Seems like every year, some vendor or group of solution providers starts pushing the idea of customers leasing hardware – servers, routers, switches, firewalls, storage arrays, etc. Just as you do with cars (or we did before the credit crisis), a business would lease the hardware in their data center and contract with the solution provider for support. At the end of the term, solution providers would give the customer the option of either upgrading equipment or purchasing the hardware and extending the warranties.
In the age of managed services and what some people call “hardware as a service” (HaaS), businesses no longer have to take possession of equipment. It’s sort of managed services in reverse; the hardware sits in the service providers’ data center, and the customer leases either parts or whole functionality of core equipment.
The question I recently got from a solution provider is, What’s the difference between leasing IT equipment and the HaaS model? On the surface, the difference is in the delivery of functionality. But there’s more to it than just that.
In practical operational terms, leasing is no different from purchasing or owning the equipment. The consumer takes possession of the hardware, deploys it in operating environments, and is responsible for the management and routine maintenance (although we’d hope they would contract with a solution provider for the routine maintenance). A lease coming to term creates a natural sales opportunity, where the customer must make a choice about taking full possession or replacing with new equipment.
The HaaS model is similar to leasing in that the customer is making regularly payments to a service provider for the use of the equipment. But the only thing the customer is really paying for is functionality and performance. The service provider is responsible for operations, maintenance and performance. Upgrades, equipment in use, maintenance and management are all, theoretically, transparent to the customer. It could be argued that HaaS is more advantageous to customers, since they’ll never be caught in the obsolescent cycle.
Leasing and HaaS both convert the purchase from a capital to an operational expense. The cost structure of each model is different, but the business can carry both as a recurring expense rather than a single outlay of cash. That’s increasingly a benefit to cash-strapped customers. While some will argue that leasing creates a point in time in which customers and solution providers must talk about the future of the leased equipment, so does HaaS agreements.
There are significant differences between the two and, from a certain perspective, the HaaS model has the edge over leasing in terms of value to both the customer and the solution provider. So the real question is whether HaaS will eliminate the value proposition of leasing.