The Future of Company Devices may be as a Service

Procurement and deployment of the PC and other devices is about to be dragged, kicking and screaming, into the 21st century as a growing number of companies explore the potential benefits of PC-as-a-Service (PCaaS) and Device-as-a-Service (DaaS). At IDC, we’ve been researching this trend for some time, surveying IT buyers and talking with industry players. This week, HP launched a major DaaS marketing campaign. The company, which cut its teeth on the hardware-as-a-service model through its print managed services business, has been quietly rolling out DaaS solutions through its channel partners around the world for months. This trend has legs because, done right, it has the potential to be mutually beneficial for customers and the industry.

Defining DaaS
Some will dismiss DaaS as the industry merely jumping on the “as a service” naming bandwagon. And truthfully, the name can be a bit confusing, especially when you consider that Desktop-as-a-Service is already a thing. Despite the matching acronyms, the two are notably different. Desktop-as-as-Service serves up a data-center based, highly-secured virtualized desktop, accessible on a wide range of devices including thin clients, desktops, notebooks, tablets, and phones. Device-as-a-Service, conversely, serves up the hardware itself. Plans vary, but typically they include deployment, management, services, and eventual end-of-life recycling of the device. Companies choose a length of service, typically around three years, and pay a monthly fee for each device.

IDC surveyed US-based IT buyers across a range of company sizes about PCaaS earlier this year and found that about one quarter were already actively looking at such services. Among those who were not, nearly 20% said they had plans to do so in the next 12 months. Why would a company want to pay a monthly fee for a device versus simply buying it outright? Among respondents, the top three selected reasons included the ability to deploy only the PC assets they need, based on workload, As well as the ability to transition PC procurement from CAPEX to OPEX, and the ability to reduce IT workloads by offloading procurement and management to a third party. Let’s look at each of these more closely.

Key Benefits of DaaS
The ability to deploy only assets as needed based on workload is a big one. This means a company has the ability to flex up, adding devices as needed when its workforce grows. More importantly, however, is the ability to flex down. The problem with the traditional PC procurement model is companies that decrease the size of their workforce due to seasonal changes, layoffs, or the like, have to deal with the surplus of PCs (and sunk costs) that result. In a DaaS model, the provider takes back those devices, potentially redeploying them with another client.

Shifting device procurement from CAPEX to OPEX is a key reason why even a large firm with an in-place IT organization might consider DaaS. Instead of the high cost of purchasing PCs as part of capital expenditures they must depreciate, the as-as-service model lets a company shift the ongoing cost over to the operating expenses side of the ledger. The model also drives increased cost stability. Instead of trying to forecast the need for future hardware refreshes, those refreshes are built into the service plan. From an industry perspective, the upside here is to not only have a more reliable understanding of when customers will need new hardware but also, the potential to reverse the ongoing trend toward ever-longer device lifecycles.

Finally, reducing IT workloads is attractive for all the reasons you might expect. By offloading-day–to-day management and other service tasks to a third-party organization that is incentivized to keep everything running smoothly, employees are likely to have a better overall experience. Plus, overtaxed IT organizations can focus on other business-driving initiatives. If the service provider does its job well, it’s a win-win situation, with more attractive margins for the seller and simple, single-contract experience for the customer.

There is a long list of other potential benefits associated with DaaS, including reduced overall costs, the ability to predict and prevent hardware failures through enhanced analytics, and the capacity to make sure all devices are properly retired.

That last one, interestingly, may be a key driver for many companies. During a recent conversation with HP executives on this topic, they noted that asset disposal is a key challenge for many businesses. Too often, old PCs in non-regulated small, medium, or large-sized business end up stashed in desk drawers, still filled with company data. A DaaS model not only ensures those devices are collected and wiped of sensitive data but that the business also recovers the residual hardware value.

Early Days, But a Clear Opportunity
DaaS programs are just starting to spin up and the model is far from a guaranteed success. As more companies enter the space and we dive deeper into the research, we’re likely to find some aspects that need refinement. What’s clear now is one size certainly doesn’t fit all. For example, the needs of small companies in emerging markets will be dramatically different from those in a mature market. Many companies will likely find the available products and services too limited. Others will prefer to stick with their existing lease programs. Still others will simply always prefer to buy and manage outright. And, of course, the appetite for DaaS providers to take on higher-risk organizations will only scale if they first find success with well-established, stable ones first.

Bottom line is, in a world where much of the news around PCs and devices more broadly is often negative, with growth rates going the wrong way, DaaS looks like a promising development for all involved.

Published by

Tom Mainelli

Tom Mainelli has covered the technology industry since 1995. He manages IDC's Devices and Displays group, which covers a broad range of hardware categories including PCs, tablets, smartphones, thin clients, displays, and wearables. He works closely with tech companies, industry contacts, and other analysts to provide in-depth insight and analysis on the always-evolving market of endpoint devices and their related services. In addition to overseeing the collection of historical shipment data and the forecasting of shipment trends in cooperation with IDC's Tracker organization, he also heads up numerous primary research initiatives at IDC. Chief among them is the fielding and analysis of IDC's influential, multi-country Consumer and Commercial PC, Tablet, and Smartphone Buyer Surveys. Mainelli is also driving new research at IDC around the technologies of augmented and virtual reality.

72 thoughts on “The Future of Company Devices may be as a Service”

  1. What is wrong with depreciation of CAPEX equipment? Does IRS allow this? Are companies OK with entrusting their confidential data stored on these DaaS PCs to third parties? What about large companies IT departments, outsourced too? This topic has a taste of “buy vs. lease” for business reasons discussion.

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  2. IT is somewhere between light bulbs (which all companies need, but isn’t any company’s core skillset, and which is literally a black or white issue) and the core production process that is the very heart of any company’s value creation, very specific to each company with inbuilt strengths and weaknesses, constraints and opportunities…
    I’ve seen even simple client device subcontracting turn into an expensive, inflexible, unsatisfactory mess. Times ten for servers and/or apps. The issue with subcontracting and leasing is always the same: it looks good short-term because it takes stuff off the balance sheet and creates an external scapegoat. But it’s not guaranteed to work since it assumes the savings will be big enough to make up for the supplier’s margins (bound to rise over time with lock-in) and does require a very specific relationship management skillset (to cover emergencies, day-to-day, mid/long term evolutions…).
    Most It projects fail. That might be a signal to hand them off, or, maybe to get more down and dirty and make IT a company’s core skill. The pendulum has been going back and forth on the issue for a while.

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