Hardware as a Service Meets Linux
Should managed service providers start adding Linux-type devices to their hardware as a service (HaaS) strategy? Before you answer, consider a conversation I had with Canonical (developer of Ubuntu Linux) at last week’s OSCON (Open Source Convention). Here’s the scoop.
A Canonical source told me he expects Linux devices to soon become free as part of Internet service contracts. The products will be so-called Mobile Internet Devices (MIDs), which Canonical, Intel and other companies are evangelizing.
I’m an Ubuntu Linux user myself — but I realize Linux remains a tiny niche in the desktop market. Still, I think progressive MSPs — especially in the government and education markets — should explore Linux-oriented HaaS services.
At a time when Microsoft is reinforcing its efforts to promote Windows Vista, even the company’s most loyal partners are making Linux PC-focused moves. Check out this Web page from Dell, for instance, promoting Ubuntu Linux pre-installed on laptops and desktops.
I have one of the systems. My kids use it. My wife uses it. They never had a minute of training on Linux. Now, let’s apply their experience to a cost-conscious small business.
For the typical user — who needs email, Web browsing and productivity applications — Linux is now ready for the mainstream. I use OpenOffice (the open source alternative to Microsoft Office) and exchange files with Microsoft users all day. Nobody ever notices that I live outside of the Microsoft world.
Linux Meets MSPs
For MSPs, Linux is compelling because you can really customize the system — and lock it down for small business novices, etc. Things will get particularly interesting later this year, when Linux-based sub-notebooks (known as NetBooks) start flooding the market.
MSP platform providers are waking up to the reality that some end users are making the Linux move. That’s why Kaseya, for one, has introduced remote Linux administration.
Linux Goes Vertical
Linux is particularly appealing in the government and education markets. Intel, for instance, is promoting Classmate PCs, which are “purpose-built Netbooks for Education.” The systems target K-6 kids in the United states, and K-12 in emerging markets.
In the higher education market, just about every university CIO is familiar with Linux and open source. And multi-user Linux systems, which have multiple keyboards and screens linked to a single Linux PC, are showing up in university computer labs, libraries and study areas.
I’m not suggesting that you’ll move all of your customers from Windows to Linux. But as you do hardware refreshes, Linux-based systems could be a tempting HaaS option because they’re affordable, reliable and easy to use. Just ask my kids.
Linux is on my long term horizon but I’m having enough difficulty right now with my existing haas efforts for Windows desktops and servers and MFPs.
You know I have to chime in – I will try to keep short…..
Part of the issue with HaaS, is understanding how to develop, support and SELL a HaaS solution. I have been saying for years and I wish I could actually claim it. “If you do the same thing today….tomorrow, you will get the same outcome”
So what does that mean for HaaS….. If you present HaaS solutions the same way you have been, Value+Products+Price and by the way we can charge you monthly for this if you would prefer. Then more than likely your client will call a spade a spade and tell you that your finance model option is expensive. However, if you build the solution backwards – you get HaaS. Payment (price)+Products+Value. Confused?
My favorite example:
Verizon wireless (Any carrier) sells you on a price per month that includes a phone, service, applications and support. Do they sell you on the Value then the product then pay me 599.00 for the phone, 199.00 for the applications, 59.00 activation fee and 99.00 install fee? Our monthly access charge is 29.95 per month. (This means 956.00 upfront and 29.95 per month access/support) Then they say, “We do offer a payment plan which would be 99.95 per month for a 24 month contract.
Now do the math – 99.95 per month minus the support plan (29.95) is 70.00 per month for the equipment. That’s 1,680.00 for the equipment alone – That’s highway robbery – I am not paying that. Now the question becomes – will they even buy the 956.00 upfront solution?
One reason Verizon became successful is because they offered payment based solutions upon approved credit. They used the Typical solution sales cycle – Identify a client, Qualify the client by defining what they can afford (too many people move this step to the end), Investigate what is needed, Propose the correct monthly plan and close the deal.
Since our normal business model has been based on selling a solution by giving a total estimated price (you gotta love it), then tell your client a total price…the monthly fee times 36 months equals the total price. You may write the check today if you would like. If I sell you something for 99.00 per month and then my outright purchase price is 99.00 x 36 months, who is paying the interest? I know you could argue both ways but in this case it is hidden. Your HaaS solutions are based on 0% financing. You are not deceiving them because in theory you are absorbing the interest however you finance the deal.
Once you have the first part figured out then using other products to reduce your solution cost without sacrificing value works great. Your HaaS price is X, with a value of X. Once this is established properly then no one starts to really care about your labor pains, they just want the baby. Other words, IBM on the front of the machine does not matter as much to the client as long as you make it all work – they do not care.
Sorry for the book.
Ramsey
Hey Ramsey: You can write a book for us anytime. Thanks for providing some real-world perspective to our readers.
Folks: For anyone who doesn’t know him, Ramsey is a solid source for HaaS-related expertise.
Best
-jp
In the models I’ve created, and I just did a storage as a service (actually its a HW, SW and service) I did have them charge interest. The reason why is that for at least some of their clients, they will be on a master lease with me so they need a cushion against some losses and some profit for themselves. They get to make $$ on my people’s $$ and in fact they should for the risk of being ‘in the middle’ (between my funders and their clients).
Pamsey, I think you make some excellent points on selling it as an all in one service and Jeff I’d love to talk to you about the troubles you are having and see if I have something to help you.
Stu
Stu@southernlendingsolutions.com
Stu,
I am all about making money on money. However, which widget will sell more.
A 99.00 payment on a rental/lease contract that resellers do get paid all their money upfront….. we just fund the payment stream and use the clients credit and we put the resellers logo on the contracts with No-Recourse. (HaaS in a Box)
or
4000.00 solution that you put on a Master Lease that when the client runs the payment structure they see a 4900.00 payback and the contract is with a third party they do not know.
Stu – I have read a few of your posts and you know leasing very well. However, HaaS is like leasing on steroids – You have to add a lot of pieces to make things look and feel different in order to create a win/win. You can definitely use leasing services to accomplish everything but you have to do it with a twist.
As a rule a reseller will generate about 20% of their revenue into lease revenue using a third party source. Our model has increased that to 35% with an average of 10-15% increase in gross margins for the reseller. Unless the twist occurs none of that will happen.
I would be more than happy to discuss HaaS in more depth with you anytime. Its always a good debate and I am willing to always learn and listen.
As a note of reference – its Ramsey not Pamsey….. If we get to know each other better maybe then. Ha Ha
Ramsey Dellinger
rdellinger@mspondemand.com
Sorry for the typo there RRRRRamsey :-).
I’d like to discuss it with you too anytime as there’s always opportunity for me to learn more about what you guys see in the marketplace.
With the most recent one I just did, the MSP’s client didn’t see that its a $4000 solution, they got the $200/mo inclusive price for hardware, software, services and the credit cushion since they are on a master with us, the MSP is sharing some of the risk. This MSP has clients under contracts with them, no 3rd party activity at all unless they have crappy credit, which they would then hand off to me for the hardware and software piece and bill them just for the services separately.
Unless I am misunderstanding, the 2 programs you describe are similar in that your client still has to pay for a hardware piece and a services piece right?
I’d love to hear what you think the twist is as I created a custom program for this client in my example and feel confident I can create something custom that helps solve most MSPs primary problems with implementing a HAAS program. What are the current twists required?
Stu
Stu@southernlendingsolutions.com