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Marc: Hi, everyone. Welcome to this first episode of the Bounce podcast. A podcast that looks at everything related to commercially using drones indoor. In this first episode, we're talking about inspection companies and return on investment. To talk about this topic, I have Junio Palomba here with me. Junio is an account manager at Flyability and he looks after inspection companies which are engaging with Flyability Elios, guiding them and advising them in their acquisition process. How are you Junio? Thanks for being with us today.
Junio Palomba: Good to be with you, Marc.
Marc: Junio, you're looking after inspection companies. Could you give us a better description of your typical customer and explain their particularities?
Junio: When we talk about inspection companies, we're primarily looking at two kinds of companies. There are inspection companies that are born and designed to use only UAVs as tools for inspections, and there are what I call more traditional inspection companies. The main difference is that the first one as set up to be using only robotic tools to perform inspection in industrial environments.
The second one, on the contrary, had been doing the same kind of inspection for a number of years using more traditional tools like any sort of NDT equipment. For them, the use of a robotic tool, it's an addition to their traditional portfolio of instruments. These I was, pretty much say, are the two main segments within inspection companies.
Marc: All right. Two types of inspection companies. How do they differentiate from other type of customer we may have? What's the main criteria to say they are an inspection company?
Junio: It's a very good question. Sometimes we have challenges internally to see which basket does one fall. The key differentiation between an inspection company and I would say, an asset owner, the final user, is that inspection companies primarily use Elios as a revenue maker. Essentially, the main difference is whether they purchase the drone to be used internally, on their own assets or whether they use the drone to perform services on assets that belong to other companies.
Marc: To summarize, inspection companies look after assets of others and Elios is a source of revenue for them. What are the pain of these inspection companies? What's their main challenge?
Junio: Well, I would say there are two main challenges. The first one from a regulation point of view. We're talking about inspections very often that have been done in the same way for a number of years. That are very tied to certification processes to a certain way of doing things that is highly regulated especially in certain industry like the maritime industry where the classification of society pretty much dictate everything around the certification process of the assets.
The main challenge is how to change the status quo, and how to adopt a tool that until a few years ago didn't exist to fit procedures that have been established over a number of years. This is something that we find that is very common. Essentially, how we can make sure that we can guarantee the same standards of inspection by using a tool that it's for many companies and many industry brand new.
The second one is more commercial and essentially easier. How do I, first of all, justify the investment? Secondly, how do I price it? For many companies, one of the most asked questions is essentially, "How much should I charge for an inspection with Elios?" This is very much an open-ended question.
Marc: How do they price the inspection using Elios is obviously a high concern. How do they perceive the benefit of having Elios among their tools and how do they use that argument when approaching customers?
Junio: I think a lot of them are still trying to find their bearing around how to price Elios inspections. A lot of it's done on the back of what they would normally charge for an inspection performed with similar tools. However, for many companies that simply did not provide this kind of survey before, it's even more complicated to put a value to the number of hours, to the number of inspections performed.
I like to think that the correct price for an inspection is not simply a result of the number of hours spent, but it's also very much a result of how much time and consequently, money, and risks you're saving to the final customer. I would say, probably, that there is already quite a bit of commoditization of the price of inspections. Whereas, I would've hoped that for this kind of tools there would still be a little bit more of a whiteboard when it comes to pricing the inspections.
There's obviously also other elements to keep into consideration, like competition and whether you're operating in an area that already has Elios users, or whether pretty much you have a free margin to spare and experiment on different prices.
Marc: What I hear is that the ability to reduce your end customers expenses in the form of safety, downtime, or overall cost seems to be the greatest opportunity here. Is that the only criteria that asset owners would look at when they hire an inspection company?
Junio: I think these are definitely the most important criterias. I like to think that in the longer run the real competition will come from the skills of the pilots behind Elios. However, I definitely feel that the biggest differentiator at the moment, the biggest drive for the price of the inspection, is the time that you save, the cost that you save, and the risk that you reduce. These are, by far and large, the elements that the ultimate customers and the asset owners look at when evaluating an inspection company.
