There has often been a clear divide between business owners as to whether one should purchase equipment outright versus rent, lease or finance equipment. Often these decisions were based purely on cash flow or tax advantages as well as many company’s preferring not to be beholden to a financier. However, recent economic uncertainty is not the only driver in changing these attitudes and is leading many CFO’s and IT decision makers toward more palatable pay-as-you-go options. These options include HaaS (hardware as a service) but have also recently been referred to as IaaS (infrastructure as a service) or TaaS (technology as a service).
Substantial tipping points have occurred in technology, so much so that owning a piece of hardware or software that is likely to be superseded in a matter of 2-3 years (or less) means equipment and software unless routinely updated is rendered useless during its own lifecycle.
Even high end servers that were purchased less than a few years ago have demonstrably higher power usage, so much so that it has led to some organisations to shed these systems just on power savings alone.
Of course there has always been a technology cycle, but now it’s unarguably faster, so much so that technology decision makers must consider whether computer hardware should no longer be owned but rather, delivered to the organisation as a service where the provider keeps the equipment maintained and able to keep pace with the technology as it advances.
The advances in cloud technology where virtual servers and virtual desktops can be delivered to relatively inexpensive desktops, notebooks and mobile devices highlights how far we’ve come in less than a decade. Company applications that were once delivered in a box and manually installed to several computers in the office are now delivered as a download or via a website and paid for online typically on a monthly basis. If not already adopted by most software vendors, it’s only a matter of time before it becomes the norm, leaving only a handful of legacy applications which in the future will be forced to change or face competition from other vendors.
Fairly recent changes by major software vendors such as Microsoft, Citrix and VMWare provide a licensing program that enables an IT service provider to bundle core program’s like Windows and Microsoft Word as a pay-as-you-go service but only when the infrastructure is owned by the service provider. This makes for a competitive environment where prospective buyers of new equipment such as servers, desktops and networking equipment can now get leading edge equipment bundled with a perpetual software license for the program’s they use. This is particularly valuable for organisations who scale in size and don’t wish to pay for what they actually use of the hardware and software when their workforce is subject to fluctuations.
This isn’t unique to the IT industry. The same availability of technology has led many traditional business models to change – think of winemakers who used to sell by the bottle and now sell by subscription, or some of the new pay only for what you use city car rental places that are popping up in major cities. These businesses, now dependent on monthly recurring contracts or subscriptions now complement a growing trend to purchase equipment and software as Opex (ongoing operating expenditure) rather than Capex (upfront capital expenditure. Large international organisations operating here in Australia are removing capex budgets leaving local decision makers with few options to upgrade ageing equipment and retired software applications. This makes HaaS far more relevant than a few short years ago.
HaaS, not to be confused with traditional leasing or renting should target the need for organisations to get more value out of equipment by bundling it with the technology the company actually uses. It adds assurance from the service provider that the equipment can support the business needs during the contract and also keep the client running the latest revisions of software such as Windows or Office applications.
So when is HaaS is a viable option? Typically, organisations who have purchased a server and software over the years may be in an upgrade cycle or a cross roads. Some wish to go straight to the cloud, but unfortunately many business applications are not yet suitable for cloud, things like slow Internet connections, security concerns or prohibitive costs mean that an on-premise server and software is still viable. With HaaS the organisation can stick to a traditional IT model without investing in new equipment, or the organisation can adopt a hybrid model adopting a pay as you go approach ready to integrate with online service providers as these limitations are overcome.
Whatever your technology needs, with rapid advances occurring in technology, the purchasing model of yesterday may not suit tomorrows environment and it is warrants a technical and financial review.
