The growing acceptance of device-as-a-service (DaaS) has in all likelihood received a boost from COVID-19. Case in point: Enterprise IT survey respondents report a 59% spike in planned cloud usage due to the pandemic. For IT Vendors who are re-engineering their portfolios to accommodate the growing “as-a-Service” market that’s a positive sign.

Technology Business Research, Inc. (TBR) states that Enterprise IT DaaS adoption and the extension into everything-as-a-Service (XaaS) is in the earliest phase of adoption with vendors still developing offerings and educating customers. To be competitive with the growing array of cloud services the DaaS offerings need two critical components:

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Flexible consumption-based pricing

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The cloud-like experience in terms of using the systems (e.g. flexibility, simplification, automation)

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The real opportunity for IT Vendors will rest on their ability to build bridges with partners and channel organizations to orchestrate a better-than-cloud experience for customers.

Channel Partners will continue to fuel DaaS growth

For decades, IT Vendors have relied on channel companies and strategic partners to sell, structure, and implement solutions to the enterprise and mid-market customers. IT Vendors embracing the DaaS model will need to quickly redefine their partner strategy to gain traction in this emerging market. The opportunity clearly exists to differentiate offerings, customer experience and demonstrate distinct advantages over other pure play cloud providers.

Early DaaS deals have been predominantly direct through large IT and Telecom vendors. Scaling sales through channel partners has been a slow process due to historically transactional-focused mindsets around hardware sales. However, larger traditional VARs (value-added reseller), or mid-sized system integrators, by necessity, have been evolving to include managed services, professional services, advanced support and cloud services to off-set the shrinkage of on-premise hardware sales. Those skill sets will accelerate their ability to support IT vendors taking DaaS to market and support it with richer XaaS services.

The large systems integrators (SI) are valued partners in large enterprise IT engagements, which are often more customized and represent larger deal sizes. Their roles in crafting strategic vision and roadmaps to execution are the on-ramps to more comprehensive DaaS to XaaS adoption by customers. The next tier of SIs have entrée to some enterprise customers at a strategic level but are better positioned to capture mid-market business and often on more project-oriented engagements.

Partnerships with co-location facilities should be considered as part of the IT Vendor DaaS go-to-market strategy. Co-location companies can benefit DaaS vendors in two ways. First, co-location vendors can engage in DaaS models with IT Vendors, by selling additional capacity around these offerings. Secondly, end customers can have their hardware deployed through a DaaS contract in a co-location facility instead of having to manage the provisioning, maintenance and support of these systems.

Independent Software Vendor (ISV) Partners represent another avenue to add customer value to DaaS by offering complimentary products and service bundles. ISVs have jumped into the cloud market for the obvious reasons of being able to streamline the buying experience for end users, enabling easier access to advanced capabilities, and scaling to meet growing customer needs. ISVs, in partnership with IT Vendors can offer the benefits of cloud without public cloud hosting through hybrid edge solutions that can offer different levels of security and flexibility.

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DaaS offerings are evolving to support channel sales

IT Vendors are refining their DaaS portfolios to make them easier to sell through partners. Adopting flexible pricing models will make these offerings more appealing to a larger market segment and easier to consume. Creating solutions that address specific industry use cases, simplifying DaaS offerings, accelerating the quoting processes, and enabling channel-led delivery are other ways to gain partner traction. Work remains to be done on crafting offerings for smaller mid-market and SMB focused resellers and carving out win-win commercial models.

By most accounts, the effort is worth it. In fact, research from TBR shows that the renewal rate for enterprise IT DaaS is high, as customers often have little reason to switch if their vendor can meet expectations. TBR expects renewal rates to fall slightly approaching 2024, as more options become available and more contracts come up for renewal. As of now, many organizations are still in their initial DaaS contract, which typically lasts two to three years.

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The real opportunity for IT Vendors will rest on their ability to build bridges with partners and channel organizations to orchestrate a better-than-cloud experience for customers. 

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Flexibility in light of COVID-19

IT Vendors are modifying DaaS options to accommodate customers who may have urgent hardware needs due to COVID-19. In the data center space, contracts as short as one year are being used to get customers in the door.

The financial services arms of these vendors are releasing billions in funding for customers and partners for infrastructure investments to support business changes sparked by COVID-19. IT vendors are positioning DaaS solutions as a way for customers to acquire hardware, software and services without significant upfront Capex investments.

Can the right dose of DaaS compete with the cloud?

Hyper-scalers and other large cloud providers have been moving to incorporate increasingly more white box infrastructure over brand name OEM (other equipment manufacturer) technologies to power their offerings and control costs. For many IT vendors, the cloud still represents a challenge.

The DaaS approach has advantages over the traditional transactional model in both customer service and closer customer relationships. A more intimate knowledge of customer needs, systems, processes, and capabilities can result in an IT Vendor’s desire to really embrace a true DaaS model. These ongoing customer relationships also lead to opportunities to bundle in more software and services to solve their customers’ problems.

In summary, DaaS solutions can be attractive when they offer flexible financial terms, rapid set up services, a streamlined experience, and proactive support. Because that’s what the customer ultimately wants.

 

Disclaimer: This article makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.

Vikrant Viniak

Managing Director - Accenture Strategy


Lucia Lesar

Managing Director – Global Oracle CX Lead​

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