles per product, and a business model that fits where regulation is heading. It isn't right for every product, but for durable, premium products that are expensive, seasonal, quickly outgrown or frequently upgraded, it is often the stronger model.

If you are considering launching or scaling a PaaS model, book a demo to see how circuly manages subscriptions for physical products from checkout to return.

Related reading:

• Case Study: WHOOP's Business Strategy and Device-as-a-Service Success
• Case Study: How Peloton Built a Hardware-as-a-Service Business
• Product-as-a-Service Case Studies: Lessons Learned from Philips, Riese & Müller and More
• Device as a Service: Everything You Need to Know