Hardware as a Service: A Non-Starter?By Pedro Pereira | Posted 2007-08-15 Email Print
The model has spurred a lot of discussion, but very few companies are actually using it.The concept of hardware as a service has spurred numerous discussions in the IT channel for about two years. And that is where it has mostly remained in the realm of concept and discussion.
Very few solution providers have put the concept into practice. Lending companies remain largely non-committal about this untried model, and distributors are just starting to embrace it.
The concept itself is simple enough: Solution providers that charge customers monthly, quarterly or yearly fees for various IT services, such as remote systems monitoring and management, would add physical equipment the routers, servers, laptops and storage systems to the equation. Rather than buying hardware upfront, the customer would pay for it through a leasing arrangement as part of an overall recurring IT services fee.
That, however, is about to change. Ingram Micro later this month plans to introduce a HAAS service to VARs and integrators as part of its Seismic managed services suite through a deal with lender National City.
The service fulfills a need, but Crotty said he believes the percentage of channel companies that will take advantage of it will remain small for the time being. However, if the HAAS model takes off, other lenders will follow National City with their own offerings, he said.
"When they realize there's demand out there, they'll want to meet the demand," Crotty said.
Also working on a HAAS offering is N-able Technologies, a managed services platform provider in Ottawa that has enthusiastically championed the model. The company's vice president of sales, Mike Cullen, said N-able has had discussions with Ingram Micro competitor Tech Data and IBM Global Financing to build a program together.
"It's going to be an extremely aggressive program," Cullen said. He had few details, but added he expects a launch in a few months.
An ardent proponent of HAAS, Cullen said even though the market has been slow to embrace it, he still has high hopes for it. For managed services providers, he said, it is a necessity. It is a way to avoid commoditization and compete with large companies that are getting into the business of remote systems monitoring and management, he said.
Through managed services, providers use tools from N-able or one its competitors, such as Kaseya and Level Platforms, to keep tabs on their clients' IT environments. The goal is to keep the systems running smoothly, prevent problems and react quickly should any glitches occur.
Because HAAS accompanies the intangible of providing services, financing companies are hesitant to fully embrace it. Even though hardware is recoverable in case of default, it depreciates quickly, and there is no way to recover the service intangibles.
Lenders also fret that customers unhappy about service levels could stop making payments for both services and hardware, said Scott Tillesen, director of small and midsize business credit at Tech Data, in Clearwater, Fla.
"It makes the billing a little messy," he said.
Mike Ellison, director of partner development at N-able, said he agrees that the service component is the sticking point. Some N-able partners with a background in selling hardware are eager to embrace HAAS, but they run into obstacles when trying to put together installment plans for customers that cover services and equipment, he said.
One N-able partner that has successfully implemented the HAAS model is MasterIT, of Bartlett, Tenn. Through a model the company has trademarked as IT-as-a-Utility, MasterIT buys its clients' IT infrastructure at book value and sets about replacing aging hardware when necessary, said CEO Michael Drake.
"We have a dedicated credit facility relationship that has committed $200 million of non-recourse financing to provide IT-as-a-Utility nationally," said Drake. "We have our own lender."
Drake said he believes most MSPs don't know how to implement HAAS because they have technical backgrounds and don't know how to articulate the value of the model to clients. In addition, he said, lending companies don't understand the model.
But this will change, he said. "At some point the industry will figure out how to deliver the total solution because the end user will demand it."