Opinion: Hardware as a service is going to happen, but the question is whether VARs will embrace it now or rush to catch up later.Of all the challenges associated with moving to deploy managed services, the toughest issue more often than not concerns how to deal with selling and managing hardware in what amounts to a new way of doing business.
Although getting into the managed services space doesn't absolutely require a solution provider to create a hardware-as-a-service offering, solution providers that have pioneered this space say that, while it can be a challenge to get customers to wrap their minds around the concept, the margins derived from this model are substantially higher than just trying to resell stand-alone hardware.
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The first thing that strikes most people about hardware as a service is that it looks like leasing by any other name. In fact, it is a form of leasing, but rather than the end customer doing the leasing, the solution provider manages the lease for the customer. In this way, the customer is still responsible for the terms of the lease, but the solution provider can then manage and, more importantly, upgrade hardware over the life span of the lease.
This is a critical point for solution providers because delivering managed services fundamentally alters their relationship with hardware of any kind. In the old model, when a piece of equipment broke or was being retired, it was cause for celebration because it meant that customers would soon be reordering systems from the reseller. In a managed services model, a broken or outmoded piece of hardware typically means higher support costs that adversely affect the service provider's bottom line.
Given that, it's in the interest of the service provider to make sure the customer has the latest and greatest hardware to keep service calls to an absolute minimum. Furthermore, this gives the solution provider more sway over vendors because it effectively makes the solution provider the decision maker in terms of what products and technology will be rolled out as a service that is largely transparent to the end user.
The biggest challenge in making this all happen probably stems not from the technology or the terms associated with acquiring the technology, but rather from the cultural bias of the customer. Most customers are conditioned to think about acquiring technology as a capital expense, which lets them pay for it over an extended period of time by deferring some costs as they write down the value of the hardware over a period of time. In a managed services model, everything is an operating expense that, while allowing customers to reduce the amount of cash they have to tie up in a technology purchase, still makes some customers feel like they are missing out on a tax benefit for their companies.
But like most cultural issues standing in the way of inevitable progress, customers soon will begin to realize that the hardware-as-a-service model eventually will become the dominant model whether they like it or not. This is because, as virtualization technologies continue to isolate software from the underlying hardware, customers will come to see hardware as being little more than a utility needed to run their software. As such, they will be much more inclined to upgrade more regularly because hardware upgrades no longer will be associated with cataclysmic IT events. Instead, upgrades will be processed as part of the maintenance associated with what many people refer to as utility computing.
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So no matter how you slice and dice it, hardware-as-a-service business models are most definitely in everybody's future. The only thing that solution providers need to determine is whether this is a future that any given solution provider wants to embrace today or simply have foisted on it tomorrow. And the answer to that question is determined only by the economic and customer circumstances of any given solution provider.
Michael Vizard is editorial director of Ziff Davis Media's Enterprise Technology group. He can be reached at michael_vizard@ziffdavis.com.
