Bundling hardware, software and services together under the “technology as a service” banner with a single subscription...
price sounds like it could be a recipe for success when it comes to SME customers. But is it proving as attractive as it sounds?
Tech Data, which has been touting its TaaS service to SME resellers, believes it is. Last month, UK business development manager James Baulch claimed the distributor was witnessing “high levels of interest in TaaS among HP resellers. A lot of businesses want to invest in a trusted brand like HP and with TaaS, they can do that and spread the cost, which makes it easier for them to commit and easier for resellers to sell.”
But just how widely are resellers buying into the TaaS approach and what can be done to make them more enthusiastic about it? More importantly, is it gaining traction with customers? What issues do partners need to address to sell TaaS to SMEs and other customers?
Matt Childs, managing director at Tech Data UK & Ireland (Endpoint Solutions), says the creation of the distributor’s TaaS offering is testament to the “growing enthusiasm among IT buyers for subscription-based consumption. We could see the opportunity to extend that model to hardware and, further to that, bring all IT solutions, software and services together into one complete offering”.
He outlines the attractions of TaaS for customers. “TaaS can be used to give customers access to new technologies that they would otherwise not be able to invest in right now and spread the cost of that investment over the lifecycle of the product,” Childs says. “As we can offer the residual value base rates at the end of the defined lifecycle – which could be anything between 18 months to five years – the subscription price that we’re able to offer is highly competitive for branded devices.”
Rik Hubbard, commercial and services director at Exertis Mobile, says customers have become used to consuming software as and when they need it so it’s not really surprising that the practice has spread to hardware and services. It’s not exactly new, he adds. “Companies have long been using this type of method in the copier market. Certainly, the old method of paying for IT hardware upfront has declined and there are different ways of spreading the cost to acquire equipment.”
Whether it’s called Taas or Device-as-a-Service (DaaS), the main advantages are scale, a lower cost of entry, more predictable costs, access to the latest features and security, better use of IT resources and more flexibility for businesses (large and small).
Back in February 2017, IDC estimated that 3-4% of PCs in the US were purchased as a service. It predicted the number would rise to more than 20% by 2020 and that 31% of the commercial PC market would move to the PCaaS model by that year. US adoption was quicker than the global trend, however, with the same survey putting the figure for the commercial market globally at 21% by 2020. According to the study, 37% of customers said they were procuring better hardware as a result of enrolling in PCaaS and that the refresh cycle was shortened by an average of 8.2 months.
In its DaaS incarnation, TaaS garnered quite a bit of attention at the Canalys Channels Forum last year. HP Inc CEO Dion Weisler, said it was a matter of when, not if, DaaS happened. At the time, he claimed 60% of customers were interested in the service and 40% had already engaged with it. HP’s DaaS pipeline was the fastest growing business across its partners, he added, with a pipeline of over two billion dollars.
Weisler compared DaaS to the vendor’s shift to managed print services. “You get time to prepare the channel community for it and your own corporation for it.” He added that it would lead to “better, stickier business”.
Speaking at the same event a year later, he described DaaS as “the single biggest pipeline we have”, adding it was worth “multiple billions of dollars”. He gave the example of one customer with 75,000 seats where, by using AI algorithms, HP discovered it had 52,000 hours of unprotected firewalled clients and 30% of the clients were over-utilised because they had a CPU spec that was too high for the user.
“We are seeing a 40% ROI in the first year, and the security benefits that we are driving across everything as a service is really compelling for customers,” he added, stressing that DaaS provided benefits for large and smaller customers.
Sarah Shields, Dell EMC vice president of enterprise channel, definitely agrees that it can lead to better and stickier business, although her company adopts the term PC-as-a-Service (PCaaS) rather than TaaS or DaaS. She argues that PCaaS enables partners to “stay close to their customer” and it gives them “the stickiness that a lease or service agreement brings. It delivers value to the customer and value to the partner, so it’s a good business opportunity.”
Describing PCaaS “as a massive boom area which offers a great opportunity for the channel”, she concurs with Childs that PCaaS also enables shorter refresh cycles “which means more business, so it’s a really good opportunity for our partners”.
PCaaS also plays well in an environment where organisations are under increasing pressure to “embrace digital transformation” because the requirement to upgrade and manage client infrastructure can be “a massive drain on the available IT budget”. She agrees with Childs and Hubbard that it “gives an organisation the ability to precisely predict its spend and to increase and decrease that spend as required”.
According to Dell EMC, businesses can save up to 25% on PC lifecycle management. “With 40% of global IT budgets dedicated to lifecycle management, that represents a 10% saving of the total IT budget, which enables the customer to invest in other areas”.
Like Weisler, Shields says PCaaS works for large and small customers. Dell EMC has PCaaS offerings for business and enterprise based on company size. The business service is for companies with up to 300 clients and the enterprise offering is for companies above that threshold. There are differences in what is on offer and what those customers require.
