What is Device-as-a-Service?
Device-as-a-Service (DaaS) is a business model where hardware devices such as computers, laptops, tablets, smartphones, home appliances and other such products are offered from retailers and manufacturers to customers through a subscription-based model rather than a one-time purchase.
Within the context of DaaS, hardware may also, but not always, be combined with software and additional services such as insurance, maintenance, repair etc., to provide a comprehensive solution to customers.
Evolution of DaaS - Early 2000 to late 2020’s
- Early 2000s: Cloud computing emerges with companies like Amazon Web Services (AWS) launching Elastic Compute Cloud (EC2), laying the foundation for "as-a-Service" models.
- Late 2000s - Early 2010s: Companies like Salesforce.com, Adobe, and Microsoft pioneer Software-as-a-Service (SaaS) models, shifting towards subscription-based software delivery.
- Mid-2010s: HP introduces DaaS for businesses, offering hardware, support, and management on a subscription basis.
- Late 2010s - Early 2020s: Dell, Lenovo, and other tech giants follow suit with their DaaS offerings, providing businesses with hardware, software, and services through subscription plans.
- Late 2010s - Early 2020s: Companies like Amazon, Google, and Apple introduce subscription services such as Kindle Unlimited, Google Fi, and the iPhone Upgrade Program, blending hardware and services into subscription-based offerings.
- Late 2020s: The popularity of DaaS continues to grow, with businesses and consumers embracing the model for its cost efficiency, flexibility, simplified management, access to the latest technology, reduced risk, and environmental benefits.
The most recent development in DaaS is the possibility for businesses and consumers to access products on a subscription basis without actually owning the product.
As companies continue to innovate we see more choices and benefits for businesses and consumers seeking a more agile, sustainable, and convenient approach to technology acquisition and management.
Common DaaS Business Models
The business models that have evolved in DaaS are typically based on the needs and preferences of the customers and the value that businesses aim to provide.
For example a common business model in DaaS is “try-before-buy”. This model to be because manufacturers and retailers of certain categories of products (for example sporting equipment) experienced that customers often hesitate to make purchase decisions due to uncertainties about the functionality and the high purchase price of such products.
In response to this need for assurance, the "try-before-buy" business model has emerged as a solution. Subscribers under this model have the opportunity to experience the product firsthand before committing to a purchase or further use.
Common DaaS business models are:
- Product subscription or rental
- Rent-to-own
- Try-before-buy
- Upgrade through membership
- Pay-per-use
Here’s a detailed view.
1. Product subscription or rental
The product subscription or rental model offers customers the opportunity to access and use devices for a specified period by paying a recurring subscription fee, similar to a rental arrangement.
What makes a subscription model attractive for the customer is the bundling of additional services. Service providers often add insurance and maintenance and other such services to provider value to their customers.
Adding additional services also often helps the business to justify the cost of the subscription.
Bundling of additional services with the product is also what distinguishes a subscription model from a leasing model.
In a subscription model customers are free to choose a device but they agree to a minimum subscription duration and a subscription price that is often tied to the duration of the subscription contract (the longer the subscription duration, the cheaper the subscription price.)
In the image below, see how the subscription prices changes with the duration or length of the subscription.
In a subscription model, additional services are bundled together with the product to make the service attractive. For example, Grover, a company that offers tech products on a subscription basis, provides their users with insurance of the device.
2. Rent to own
The "rent-to-own" business model within the context of Device-as-a-Service (DaaS) combines elements of rental agreements with the option for customers to eventually own the devices they are using. This model offers subscribers the flexibility to use hardware devices for a specified period by paying a recurring rental fee, with the possibility of ownership at the end of the rental term.
Companies such as Grover and Yuno, who offer tech products on a subscription basis, provide the option to purchase the product after the end of the minimum subscription duration. However this is not their key feature as such companies focus on increasing the circularity of products.
3. Upgrade through membership
The difference between this business model and the subscription business model is that in a subscription model the customer is free to choose a device from a catalogue of devices.
However in an upgrade program the customer subscribes to the possibility of upgrading a device to a newer model as part of an ongoing subscription but may not necessarily have the option to choose a device freely.
Example: Apple offers an iPhone upgrade program in which members pay a fixed monthly fee and have the possibility to upgrade to y new iPhone every year.
4. Try before buy
The "Try Before Buy" business model within the context of Device-as-a-Service (DaaS) allows customers to test and evaluate hardware devices before making a commitment to purchase them. This model provides subscribers with the opportunity to experience the functionality, features, and performance of devices firsthand, helping them make informed decisions about whether the device meets their needs.
Example: Paceheads, a sporting goods retailer, offers its customers to subscribe to products for a minimum term of 3 months so that they can experience the product without paying the full purchase price.
