Manufacturing, autos and logistics
Installed base
The number of a company's machines or systems currently in use at customers.
Facts checked against sources onWhat does Installed base mean?
The installed base is all the units of a company's equipment, such as engines, elevators, turbines or medical scanners, that customers are still using. Each one needs parts, service, software and upgrades for years, so the installed base drives aftermarket revenue. Example: 20,000 machines in use, each bringing in 15,000 a year of parts and service, give 300 million a year of recurring revenue. A company that wins a large share of new equipment sales today builds the installed base that pays for decades, which is why some sell new equipment at thin margins.
Where does it come up in case interview prep?
- Business models: who pays, and for whatLesson in How industries work: the toolkit
- Switching costs, lock-in and habitsLesson in Why some businesses win: competitive advantage and the economics of strategy
- Revenue models, cost structure, unit economics and operationsLesson in Pharma, biotech and medical devices
- How industrial companies make money: equipment, aftermarket and backlogLesson in Industrial manufacturing, machinery and aerospace
- Industrial economics and operations: installed base, OEE and make or buyLesson in Industrial manufacturing, machinery and aerospace
- Industrial and aerospace players, trends 2024 to 2026, and how to crack the casesLesson in Industrial manufacturing, machinery and aerospace
- How the defence and space industries workLesson in Defence and space
- Defence and space: players, trends, rules and casesLesson in Defence and space
Related terms
- AftermarketParts, service, repairs and upgrades sold after the original equipment.
- Switching costsThe cost or effort for a customer to change supplier.
- CLV (customer lifetime value)The profit a customer is expected to bring over the whole relationship.
- Backlog (order book)The value of orders a company has received but not yet delivered.
- OEM (original equipment manufacturer)In autos and machinery, the company that designs, assembles and brands the final product.
- Tier 1 supplierA supplier that sells complete parts or systems directly to the carmaker.
- Vehicle platformA shared set of engineering underpinnings used for many car models.
- Battery pack costThe cost of an electric vehicle's battery pack, usually quoted per kWh of capacity.
Learn it in context
See Installed base at work in a lesson from How industries work: the toolkit, with checks as you go.
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