“Small and medium businesses don’t need a services delivery manager, for example,” she explains, “but for an enterprise roll out, that’s a critical role we provide. Small and medium companies don’t require the same levels of deployment.”
Flexible finance is another benefit provided by PCaaS, giving customers the option to flex up or down and the terms “are also quite reasonable at three or four years”. She says the ability to buy better hardware and refresh it more often could also be a benefit when it comes to keeping employees happy. When it comes to millennials and their reasons for joining or staying with a company, the choice of IT hardware can be a really important factor, so the ability to shorten the average refresh by just under a year can be a significant advantage.
According to Shields, PCaaS also helps partners to sell across multiple lines of business (LOBs) which gives them the opportunity to make 17 times more revenue than if they sell just a single LOB. “PCaaS is a great way of starting a conversation. It gives them the ability to expand from the edge to the data centre and creates more opportunities around cloud by bringing in services and infrastructure together,” she adds.
Greg Lissy, vice president of product management at SolarWinds MSP, sees TaaS as a means to bridge the gap between on-premise technology and cloud services that has become “a common consideration as cloud services become more ubiquitous across all sizes of companies. For managed services providers, it’s about the ability to unify traditional managed IT services with cloud services management under a single dashboard and billable package”.
He describes TaaS as a means of “delivering a single view, a single management opportunity and package, across cloud services and hardware, along with the management of other assets. Whether or not it’s proving itself fully yet may be a bit too early to tell. But from a trends perspective, it certainly fits into the new hybrid model well and I would expect it to continue to gain traction”.
Are resellers buying into the Taas/DaaS/PCaaS approach? If Weisler’s figures are correct, the answer appears to be “yes”. Over at Tech Data, Childs says “more progressive resellers” are already moving towards TaaS and “a number of resellers are embracing TaaS with a great deal of enthusiasm”. He reveals the distributor has “transacted a lot of business through TaaS already and there are some very big deals in the pipeline. We are talking to a number of partners who want to make it a core part of their value proposition. We got a very enthusiastic response at our recent TD Live event, which shows that it’s right in tune with the way resellers are thinking about the future”.
The distributor is “running a continuous campaign to spread the word about TaaS and articulate why we believe it’s the way that a lot of hardware and software products will be acquired and consumed in the future”. He claims Tech Data “has broken new ground in launching this service. We are ahead of the game and we expect the rest of the industry to follow”.
Exertis has a slightly different take on the DaaS front. Hubbard notes that “the percentage of PCs shipping as part of a service offering is still relatively low but it is certainly gaining traction in the mobile market, particularly with smartphones”.
The DaaS offering from Exertis is becoming attractive to companies as smartphone values increase “for the latest flagship handsets” and users hold on to them for longer. “DaaS offers a solution for companies wishing to control, maintain and provide the latest offering to their employees in a cost-effective manner,” Hubbard argues. “Purchasing a fleet of handsets clearly limits most companies with the ability to keep up with the latest equipment. With DaaS, companies have the flexibility of scaling the number of devices based on demand, refreshing the technology at regular intervals and outsourcing maintenance and asset tracking to their provider as a bundled service.”
The distributor was recently “able to help a reseller fulfil a large-scale deployment of handsets with one of our vendors using our DaaS service that encompassed a managed service for hardware (inventory, provisioning, asset tracking), software (including configuring specific business applications) and accessories (rugged cases and protective screens)”.
Customers and resellers can add managed services to the lease to incorporate repair, refreshment and asset tagging. “Providing an easy to use service that resellers can just deploy for their customers is key to its success and will drive demand for this type of procurement,” Hubbard argues. “For resellers, it has the added benefit of keeping them closer to their customer.”
Shields is convinced that PCaaS is the way that customers want to go with their IT infrastructure spending. “We are 100% ready to take on board this is what customers want, so partners absolutely have to be on board for this. There are opportunities galore.”
PCaaS can be partner-led and give partners control of the whole sales motion while it also enables them to give customers more choice. “The whole basis of Dell technologies is around enabling partners to be able to benefit and an awful lot of partners are benefiting from PC-as-a-Service. It’s something all partners should be embracing,” Shields believes. “It creates great customer satisfaction and it’s becoming the conversation opener with customers.”
She stresses that the PCaaS programme “was built on feedback from customers and from partners as well. We need services that are channel friendly as part of our commitment to the channel. PCaaS is just as powerful through a partner. In fact, it’s more powerful because of the partner’s ability to build it into a larger solution”.
Are there any potential inhibitors to the adoption of Taas/DaaS/PCaaS? “If there is a challenge,” replies Childs at Tech Data, “it’s educating and changing the habits of sales people and of customers. Resellers are used to selling and businesses are used to buying hardware outright, but this is the same challenge that the industry faced with the cloud and that has become perfectly acceptable.”
He predicts that there will be a similar trend “toward acceptance with TaaS” although “it may happen faster now because everyone is already familiar with the cloud”.