Device as a Service Ripe for Takeoff

In 2015, the device-as-a-service (DaaS) market came into being, but since that time the pace of uptake has underperformed. The lack of enthusiasm for this opex purchase model, at a time when opex is gaining favor over capex for a growing number of IT purchases, is a bit of a head scratcher. The good news for channel partners is that there’s confidence among industry experts that DaaS will prevail.

Now, don’t confuse device as a service with desktop as a service. In desktop as a service, there’s no physical hardware involved, per se. Customers subscribe to a virtualized desktop that’s accessed through a terminal such as a thin client, PC, or even a phone or tablet. Basically, a customer rents out infrastructure in the form of a virtual desktop. Device as a service, on the other hand, allows customers to subscribe to a piece of hardware, or as DaaS evolves, a bundled offer.

IDC’s Lin Huang

“At the heart of it, device as a service is about hardware and the life-cycle services, such as deploy, maintain and dispose,” Linn Huang, research vice president at IDC, told Channel Futures.

You might also be wondering how DaaS differs from leasing.

The answer isn’t as straightforward as one would hope given that the DaaS market is still nascent and evolving. Additionally, there was the expectation around subscription — namely, that it was monthly, and at the end of a paid month, the subscription was done.

“Our expectation was that DaaS offers would unfold like that, but certainly people wouldn’t be trading in their PCs every month,” said Huang. “Generally, the PC life cycle is about four years [and three months], and so we thought that someone who signed on for device as a service, their plan wasn’t to get out of the DaaS contract but that their PCs would be turned in at a three-year cadence, or something to that effect.”

As it turns out, there is convergence in the DaaS market toward a three-year agreement; however, it did throw in a wrench — Is this a subscription? Is it truly as a service?

Huang contends that a key difference between leasing and DaaS is the contract: A lease requires signing a contract for a period of time and you’re on the hook for the duration of that lease. If you back out, there’s a penalty. In an as-a-service model, there’s a lot more flexibility written into the contract, and in the managed services market you’ll often see customized customer contracts. But leasing/finance companies such as DLL talk about DaaS.

So why isn’t there more wind in DaaS’ sails?

Well, for starters, there’s that confusion around the monthly subscription-model concept and where DaaS fit into that. That confusion, however, is slowly dissipating.

Vendors and distributors have been rallying around DaaS for several years. In 2015, HP talked out PC as a service, and was soon followed by other vendors, such as Lenovo, Dell, HP, and Microsoft. IBM has been doing device as a service for years in a customized capacity.

Distribution jumped in as well. Tech Data, for example, offers its own flavor of DaaS, calling it technology as a service (TaaS), which allows partners to …

… bundle multiple vendors’ hardware, software and services into a single monthly subscription. Ingram Micro also has a TaaS program. Synnex has a device subscription program, as does D&H Distribution.

D&H launched its DaaS program about a year ago , reporting that the uptake is better than expected and it continues to expand and retool the program.

D&H Distributing’s Jason Bystrak

“We’re integrating it more with our cloud business — hardware and cloud and professional services,” Jason Bystrak, vice president, cloud business unit, D&H Distributing, told Channel Futures.

So for example, D&H will bundle hardware, Buffalo NAS and Dropbox, taking a more prescriptive approach to selling DaaS.

“What’s driving the market is when we put things together and show the customer what DaaS can look like versus leaving it conceptual,” he said.

D&H will also customize bundles. Initially, D&H had a two-person team for DaaS. Bystrak, a recent addition at the distributor, has already grown that team to five people to support partners.

Brent Lindke, owner of BizTech Plus, Sacramento, California, a sole proprietor of a small IT services and solution shop that caters to small businesses – primarily law firms with up to 35 employees – is making some headway with DaaS. Lindke is a D&H partner who began selling DaaS last August.

His sales approach to DaaS is the approaching Windows 7 end-of-support deadline (January 2020).

“With the need for replacing equipment, at some companies five or six at a time because of the Windows 7 end of support, it’s time to get them on a new refresh cycle,” said Lindke. “Most refreshed their desktops every four to five years but DaaS gives them a three-year refresh cycle.”

Most importantly, these small businesses don’t have to pay for everything up front. Additionally, BizTech Plus’s customers get around-the-clock support through D&H, in addition to Lindke.

“It’s nice for them and for me because they’ll call support services first for, say, an operating system problem,” he said. Customers also get warranty support, which Bystrak said adds significant margin for partners.

One Biztech Plus client growing its business recently added five laptops for employees who would be working from home. This customer already had three desktops.

“They bought five laptops with docking stations rolled into the same package. They already have Office 365 with support and remote access to cloud storage,” said Lindke.

Another customer bought six computers with dual screens — Lenovo ThinkCenter Tiny-in-One devices.

“It took a while to understand how [DaaS] worked and then convincing my clients that this is a direction go — a three-year refresh plan that keeps up with technology and faster processing speeds,” said Lindke.

Cost and the resistance to buy as a service are two hurdles Lindke contents with.

“There’s a mindset among a lot of customers that once I buy a computer, I’ll have it forever. They don’t think about working on slow computers and how that impacts productivity.”

Richard Chambers, president of America’s Return, an IT distribution sales enablement consultant, has been observing DaaS and sees events, such as Windows 7 end of support, as an impetus for DaaS as it prompts the need to replace equipment and …

… how to best do that.

While he can’t account for the slow uptake of DaaS, he talked about product acceptance versus brand recognition.

“People just haven’t accepted the concept of DaaS, but when they do, there will be a fast switch to brand recognition; then we’ll see a rapid adoption,” he said.

How much of a shot in the arm Windows end of support will be for DaaS is up for debate, but it makes a lot of sense. Early on, messaging around DaaS was tied to the Windows 10 transition.

“The message was, if you’re behind in your Windows 10 transition moving to DaaS, which flattens a large capex number to a predictable monthly cost, [it] could help you get there faster,” said Huang.

He points out another bump in the road for DaaS.

It’s a big move for businesses. It changes not only the way you get hardware but whom you get your services from, and in some cases, whom you get your software from.”

All that said, while the transition to DaaS has been underwhelming, none of the inhibiting factors are of the discouraging variety; rather, market momentum is just going to take a bit longer than initially anticipated.

“Taken in the abstract of how the [Daas] market is unfolding to date, interest is strong; we expect to see hockey stick growth, and the pipelines are full,” said Huang. “DaaS is here to stay.”