The integration of production automation drives innovation in manufacturing by enhancing efficiency, quality, and cost reduction. However, the capital requirements of conventional automation solutions hinder many manufacturing companies. Production Automation as a Service (PAaaS) emerges as a cost-effective alternative, offering improved flexibility and efficiency. Yet, adopting PAaaS faces challenges: a lack of expertise, awareness, and cultural resistance. This study explores PAaaS implementation in manufacturing, identifying its specific needs and challenges. Qualitative research across ten diverse manufacturing companies reveals two key drivers: technological advancement and evolving business models. It highlights four primary benefits—cost-effectiveness, flexibility, efficiency, and product quality. Simultaneously, it addresses five significant challenges—legacy system integration, cybersecurity, internet dependency, expertise gaps, and downtime risks. To aid early decision-making, the study proposes a framework covering drivers, benefits, challenges, and suitable strategies. This study contributes to the ongoing discussion on smart production and automation development by focusing on business model innovation and the pay-as-a-service approach.