Which is also the other very challenging part of our work when working with inspection companies because, in a way, we have to pitch twice. We have to pitch to the inspection companies themselves, but we also need to give them the tools to convince their clients, the asset owners of the benefits of using Elios compared to more traditional means of inspections.
To some extent, the benefits of using these compared to scaffolding are self-evident in terms of the effort, the time, the risks, and the procedures that go with the two different approaches. At the same time, as I said, very often there is regulation in a way. There is a certain reluctance to change or resistant to change, that could be risk management or simply a drive not to innovate.
Marc: Yes, that can be a constraint for these inspection companies to convince their customers to deploy drones at their site and to adapt that kind of an inspection. Beyond pure financial return investments, are there other benefits of acquiring Elios in starting to offer indoor drone services?
Junio: I think one of the most interesting elements when working with Elios is that, suddenly, traditional inspection companies that were only doing a certain kind of inspection discover that this drone can actually be used across a number of industries and a number of different assets. Very often clients have come to me asking me, "So far I've only been doing glass fiber tank inspections, but there is a refinery around the corner. Can I go and pitch this to them?" I say, "Absolutely."
The application catalog for Elios keeps growing bigger and bigger. I think when we talk about return on investment, inspection companies need to see this as an incredible way to differentiate and grow their business. This gives them, really, the opportunity to go into really almost any confined space. A company that, until yesterday, was focusing on doing simply above ground tank storage inspection can now be looking into doing pipe lines inspections, can now be looking to doing any other sort of confined space inspections.
There is always an underground element of the qualification, the certifications they you need, in order to be able to evaluate the outcome of the inspection. Having said that, it's also true that when we talk about return on investment, all of a sudden you're looking at, instead of just one industry where you can operate to multiple industries
where you can and assets where you can deploy this tool. This certainly makes Elios a fantastic tool to generate new sources of revenues.
Marc: There is this idea of diversification and this opportunity to suddenly cover new industry which is obviously attractive. Now on the pure financial side, how long does it take to see a positive ROI with Elios? What is your insight on return on investment to your customers when they are considering the opportunities to offer new services with Elios?
Junio: I think, ultimately, the return on investment is a function of two factors. The first one is how much do you pass for an inspection, and how often do you get to use the drone. Now, over the first one obviously we have little or no control in some markets like in the US. As I mentioned earlier, this is a bit more commoditized. In other markets, this is still up to speculation or up to the initiative of each user.
Some companies charge per day, some company charge per hour, some companies charge per asset. What we do have influence on and we will like to help our customers as much as possible, is the number of inspections performed. This is probably-- our biggest challenge at the moment is how do we help customers get the word out there and how do we help them to get as much business as possible with Elios. I think there's certainly a lot of preparation behind it. Certainly, I always suggest customer to start spreading the word before they actually get the unit so they can essentially start lining up jobs.
There’s also, as I mentioned earlier, a lot of cross-pollination in many industries. Very often the industrial environments in which these pilots operate, they tend be very small enclaves. Therefore, when one asset owner finds out that there is this new tool he wants to know about it, he wants to hear about it. He would give the other asset owner a call, he is going to enquire about it. Before you know it, you start having more and more leads coming through for jobs that perhaps previously you couldn't do.
Our role here at Flyability is to make sure that our inspection companies have the best possible training, and can perform the best possible inspection on the assets. At the same time that we give them all the tools that they require to reach as many customers as possible. Whether this is statistics or case studies or figures in terms of return on investment, this will have to be determined. It's definitely the biggest challenge for inspection companies to essentially go out there and make their customer base know that they can provide this additional service.
Marc: Based on your experience with the different customers you have followed so far, is there any average range of time where they usually start to see positive ROI?
