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Has the hardware-as-a-service model come of age?

New research from Spiceworks (see tomorrow’s article) has revealed that nearly one in four businesses subscribe to Hardware-as-a-Service (HaaS) (defined as a subscription model in which leased devices are owned, managed and supported by a third-party) for at least one type of device. This month’s panel share their thoughts on whether or not HaaS will become as mainstream as SaaS

PrintIT Reseller: To what extent do you agree/disagree with the research findings which indicate there will be a gradual transition from traditional hardware leasing, where leased devices are managed in-house, to the HaaS model, where leased devices are managed by an OEM or MSP?

Shaun Wilkinson, Managing Director, UTAX UK: “I agree that businesses want to smooth out their expenditure into regular monthly outgoings and HaaS certainly fits this model. IT is becoming all-encompassing and the addition of MFPs into the IT offering is a natural progression, providing the right contractual environment exists. For SMBs, cash flow is always at the forefront of any decisions, so to be able to pay a fixed monthly rate for the hardware equipment and all the maintenance and upkeep, will be a big selling point for them.”

Glen Kershaw
Glen Kershaw

Glenn Kershaw, Marketing Manager, DSales: “This isn’t something new to the industry, successful Develop dealers have been offering this cost model for some time now. As a channel-only operation, we advise and train our dealers to get the best out of their existing clients as well as offering potential new clients the best fit for what they are trying to achieve, this sometimes can be an all-in-one cost to include capital, service/maintenance and consumables or simply a capital cost with a separate maintenance charge. All of this is dependent on what the client prefers.

“The main issue which has always held the all-in-one model back is the behind the scenes management of the funds that are realised at day one. It is not unheard of for these funds to be distributed too quickly, leaving clients unprotected when acquisitions/buyouts occur.”

Derek Jones, Chairman, Synaxon UK: “I don’t think it will be as simple as that. I can see there being some movement towards hardware being supplied ‘as a service’ on lease or some other kind of finance deal, and I think that it will have to become something that all resellers offer as an option for customers. But – like traditional leasing – it won’t be the way everyone wants to buy and manage hardware products. Many will still want to own the hardware, either because they feel more secure or because they want to treat their IT hardware as an asset on their books.”

Jamie Coombs, Group Professional Services Manager, Altodigital: “I agree with it wholeheartedly. The transition has already begun and I believe the speed of change will only start to increase as we go forward.

“Various other markets are already doing this, like the automotive industry where it has become very common for people in the UK to lease rather than buy their car. People want to pay as they go. If you buy a car or piece of IT equipment it depreciates and eventually becomes pretty much worthless. By signing up to a monthly payment scheme, businesses know they will get the support required if and when hardware problems occur. They can get regular hardware updates plus refresh equipment easily as well and businesses like that.

“It is also a good way for businesses to control cash flow and know where they are. There are a lot of plus points for it.”

Simon Warnes, Head of Corporate, Bid Management and Partnering, Sharp UK: “The transition towards HaaS has already begun and is relatively common in the IT infrastructure and storage space and for smaller devices, such as laptops, PCs and mobile phones. However, most businesses still view print as a longer-term fixed asset commercial commitment, and it will take some time for this perception to change.

“At Sharp we’re starting to see more demand for hybrid requirements, where a business will lease a large portion of its hardware, perhaps 80 per cent, on a fixed term basis but require the as-a-service model for the remaining 20 per cent of devices. This could be to accommodate project work or temporary office spaces. For example, in construction, a company may have fixed hardware needs for a large head office, but need flexible, shorter-term access to devices at transient building sites. Gradually, we will see a shift towards a 100 per cent as-a-service model in print, however it could take up to three years before this becomes more the norm.”

Gary Tierney
Gary Tierney

Gary Tierney, UK&I Printing Director, HP: “It’s not surprising that the research from Spiceworks reveals a shift towards ‘as-a-service’ business models. Today, IT managers are expected to manage an increasingly complex device ecosystem. It is now estimated that by 2020 there will be nine billion commercial devices worldwide. Managing those devices effectively is becoming both time intensive and costly for businesses, and ultimately impacts negatively on the bottom line.

“Recognising this, business leaders are leaning towards ‘everything-as-a-service’ contractual models to reduce the time and expense of deploying, managing and securing IT infrastructure. In terms of business technology, you could argue this process began with the advent of managed print services, of which HP is a leader.

“Aware of this contractual trend, we’ve applied much of our MPS know how to our personal systems business, creating our ‘Device-as-a-Service (DaaS)’ offering. HP DaaS is a complete solution that combines hardware, analytics, proactive management, and device lifecycle services.”

Martin Randall, Sales and Marketing Director, Vision: “I have no doubt that the ‘as-a-service’ model will continue to gain traction in many new markets, including ours, but the speed of adoption varies (often greatly) so it will be interesting to see the pace at which this happens.”

