In the IT Support world, many items that clients used to purchase for their network have become services. When a vendor changes the nature of how they sell their product, many are inclined to think that the change is good for the vendor, but not so much for the customer. With Hardware as a Service (HaaS), it’s truly a ‘win/win’ for both.
Products from an automobile to a lawn mower start depreciating the moment you buy them. Some take longer to reach obsolescence than others, but everything electronic is on the fast track – these aren’t your grandmother’s antique dining room table. Computer hardware is a sizeable capital investment that typically will need to be replaced every four or five years, involving a painful outlay of cash.
Aside from the inconvenience of paying that big hardware bill, there is the potential for disruption of operations while the new hardware is installed, set up and the data migrated.
The question is: Why buy the chicken when all you want are some scrambled eggs? With HaaS, you pay for the use of the hardware rather than the hardware itself. But it is not always that way.
What is hardware as a service?
Hardware as a Service (HaaS) is a method of procurement used by many industries, but in the world Managed IT Services, as well as the entire IT Support Los Angeles Community, it specifically concerns network hardware, such as workstations, laptops, servers, data storage units and peripheral networking gear.
There are two different HaaS models - based on hardware ownership:
1) 99% of IT Services firms out there, at least in the IT Support Los Angeles Community, place needed network hardware in the clients’ offices, but very importantly, it is on a licensing or leasing basis, wherein the IT Support company retains ownership of the hardware, and the leasing/licensing cost is reflected in the clients’ monthly retainer.
2) The model which IT Support LA practices, is exactly the same in every respect except one: Once the hardware is installed in the clients’ offices, the clients take ownership. They still pay the licensing leasing fee as part of their monthly payment, but we do not hold hardware hostage – if a client chooses to cancel our agreement (which they are free to day at any time with 30 days’ notice) they retain ownership of their office hardware. That would be a big ‘OUCH!’ for us.
The reason not many IT Support and Services providers offer this model is that if their service is poor, they stand to lose a considerable amount of money. This is also the reason most IT Support companies require a hard contract, lasting from 1 to 5 years. IT Support LA goes out on a limb: No contracts - just a cancellable Service Level Agreement (SLA), and we do not retain ownership of
any installed hardware. We have to earn our clients’ business every single day by giving excellent and prompt service, or we stand to lose tens of thousands of dollars – that’s the kind of faith we have in our abilities.
Frequently Asked Questions
Q: Which model concentrates on offering hardware as a service?
A: In the world of IT, especially in the IT Support Los Angeles Community, with which we are most familiar, there are two main categories of IT Support:
1) Time and Materials: Or ‘Break & Fix’ as it is known in the industry. This not the arena of HaaS – these
‘B&F Guys’ wait for a call, then drive to the client, see what broke and then fix it. HaaS is far above the sophistication level of the average ‘garden variety’ provider of this outdated and obsolete service model. This is ‘pay as you go’ – HaaS is a difficult fit.
2) Managed Services: This ‘all-inclusive’ model is where you will find HaaS. They have both the
infrastructure to accommodate HaaS, and a more vested interest in the ease with which they can
maintain a network with HaaS. The ‘B&F Guys’ get paid more when things break down – see how that works?
Q: How does hardware as a service model work?
A: The underlying concept is that customers are paying for the service rather than the hardware itself. This helps both the client and the Managed IT Services provider: The client is saved from the capital expense, which generally involves huge periodic cash outlays to keep the network hardware up to date. The Managed IT Services Provider is assured of an up to date and easily managed network and spared having to ‘nag’ the client to spend money as aging, obsolete hardware presents both maintenance and security challenges.
Q: Is hardware as a service taxable?
A: As with anything, we are not qualified to give tax advice, so consult your tax accountant or attorney. The general rule of thumb is that products are taxable, whereas services are not. Each state has its own way of handling these taxes.
Q: What is hardware as a service in cloud computing?
A: It is the same as in non-cloud computing – utilizing the ‘old-school’ localized network. The difference is that once in the cloud, your office computer really just acts as a terminal to the cloud, rather than the self-contained little ‘factory/storage warehouse’ it was on a local network. You still have to have something at your desk, but it’s less expensive and needs far less IT support.
Q: How to sell hardware as a service?
A:
The old saying in sales is, “Sell the sizzle, not the steak.” Don’t roll in a shiny new HP Workstation and say, “Look! This is what you get with our HaaS deal!” Seriously, your prospective client doesn’t care what’s under their workers’ desks – they just want everything to work – at a quick pace with no disruptions.
Offer them two options in your proposal: One with HaaS, one without. However, the ‘without’
option will necessarily have a sub-section showing the initial cash outlay for upgrading the system, and it is rare that this amount is less than five figures. You give the client the option of forking over ten to twenty thousand dollars or more up front, or paying a very reasonable increase in the payment for the ‘with’ option – and it’s not just the money – the ‘with’ option ensures better service and less disruptions, because the network will always be state-of-the-art.
The reason why the two monthly payment options offered shouldn’t be worlds apart is because HaaS is more of a convenience to the Managed Services Provider than a big moneymaker. The mistaken assumption is that the higher monthly retainer will pay off the hardware and then the HaaS provider keeps collecting the cash like it’s gravy. It doesn’t work like that, because that hardware will need to be upgraded on an ongoing basis.
