Rethinking Tech Purchasing

Rethinking Tech Purchasing

Device-as-a-Service model can reduce management burden and improve budget flexibility.

It’s been said that every company is now a technology company. Whether they deal in software, staffing, sprockets or sandwiches, virtually all businesses today rely upon information technology to run their operations.

That said, many organizations would dearly love to reduce their technology responsibilities. Managing an increasingly diverse range of devices with various operating systems from multiple vendors is becoming progressively more difficult, particularly for smaller organizations with limited IT staff. More than 60 percent of IT teams surveyed recently by research firm IDC say their resources are drained by device management.

The emerging Device-as-a-Service (DaaS) model promises to streamline the way companies acquire, manage and use technology. According to IDC, more and more businesses are using or considering consumption-based DaaS solutions in order to reduce their device support and management burden. In fact, the research predicts that almost one-third of PCs used in business use will be procured as part of a DaaS arrangement.

DaaS allows organizations to outsource the acquisition and support of hardware such as PCs, printers, phones, thin clients and point-of-sale systems. Plans typically include acquisition, deployment, support and services, as well as end-of-life device recycling. Monthly payments are usually figured on a per-device or per-seat basis for a contracted length of service, often around four years.

Management Relief

In a recent opinion column on the Tech.pinionsweb site, IDC analyst Tom Mainelli noted that DaaS 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,” Mainelli wrote. “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.”

The DaaS model can provide relief for organizations that are spending a sizeable chunk of their technology budgets just to “keep the lights on.” In a new Forbes survey of senior-level IT executives from around the globe, 37 percent of respondents said the majority of their IT budget goes to ongoing maintenance and management tasks.

In addition to reducing management burden, DaaS helps ensure that tech assets are refreshed regularly, keeping them current and compliant. Many organizations — particularly smaller businesses — tend to put off upgrades and make do with aging systems. Intel estimates that there are more than 500 million computers in use today that are five years old or older. Although this equipment may do an adequate job, it actually has hidden costs.

Outdated technology hinders productivity, impedes automation and creates security vulnerabilities. What’s more, aging hardware is more prone to failures that could result in extended network downtime and increased operational costs.

Improving Cash Flow

Perhaps the most enticing feature of the DaaS model is that it offers financial flexibility. With hardware, software and service costs combined under a single contract with one monthly payment, organizations can improve cash flow, preserve capital and manage a predictable expense.

DaaS reduces the significant upfront capital expenses required for big hardware purchases by shifting to a pay-as-you-go operating expense. This not only preserves cash but creates tax advantages as well. While capital expenditures are amortized and depreciated over an extended number of years, operating expenses can be fully deducted in the year they are incurred.

Because assets are deployed based on workload, DaaS provides the flexibility to scale up or down as needed. An organization can easily add devices when the workforce grows, or return some devices if seasonal changes or business conditions reduce requirements.

DaaS is still an emerging model, but analysts expect more vendors will enter the space in the coming months. While many organizations will always prefer to own and operate their own tech resources, the subscription model is enticing for those looking to offload time-consuming support tasks and improve cash flow so they can focus more resources on business-transforming initiatives.