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 Channel Futures

Sales & Marketing


Hardware as a Service: Dead On Arrival?

  • Written by Joe Panettieri 1
  • June 3, 2008

During the Kaseya User Conference here in Las Vegas, several managed service providers mentioned that they have absolutely no plans to embrace hardware as a service (HaaS). But does that mean HaaS is dead? No exactly. Let me explain.

First, some background: In theory, HaaS will allow VARs to generate recurring monthly revenue for desktops, servers, laptops and other network infrastructure. Generally speaking, the VAR acquires the equipment, charges customers a monthly fee for the equipment, and the marked-up fees are enough to ensure customers receive regular hardware refreshes every few years.

Still, the HaaS model has some holes. One solutions provider, located in Florida, noted that the housing market collapse has hurt many of his small business customers. As a result, he isn’t willing to “own” hardware that sits within customer sites. After all, if the customer goes bankrupt or closes up shop, the MSP could be on the hook for a bunch of hardware that’s sitting behind locked doors in dark offices.

Still, MSPs are finding some creative ways to test the HaaS waters. Instead of buying hardware and then deploying it for a monthly fee, MSPs are working with leasing services — so that the hardware company or the lease company ultimately takes on the financial risk.

During a panel discussion I moderated, several MSPs mentioned that they continue to sell hardware as a “loss leader,” so that they can provide remote management and ongoing services to those desktops, servers and network infrastructure.

Tags: Cloud Service Providers Digital Service Providers MSPs VARs/SIs Business Models Sales & Marketing

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9 comments

  1. Avatar StuFinancesTech June 3, 2008 @ 12:40 pm
    Reply

    I get quite a few MSPs, including a couple I’ve seen also here posting on this site that take advantage of my short term hardware refreshing program (18-36 months) instead of a standard 36-60 month lease/finance period so they can sell them more hardware and get more involved in the acct management and get more touches with the client as well as more sales. Every 7-8 years is one entire additional buying cycle with this program over standard ones. The rates are terrific too, by far the lowest we offer, competitive or cheaper than OEM financing and no issues with an independent that Dell is having with their Dell Fin Services and the courts.

  2. Avatar Mike Cooch June 3, 2008 @ 7:22 pm
    Reply

    I think HaaS is just getting started…far from dead on arrival. I expect that it will be a major part of a successful managed services offering in the next 12 months.

    Mike Cooch
    http://www.smbitpros.com
    http://www.everonit.com

  3. Avatar Brian Doyle June 3, 2008 @ 11:08 pm
    Reply

    I agree with Mike’s statements, we are seeing HaaS as a key component of our MSP model and expect tremendous growth for this offering. Financing models available to MSP’s reduce the risk on the hardware on a per deal basis and by standardizing platforms at our client environments; we are already seeing lower support costs in our HaaS clients.

    We have also seen strong reaction from our clients and prospects. They like concepts of HaaS providing off-balance sheet financing and no depreciation and a scheduled refresh cycle without analyzing future capital requirements. Bundling it with traditional MSP offerings they have a firm handle on their IT spend for 36 to 48 months.

    For an MSP it should provide benefits to both the top and bottom lines.

  4. Avatar Joe Panettieri June 3, 2008 @ 11:29 pm
    Reply

    Brian: Thanks for your thoughts.

    How many nodes do you manage under HaaS contracts? Are there any particular HaaS-savvy hardware vendors whom you’d recommend to our readers?

    Also, have you pushed beyond PCs, laptops and servers to offer HaaS coverage with printers, network devices, etc.?

    Thanks for any guidance you can offer to our readers.

  5. Avatar A. Douglas McLeod June 4, 2008 @ 2:17 am
    Reply

    we have been at HaaS since 2003, ( full blown desktop and servers, software, support, flat fee every month) we have our first machines just now coming out of rotation, we have lost one client since original contracts got started, steady gain over the years, recently gaining faster … some positives are for our smaller customers there is just no “price is too high” and “I just bought that” computer discussions. It is just fix the problems, do it right and standardize everything. Get your contract right and get your insurance right, watch out for depreciation issues if you own the hardware… these all can sneak up and BITE YOU.
    We have had computers stolen from locations and customers leave laptops at airports. Just treat it all like corporate IT for small business. One big pool.
    Haas is here to stay and soon it will always be about the delivery of “whatever” anyways…. hardware is just an item in the toolbox. The funny thing is in three years the big craze will be moving the servers out to the remote offices. (again) *grin*

  6. Avatar Brian Doyle June 4, 2008 @ 9:39 am
    Reply

    Joe: We are only about 90 days into offering this program so we have about 100 assets under the HaaS. Today it is isolated to servers, PC’s, firewall, and other network gear. We have talked about expanding into the printer market and are researchiing partnering opportunites surrounding support since that is not our area of expertise.

    On the vendor front, we have not seen any vendor stand out in this space in terms of hardware.

    I also appreciate A. Douglas McLeod’s comments regarding insurance and depreciation associated with HaaS. This was a concern on our end, and I believe we have covered ourselves adequately, but we will not be able to evaluate this until we are deeper in the program. I would be interested in any additional thoughts he may have on those topics and the hidden costs of HaaS we have yet to experience as we enter into this market.

  7. Avatar Jim Van June 4, 2008 @ 10:45 am
    Reply

    We’re seeing more client interest in HaaS in 2008 than in previous years, and I agree with Mike that it’s in its early stages. And, as our customers become accustomed to a predictable IT budget, many are finding the factoring in of hardware, with its disappearance from their balance sheet, very attractive…

  8. Avatar StuFinancesTech June 4, 2008 @ 10:52 am
    Reply

    Depreciation is an issue if you buy outright, finance through an EFA (equipment finance agreement) or do a capital lease ($1 buyout lease) for the hardware. There are also things to consider like the IRS Section 179 deduction which allow for greatly accelerated depreciation but a company needs to show a profit to take full advantage of that.

    Otherwise, a simple refershing program like what I have does the job since my leases are written at Fair Market Value and are considered true ‘tax leases’, a fully deductible expense dollar for dollar each year. My program happens to work best with hardware, software and networking gear specifically but the more hardware, the cheaper since there’s more of a secondary mkt for hardware and thats how my funder makes their $$, on the resale of the hardware after taking back from the client.

  9. Avatar Brian Doyle June 4, 2008 @ 12:02 pm
    Reply

    Thanks for the insight, we have set up our financing in a similar fashion utilizing FMV leasing to get the tax benefit (dollar for dollar)you refer to. I appreciate the feedback from all the readers, it has helped confirm that we have assessed the correct financial risks and should be on the right tract with this service offering.

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