Mike Mulholand
Mike Mulholand

Mike Mulholand, Head of Services and Solutions, Brother UK: “An increasing number of organisations are outsourcing the management of their print fleets, driven by the growth of highly flexible Hardware-as-a-Service solutions, where customers benefit from hardware inclusive service packages, and managed print services, where print systems are completely managed by a managed service provider (MSP) and vendor partnership.

“We expect this trend to continue as customers see the benefits of leasing systems over ownership. While it will no doubt contribute to a rise in HaaS adoption, it will help spur the growth of MPS, too. Nine in ten of our MPS customers renew their contracts with us – a sign that this type of model is delivering significant benefit for businesses.”

PrintIT Reseller: It could be argued that HaaS is easier to sell because of lower upfront costs and the fact that companies are used to paying monthly for more and more of their IT provision. With this in mind, do you believe that Haas will become as mainstream as its software equivalent?

Shaun Wilkinson: “A subscription-based service is far easier to sell than any upfront costs. The challenge for OEM and MSPs is the upfront costs they must carry to provide the service. Software is often provided on an ongoing monthly licence basis to the OEM/MSP, therefore adding some value to this and billing the customer monthly, is an easy proposition.

“The challenge with any hardware is that the OEM/MSP must purchase the equipment and incur the capital cost. Passing this onto the customer and ensuring a low monthly outlay, means spreading the cost over a five-year term. Therefore, the OEM/MSP must ensure a five-year contract is entered into which in effect goes against the HaaS model.”

Glenn Kershaw: “Possibly, however a standard lease agreement with separate maintenance costs may sometimes be a better option for the end-user. The lease cost is fixed for however many years determined by the contract, whereas the maintenance cost is subject to annual increases set by numerous variables. If you wrap the whole deal together it takes away some of the flexibility enjoyed by both the dealer and the enduser.”

Derek Jones
Derek Jones

Derek Jones: “Of course, it could be argued that a lower upfront cost is beneficial, but for the reasons I have already given, I don’t think HaaS will become as popular as SaaS. In the end, most reseller salespeople will follow the path of least resistance and won’t push customers too far if they don’t want to get involved in financing (or renting) their hardware purchases.”

Jamie Coombs: “Yes I think so. There will still be people who want to do traditional buying and make purchases outright, but there will definitely be a move towards HaaS. It makes everyone’s lives a lot easier.

“It has also become an easier sell, people like paying a monthly charge, as they can get a better price point.”

Simon Warnes: “Print is increasingly owned more and more by the IT department rather than procurement and they (IT) have been transitioning toward software-as-a-service for the last few years. As such it is clear that IT departments will be drivers of this change for printer hardware too.

“In order for HaaS to become as mainstream as its software equivalent, the business models of the OEMs and dealers selling the products also needs to change. Part of the challenge in print is that the capital outlay for an MFP can be much higher than for smaller hardware items such as laptops or phones. By moving to as-a-service, these organisations won’t receive the upfront payment revenues associated with a traditional lease and will instead have to fund more of it themselves and be paid out gradually over a longer period of time – utility style. This obviously has funding implications for the business, so the industry will need time to adapt to this change and address its accelerated cash flow requirements.”

Gary Tierney: “Yes, this is definitely where we see the market heading. There are certainly clear financial benefits, however, this is only one component. Other aspects such as enhanced performance analytics, proactive management, easier upgrade opportunities and device failure prediction tools also offer business great value.

“The joy of ‘as-a-service’ is that businesses can choose a tailored model that works for them, adding the components that suit their business operations and removing the ones that don’t. So, although financing is an option, it is one of many – ultimately, businesses can still utilise the benefits of DaaS and pay for their devices up front, if it suits.”

Martin Randall
Martin Randall

Martin Randall: “I think HaaS will become as mainstream but not because of paying monthly or lower up-front costs, this is already seen as a given in most cases. The change will be born from the continued need for flexibility, ease of management, and optimising accounting practices.”

Mike Mulholand: “One of the key drivers behind the shift to MPS, which is common with HaaS models, is how customers avoid the upfront cost of purchasing an entire fleet of devices – a prospect that’s become more attractive as IT budgets tighten. But what gives MPS the edge is the added value it can create for customers, delivering services such as real-time usage dashboards, forecasting tools, automated replenishment of consumables and fleet monitoring, which can boost productivity and provide greater insight to drive new efficiencies.”

PrintIT Reseller: Is HaaS the next logical step for vendors in the battle to build long-term customer relationships?

Shaun Wilkinson: “It is, providing the contractual issues can be agreed. The HaaS model gives vendors the opportunity to accelerate growth by making it easier for businesses to purchase, as well as retaining those customers for a fixed period, however it does not come without its challenges. There are costs that are involved with selling hardware that you don’t come across with software such as manufacturing and shipping, which the OEM/MSP have to put up front, which makes it a less attractive prospect for hardware suppliers to enter offer HaaS.”