Junio: It's very difficult to put a number on the return on investment in general, however, what I can I tell you is that last year we've got about half a dozen companies that started out with the rental model. As you know, this is something that we came up with to reduce the upfront cost and give those customers that are still a little bit on the edge about making the full investment the time to assess the market and the potential for this kind of platform.
I'm very happy to say that basically we've got a conversion ratio of 100% on the rentals. These goes to demonstrate that basically over that period of time which goes to between two and three months, they've not only been able to recover the amount of money for the initial investment, but they also found reason to believe that there is a market that can justify the full investment on the platform. I would say taking that as a small sample that you're probably looking at anywhere between four to five months to recover your initial investment and start making a profit.
Marc: Four to five seems pretty good. I'd like to get back on a point you've mentioned earlier. You said that one of the value the end customers and asset owners see in service provider using Elios is this possibility to save on risks, downtime and overall costs. If we take into consideration the money that they will save by hiring these companies, do you think it can justify a higher cost per hour from the service provider?
Junio: Absolutely. I think that there is leverage, there's a lot of leverage on the return on savings essentially when you can actually argue and demonstrate that this inspection would have cost a lot more with the traditional means. I think if you can actually make a point that the price of inspection should be calculated and not just on the mere cost, but also compared to the closest possible alternative.
In most cases, this is scaffolding. This is human entry inspections which as you said it's very timely, it's very expensive in terms of downtime and it's also very risky. Normally, asset donors would argue that the nearest animal comparison should be by doing this through traditional means which is not necessarily always more expensive than doing it with Elios. However, there are also situations in which simply you can't do this without putting humans in harm's way. I feel that that's where you really have the leverage of saying, "These inspections should be charged compared to that scenario." Not the alternative of not doing it.
Marc: Basically, we are back on putting a price on the life which is very hard and the fact that sometimes investing a little bit more and being able to save life can justify the expense.
Junio: I think so. I think, obviously, this is something that varies dramatically from region to region, from country to country. Unfortunately, not all the countries have the same policies when it comes to health and safety. Nonetheless, it remains a universal argument for the value of a drone like Elios. I think it should be built into the price of an inspection.
Marc: Right, very good insight. If a company wishes to start using Elios tomorrow and offer indoor inspection services, what's your advice? What are the things they should look at before coming at you?
Junio: I would say certainly start from your own backyard; both in terms of your existing customers, but also your surroundings. With your existing customers, you can check essentially whether they have any asset on top of which you're already currently inspecting, where Elios could be deployed. This could very easily double the amount of work that you can do in the same asset where inspection companies normally go. For instance, an inspection company that normally performs inspection on time can very easily find out if, for example, their clients have a need to inspect pipes or all those sort of confined spaces.
The second one as I mentioned earlier is to check your backyard in terms of the geography where you're at. We've got several cases of companies that were operating primarily in the oil and gas so in the maritime field, they find out there's a pulp and paper mill a few miles down the road. They try to approach that person, reach out and find out whether they could be in need of confined spaces inspection with drones. My suggestion is, do your homework, start from where you already know then get the technology and build your successes from there.
Marc: Okay. Then they can reach out to you and they have the possibility to get started with the rental. Can you detail a little bit, that offer?
Junio: Yes. The rental is set at a minimum of two months at 5,000 CHF per month. Essentially at the end of the rental period, you have the option to terminate it - which is never the case - or essentially decide to purchase the unit. We normally credit one month towards the purchase of the full unit.
Marc: All right. We have reached the end of that podcast. I hope you had a few good insights coming from Junio, and that you are ready to explore the new possibilities and new services you could offer with Elios. If you need more information or if you have remaining questions, you can reach out to us either through firstname.lastname@example.org or by reaching out to Junio directly--
Junio: Yes. You can reach me at email@example.com..
Marc: Thanks for listening.
Junio: Thank you, Marc.
Marc: Thank you, Junio. Bye-bye.