5. Pay-per-use
The "Pay-Per-Use" business model within the context of Device-as-a-Service (DaaS) offers a flexible and cost-efficient approach to accessing hardware devices. In this model, customers pay for the actual usage or consumption of the devices, rather than a fixed monthly or annual subscription fee. This allows businesses to align their costs directly with their usage patterns, making it ideal for scenarios where device usage fluctuates or varies over time.
For a business model based on pay-per-use, the service provider needs an additional device that can calculate the usage of the product.
Example: Miele the German manufacturer known for its high-quality home appliances, also offers a pay-per-use model for some of its products, particularly in the commercial sector. This model allows businesses to utilise Miele appliances and pay based on their actual usage, providing flexibility and cost-efficiency.
Reasons for popularity - Benefits of DaaS
From empowering businesses with seamless device management to offering customers access to the latest technology without the burdens of ownership, the benefits of DaaS are reshaping the way businesses and end consumers approach their hardware needs.
Benefits for the provider
- Recurring revenue stream
- Improved customer retention
- Better customer touchpoints
- Device lifecycle management
- Participation in recommerce and/or circular economy
- Upselling and crossselling opportunities
- Reaching suatianbility goals
- Change according to need
Three dimensions of the DaaS Supply Chain
Device-as-a-Service changes the complexity of data and flow of the supply chain as device providers have to integrate several phases of “Source, Make, Deliver” across different possible cycles of device deployment. There are three different dimensions of DaaS:
1. Device fulfilment
Device fulfilment requires the provider to carefully consider and decide how the devices will be delivered to the customers. In the Device-as-a-Service example, the fulfilment is not based on the usual order-based model.
2. Device services
Device services, as well as all connected processes, need to be both thoroughly defined and simple to follow, which is not frequent in the case of add-on service models. With DaaS, device providers must have an in-depth understanding of the device and all its components. They also need to know how the device will behave (and change) as time passes.
3. Device recovery
Device recovery allows providers to improve their device revenue by getting additional value through reverse logistics, device refurbishment, and redeployment to new customers. This dimension is basically unique to Device-as-a-Service since it is nothing more than an afterthought in most product distribution models.
How to Get Started with DaaS?
You essentially need to think about the following:
- How will your customers explore your product.
- How you fulfill the order.
- What will the business model look like (subscription, rent-to-own, try-before-buy, pay-per-use, membership or perhaps a combination of these )
- What you will do with returned products.
Resources: If you are just starting out here are some resources to help you develop and build your DaaS business model. FAQ Checklist for a Subscription Pilot, Paceheads Case Study, Circularity Check: Determine if a subscription model fits your business.
What are some examples of Device-as-a-Service?
HP's device-as-a-service business model can help businesses save on costs associated with remote working, security, and digital transformation. The monthly payment plan is flexible and can be optimised to help the business cash flow.
With this service, customers can also access software that helps manage their devices remotely. This can include monitoring device health and performance, setting up security policies, and managing apps and updates.
Another example is Grover. Grover's mission is to democratise access to consumer tech and bring the circular economy for electronics to new countries. Grover will accelerate its mission and expand its operations in existing markets—Germany, Austria, Spain, the Netherlands, and the USA—with its latest funding success. It is Grover's goal to continue providing access to consumer tech and growing subscribers in existing markets. The company has ambitious plans to expand its consumer tech subscription and has forever altered how the consumer electronics industry does business.
Germany's Samsung Electronics partnered with Grover to bring monthly tech subscriptions to Samsung customers. Grover will now offer Galaxy S20 smartphones for rent through Samsung's online shop in Germany.
This new partnership between Grover and Samsung is designed to give German consumers more flexible and affordable access to the latest smartphone technology. With Grover, customers can choose to rent a Galaxy S20 for 12 or 24 months, with the option to upgrade to a newer model after 12 months.
On the same vein, Apple is coming up with its own hardware-as-a-service. This program would allow customers to subscribe to hardware with the same Apple ID and App Store account they use today to buy apps and subscribe to services. In doing so, Apple would make buying an iPhone or iPad as seamless as paying for iCloud storage or an Apple Music subscription each month.
Conclusion
According to the device-as-a-service Market Research Report conducted by Market Research Future, DaaS market size can touch a value of USD 307.42 Billion by 2030 which is a staggering increase considering that it stood at USD 9,843.8 million in 2019. Conclusively, device-as-a-service is gaining momentum because both businesses and customers want to make things as easy as possible for themselves. Most customers really only care about the service and not the device itself, meaning that if the device breaks, they simply want it replaced. Furthermore, customers want to have the option of trying the device before purchasing it, and they want to pay as they go. And this is where both the flexibility and value of the Device as a Service model comes to play. For businesses on the other hand, the focus is shifting from delivering digital workplace experiences with high degrees of automation towards enhancing their workplace delivery and productivity capabilities. The reality is that the actual devices are starting to matter less and less, and the innovations related to the quality of value-added services are becoming increasingly important. And this is exactly where Device as a Service comes to play, as it serves as a source for differentiation and competitive advantage for businesses in the device industry.
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