Answering the Critics of Device as a Service

on July 6, 2018
Reading Time: 4 minutes

The concept of Device as a Service (DaaS) has been gaining steam for a few years now, and my team at IDC has done extensive work around this topic. In fact, we’re currently wrapping up an extensive study on the subject that includes a massive multi-country survey of commercial adopters, intenders, and resistors, as well as a forecast that will include our view on the impact of DaaS on the commercial PC, tablet, and smartphone markets. While the momentum in this space is clear, there are still plenty of doubters who like to throw out numerous reasons why DaaS won’t work, and why it won’t bring about the benefits to both buyers and sellers that I’ve outlined in previous columns here and here. Let’s examine some of those criticisms.

There’s Hype, But Is Anybody Really Buying?
The hype defense is probably the most common pushback and question we get when it comes to DaaS, and it’s easy to understand why the average IT professional or even industry insider might be skeptical. But the fact is, we’ve now surveyed hundreds of IT Decision Makers (ITDMs), and talked to most of the major providers, and this isn’t just an interesting idea. We continue to find that DaaS is very appealing to a wide range of organizations, in numerous countries, and across company sizes. The idea that a company can offload some of the most mundane tasks that its IT department deals with while right-sizing the devices it deploys, gathers users analytics, and smooth’s out costs is very compelling. And as the industry has moved quickly from a focus purely on PCs to one that includes additional devices such as smartphones and tablets, interest and adoption will continue to grow.

It’s important to note that even a company completely sold on DaaS won’t make this type of transition overnight. Most companies will start small, testing the waters and getting a better understanding of what works for their organization. In the meantime, there’s existing hardware, software, and services contracts that could still have months or even years left before they expire. Like many things in technology, you can expect Daas adoption to happen slowly at first, and then very fast.

DaaS Costs Are Too High
One of the key areas of criticism leveled at DaaS is that today’s offerings cost too much money per seat. It’s hard to argue with this logic: If an organization thinks DaaS costs too much, then it costs too much, right? But often this perception is driven from an incomplete understanding of what a provider includes in the DaaS offering. Today’s contracts can run from just the basics to something much more complete. Yes, a contract with a full range of services such as imaging and migration, deployment and monitoring, break/fix options and secure disposal can be pricey. But what critics often fail to realize is that their company is paying for these services in some way or another today. Either they’re paying their own IT staff to do it, or they’re paying another service organization to do bits and piece of it (and they’re likely not tallying all the costs in one place). Alternately, some of these tasks—such as secure disposal—aren’t happening at all, which is one of those areas that could end up costing the company a lot more money in the end.

Now with all that said, it’s entirely possible that at the end of the day a company may well end up paying more for its entire pool of services under a DaaS contract. At which point, the questions they need to ask: Am I buying my DaaS service from the right vendor? If the answer to that question is yes, then the follow-up question should be: Are the benefits of managing all these services through a single provider worth the extra cost to my organization? Does it free my IT organization to do other important jobs? The answer may be yes.

Refurbs Will Negatively Impact New Shipments
One of the key benefits of DaaS is the promise that it will shorten device lifecycles which have always been, to me, one of the win/win benefits of this concept. Companies win by replacing employee’s hardware more often thanks to pre-determined refresh cycles. Instead of finding ways to keep aging devices around for “one more year” to push out capital expenditures, DaaS allows companies to equip employees with newer machines that drive increased productivity, offer improved security, and lead to improved user satisfaction. From the hardware vendor side, the benefits are obvious: faster refresh rates that become more knowable over time.

But what about all those PCs collected at the end of a two- or three-year DaaS term? Won’t they cannibalize shipments of new PCs? The fact is, today there’s already a huge business around refurbished PCs, tablets, and smartphones. What the DaaS market could do is create a much more robust, high-quality market of used commercial devices. As with the automobile leasing market, these devices receive regular maintenance, which means a higher quality used product. DaaS providers can redeploy (or sell) these into their existing markets at lower-than-new prices and still drive reasonable profits. Or they can target emerging commercial markets where even ultra-low-cost devices are a tough sell today.

Ultimately, I believe that DaaS will prove to be a net positive in terms of overall shipments for the industry. Even if that proves incorrect, I’m confident it will drive greater profitability per PC for vendors participating in the DaaS market.

DaaS Will Never Appeal to Consumers
It’s true that to date DaaS has been focused on the commercial segment, but its only a matter of time before we see consumer-focused plans come to market. Apple’s success with the iPhone Upgrade Program, where you pay a monthly fee that includes AppleCare+ coverage and the promise of a new iPhone every year, shows there’s already an appetite for this. It also proves that a robust secondary market doesn’t necessarily cannibalize a market (and Apple profits greatly from its resale of one-year-old iPhones). You can easily imagine Apple adding additional services to that program and extending it to include two or three-year upgrade paths for iPads and Macs.

And so it’s not hard to imagine the likes of Apple, HP, Dell, Lenovo and others eventually offering consumer-focused DaaS products. To many, the idea of paying a single monthly fee to one company to eliminate most of the hassle of managing their devices—and to ensure no budget-busting costs when its time to replace an old one—would be too good to pass up.