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The advantages of hardware as a service are immense

Why outsourcing ownership of IT assets, specifically hardware, is the latest burgeoning trend that boils down to both common sense and good business sense.
Read time 4min 40sec

The origins of hardware as a service (HaaS) go back to the 1960s and '70s when we had sharing on mainframes and minicomputers which in turn gave way to managed services.

So, while in some ways it is still in its infancy, in other ways the concept has been around for a while. Some sources today are even touting it as the saviour of the Internet of things (IOT), as ‘things' might not work, or you might not use them. On the consumer level, many gadgets end up in drawers gathering dust.

The business perspective is somewhat different, with devices not performing as anticipated and ending up as a high-maintenance drain on revenues. It can be difficult to gauge the application value of new innovative hardware 'things'.

To make matters worse, the effective devices used to run the business every day will soon become obsolete − such is the fate of all hardware in the fast-changing technology landscape. Innovative updated hardware options need to be explored regularly and the most cost-effective way to do this is via the HaaS business model.

HaaS is part of the shift towards everything as a service; paying only for what you need, when you need it, through service level agreements (SLAs) that cover hardware, software, maintenance, even installation − all based on a monthly charge.

In this setting, when machines break down, or fail to fulfil business requirements, it's no longer the IT manager’s problem but that of the service provider. The advantages of HaaS are immense but the bottom line is that it boils down to both common sense and good business sense.

Asset depreciation

Almost all hardware is a depreciating asset, so that begs the question: why would anyone wish to own these 'things'?

Think of the last time you bought a shiny new car only to realise that not only is it a depreciating asset over time, but the day you drove out of the showroom it depreciated immediately. Obviously, not all cars have the same rate of depreciation, but most cars are said to depreciate at a rate of about 15% to 30% per annum, with the first year of ownership accruing the highest rate. It then decreases as the car gets older. In general, you can expect your vehicle to halve in value after five years of owning it. That's a sobering thought.

IT managers need to get the financial advantages attached to the HaaS business model onto their radars.

Computer hardware is no different, with PCs being said to lose roughly half their remaining value, on average, with each additional year of use.

IT managers need to get the financial advantages attached to the HaaS business model onto their radars. For example, IT equipment, in the HaaS scenario, is no longer a capital expense but rather an operational one.

Moreover, not only is the cost predictable, but it is fixed − a tremendous benefit from the CFO’s perspective when it comes to planning cash flow because you know exactly how much it will cost for as long as you use it.

In the HaaS model, pricing becomes a function of the value provided, not of the underlying, diminishing hardware cost. Where an SLA includes maintenance, it can cut down on admin and billing, and can reduce the total cost of ownership by up to 20% or more. This latter also reduces the IT manager's headaches in terms of servicing, obsolescence, malfunction of machines, etc − all of which are now the service provider’s problem.

Service providers will not be paid if the hardware is not working to top capacity, which encourages them to fix problems faster and upgrade machines as cheaper, newer hardware often enables the provider to offer you, the customer, a better service. Therefore, the HaaS model incentivises all parties, and is a win-win situation for IT managers.

HaaS market expectations

The attractions of HaaS are not limited to the obvious benefits for IT professionals. Just as SaaS has held advantages for software vendors, IOT companies will benefit from the HaaS model with lower up-front costs and contracts that generate predictable monthly revenues.

It can also lead to longer customer relationships, which in turn drives further sales. Bundling hardware, software, maintenance and installation into an SLA also serves to improve margins.

All the foregoing outlines just some of the benefits of this model and goes a long way towards explaining why the HaaS market is anticipated to experience a compound annual growth rate of 26.2% between 2021 and 2026.

This is being driven by various factors, including the increasing need to adopt new IT solutions, increased digitisation, growing investment of small and large-scale enterprises in HaaS hardware and services. Moreover, technology innovations and the increasing load on cloud infrastructure are also major factors influencing HaaS growth.

The HaaS model is emerging as a method of technology acquisition for businesses looking for new ways to serve customers in a competitive market, with minimal pressure on the company's financial operations.

We are seeing business of all sizes shifting their mindsets from ownership to on-demand service.

Ethan Searle

Technology advisor at LanDynamix.

Ethan Searle is technology advisor at LanDynamix. Upon acquiring his Hons BCom, Marketing from the University of Johannesburg, Searle followed his passion for the fast-moving business technology arena.

He joined LanDynamix in 2017 in the capacity of technology advisor, with responsibility for guiding the company’s entrepreneurial customer base on risk mitigation, enhanced operational efficiencies and cost reduction – all of which can be achieved through technology enablement.

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