Glenn Kershaw: “There are numerous ways to build long-term relationships with clients. This is usually done by offering excellent service, the right solution for the requirement and ultimately a deal that works for all parties along with excellent ongoing account management.

“Develop products are changing all of the time with new software/security solutions being integrated into the field, which will allow a simple upgrade path that doesn’t always mean a brand new contract for the customer.”

Derek Jones: “No, I think the battle to build good, long-term relationships is all about how well vendors look after their channel partners. Resellers, retailers, VARs and MSPs want to work with vendors that deliver great solutions, provide good opportunities and deliver excellent services and support for their partners, as well as additional support for their mutual end-user customers. It is all about enabling partners to deliver the best possible levels of service and satisfaction to end-user customers.”

Jamie Coombs
Jamie Coombs

Jamie Coombs: “It’s one of them, there’s plenty of space to secure a market share. Having HaaS alongside SaaS and DaaS makes sense. Vendor businesses need to have all of these in their arsenal. If suppliers don’t get on board, they could likely regret it.”

Alastair Adams, Director, Commercial Group: “It’s important to remember that contracts often require flexibility and if the customer expects a change of circumstance, it’s important that they express that at the design stage.

“As a result many customers will define a core service and contract for that specification, but build in a degree of flexibility in case they want to send some devices back at some point or change the equipment. This means we can define the requirements as effectively as possible, and build in the necessary flexibility.

“Customers also want contractual simplicity and transparency so many prefer a single set of terms to cover the equipment rental and the services provision. This avoids arguments about which contract takes precedence.

“It’s not possible to contract at the best level of cost, and have total flexibility. Flexibility means paying a premium: the terms are better for a three year contract than for six months, that’s logical. Short-term arrangements are available of course, but they cost more.

“Going forward, customers need to try to anticipate any change in their requirements and build it into the specification at the outset: the pace of change is accelerating so this is more of a concern today than perhaps it has been in the past.”

Simon Warnes
Simon Warnes

Simon Warnes: “On the one hand, the as-a-service model doesn’t necessarily lend itself to long-term service provisions, because it doesn’t always come with the same commitments as a traditional lease. However, I do think it helps to build longterm loyalty with customers. Compared with IT, print is behind the curve for as-a-service leasing, so HaaS is currently a differentiator and helps to position OEMs or dealers as more flexible and innovative than their competitors. While moving to a 100 per cent as-a-service model may mean end-user procured commitments become shorter, the ability to provide flexible solutions that meet your customers’ needs is certainly conducive to successful long-term business relationships.”

Gary Tierney: “Service models like MPS and DaaS definitely build longer-term relationships between vendors and customers. With contractual, customers have the benefit of choice when it comes to their IT requirements – while the vendor or managed service provider can harness insights over time that allow them to provide an even better offering.

“It also means vendors can offer further value-adds which might otherwise be overlooked – for example, print supplies that deliver not only on the customer’s quality needs, but also their sustainability goals through closed-loop recycling.

“This aaS trend is already gathering pace. When we launched our DaaS platform in 2016, one in every 100 PCs in the market was under a DaaS contract. By 2020, IDC expects it to be one in every six or seven PCs.”

Martin Randall: “Customer relationships are built through trust and confidence so if HaaS can be used to breed more of this then potentially yes, but I don’t see the model itself being a relationship differentiator.”

Mike Mulholand: “The availability of both HaaS and MPS models has presented channel partners with an opportunity to switch customers away from procuring print transitionally, and benefit from flexible payment options, which can cut spend and free-up cashflow. For example, UK pharmacy chain Day Lewis saves more than £100,000 each year on printing from its MPS solution with us. Awareness of these cost savings is driving more interest and subsequently adoption of MPS.

“MPS and HaaS solutions both provide a route for vendors to build more meaningful, long-term relationships with their customers. But there’s a challenge to overcome as the industry continues to transition towards services, which is increasing the level of competition for suppliers. However, fully managed systems under MPS are where vendors and partners have the greatest opportunity to solve pain points and build customer retention.

“Vendors, together with their partners, must adapt and enhance their tried and tested MPS and HaaS offerings to differentiate their services. Supplies replenishment, fleet renewal frequency, device monitoring, flexible payment terms and high-quality servicing and support will all be key in getting ahead of the competition, while building long-term customer relationships.”

PrintIT Reseller: Is the HaaS model something you are adopting in your business in order to stand out in a market where hardware commoditisation and margin erosion are prevalent?

Jamie Coombs: “Altodigital is definitely looking at this and plan to implement our solution presently. We already do SaaS and DaaS so adopting HaaS is the logical next step.”

Martin Randall: “Our offering already encompasses ‘as-a-service’ elements and like (no doubt) most, we are constantly evaluating how our offering will continue to evolve.”