One dialogue that comes up sometimes when I review Device-as-a-Service with new clients is the “ahh, it’s just a leasing model.” This assessment comes from many different organizations’ teams, whether they are involved in sales, operations, or strategy. I find that it is generally driven from two points of view. First, that DaaS is simply another transactional sale, but with different payment terms. Second, is that with DaaS the device is viewed as the most significant part of the model, and is of paramount importance to the customer – along with the capital outlay. A devices company naturally feels that a customer getting an expensive premium device with low capital outlay is a great outcome. The reality is that DaaS is a services sell, which is inherently “solution” focused. You are furnished a great device that best enables your experience along with all other services, and where needed financial services may come into play to enable key financial models.
Let me use an analogy which is accessible, and we’ve all shared. When we use a hotel room, we never would refer to it as a “lease”, but more often something like a “stay”. The hotel room comes along with amenities and services (WIFI, parking, concierge, breakfast buffet, room service) which provides a solution to working away from home – place to sleep, workspace, place to keep clean, ability to network, dining possibilities, help navigating the local area. By the way, I’m not actually sure what brand or capability of devices are in the last hotel rooms I used – media, refrigerator, air-conditioner. I could lease a room if travelling, but I’d still have to create a way to deal with furniture, laundry, parking, WIFI, food, and so on. I could lease a furnished apartment, and could slowly advance on the agenda of services, until the moment when the lease and the hotel are indistinguishable, except for payment structure. My hotel is an experience, filled with devices and services.
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DaaS is a services sell, which is inherently “solution” focused.
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In the same vein, if we use a digital office supplied by an employer to perform work, we would never think of a lease on the tools, it would more like being “furnished’ with tools – even if we were the employer. We need a laptop, software and license management, network and connectivity, storage and backup, security, and support as a start. I could lease a laptop, but I’d still have a lot of work to deal with software, connectivity, voice, and so on. If the ‘lease’ expands to include all the parts of the digital office experience mix, it’s indistinguishable from simply a digital office “DaaS” solution, with one interesting catch. I can switch from lease other payment models – ‘pay as you go’ for instance - and the solution is still DaaS. If I switch out all the services from the mix and only leave the lease or ‘pay as you go’, it certainly isn’t a DaaS solution. It’s a device with a payment plan. Imagine rating that experience, versus an all-in concierge digital office experience.
How important is the payment structure and device itself to the DaaS offering? I want to share two ‘from the field’ observations as key takeaways.
First, I’ve not seen very successful DaaS offerings wrapped around a device and payment structure as a core.
- Device leasing is fairly common and has a history as far back as the ‘60’s with IBM. It provides little differentiating value in many markets – there are an enormous variety of businesses offering leasing arrangements. With capital costs at historic lows, it may be cheaper for business to finance themselves.
- Customers instinctively seem to know that lease as DaaS is more of a rebrand than a solution. Offerings which focused heavily on other payment structures - ‘pay-as-you-go’ versus lease – still tend to get wrapped up in solutions evolved towards the payment structure, not in experiences enjoyed by the customer.
Second, what does seem to work is a DaaS solution with an emphasis on a collection of standard groups of branded experiences, and appropriate pricing models.
- These experiences (solutions, services) are defined by what device, software, and support they include. The emphasis tends to be mostly placed on software and service capabilities, rather than just the device by itself.
- These definitions and groupings tend to be less a-la carte, and more what we call ‘tee-shirt’ sizes, simplifying the sales cycle and reducing offer complexity.
- Custom configuration within these groupings can be generally available, but still tend to be focused most on advanced software- or service-defined premium capabilities, not on highly customized device capabilities, nor on complex financial arrangements.
Creating new revenue growth through experiences and outcomes through software- and service-defined offerings is the essence of DaaS – creating new highly-differentiated value to customers beyond the device. Stepping back to look at how a device is used – the context - allows companies to look at the experience, and to think about what makes it natural, simple, and highly valued. Leasing alone does not create DaaS, is unlikely to create deep customer engagement, and doesn’t attach high-margin, high-growth software and services. It’s not the lease, not the transaction, it’s the services, and the experience.