Will DaaS become the new normal for the channel?

With Microsoft announcing its managed desktop service within days of HP Inc updating its own model, Marian McHugh investigates whether DaaS is on the path to becoming the new normal for the channel

Device-as-a-service (DaaS) may not be a new concept to the channel, but when giants such as Microsoft and Computacenter enter into the fray, one can't help but take notice.

Last month Microsoft finally confirmed rumours that it was launching its own answer to DaaS in Microsoft Managed Desktop (MMD), which pulls together hardware, Microsoft 365, Office 365 and various other paraphernalia into a monthly subscription model for customers. Launch partners for the service include Computacenter, Avanade, Dell and HP.

In a blog post announcing the news, Bill Karagounis, general manager at Microsoft, wrote that the offering is a result of feedback from customers struggling to keep up with the rapid rate of technological developments and updating security.

"Through MMD, customers will be able to move towards a secure, always up-to-date environment with device management by Microsoft," Karagounis said.

"As we expand the offering, our partners will play a key role in helping us bring MMD to market and support customers in their transition to a modern desktop."

The day before, HP had announced enhancements to its own DaaS offering, which was initially launched in 2016.

Neil Sawyer, UK&I channel director at HP, told CRN at the time that the move to a contractual model by partners would only reap benefits for them.

"I'm not exaggerating when I say I don't see any negatives [for partners] whatsoever," he said.

"I say that because many, if not all, of the partners we've spoken to have a long heritage in managed services, whether that be workplace technology, mobile technology - much of which is under contract - or managed print services. They are used to contractual-led sales, so the transition from selling PCs transactionally to a managed service is not a particularly complicated one."

Making the move

The claims from the vendor pair are backed by analysts.

According to IDC predictions, some 35 per cent of Fortune 1000 companies will have a DaaS agreement in place and one per cent will have completely transitioned to DaaS by 2019.

Kieran O'Connor, sales director at Total Computer Networks, said his firm has recently started actively focusing on DaaS, driving customer engagement around it in the last few months.

The organisation has completed four projects and has more in the pipeline, according to O'Connor. The largest of these projects was for 6,000 seats in a corporate enterprise, with most of the interest coming from large organisations. However, he expects this interest to eventually "filter down" into SMBs, adding that the simplicity and manageability of the offering is attractive to customers.

"DaaS takes away the worry customers have about supporting devices, looking after them and upgrading them so that the customer can focus on doing what they do best," he explained.

"From our experience, all vendors have programmes around it. HP are certainly pushing us on it and I know Lenovo and Dell are working hard on it too, so they definitely see it as an opportunity for them."

Howard Hall, MD at DTP Group, said that around 10 per cent of the firm's customer base has adopted DaaS, attributing this to the slow uptake by universities, which he describes as being a "big chunk" of its client device business.

Hall also holds the channel responsible for the generally low customer adoption rate, saying that the transition from a transactional to contractual model can be challenging for resellers and clients, the benefits are worth it.

"Probably the biggest thing holding up DaaS is actually the channel's ability to sell it," he claimed.

"If you think of those people who are making a transactional sell, it's easier to say ‘I want a price for this particular PC'.

"But to actually construct a business outcome sale, you have to build a business case and demonstrate an ROI, which slows down the sales cycle a little bit, but in reality the benefits to the channel partner make it a lot more profitable and easier to retain customers."

The reseller boss added that DaaS was a "natural evolution" from the as-a-service model long employed by the managed print sector, saying that HP is leading the DaaS charge because of its experience with managed print services.

"From our perspective we prefer contractual business to transactional business simply because it allows us to build and invest in client relationships over a period of time, which then helps us retain the client at the end of the contractual period," he said.

"So long as you deliver good service, you can tie your client to you for a contractual period which locks out the competition."

The changing nature of customers could also lead DaaS to move from its current niche to the default standard model of revenue streams.

Consumer buying habits have changed over the past decade, with as-a-service platforms becoming more popular.

As a result, a whole generation has grown up using this model and is now entering the workforce - and this will have a knock-on effect on the services offered by the channel, according to David Smith, customer solutions director at Xeretec.

"This as-a-service generation is really resonating [in the channel], and I think that is helping more and more companies to accept DaaS," he said.

"There's a whole generation of people where ownership is not a thing and we are seeing that impact of millennials and Generation Z coming into the workplace and influencing the IT styles of the businesses we talk to."

Niche opportunity

Dell, HP, Lenovo and now Microsoft are some of the vendors pushing their DaaS offerings, with partners able to offer additional services around it, such as helpdesk, configuration services and secure hardware disposal.

This opportunity for reseller partners is encouraged by predictions from IDC that the percentage of PCs shipped under a DaaS contract will rise from one in every 100 to one in every six or seven PCs between 2016 and 2020.

The model also offers an alluring financial element to both customers and their DaaS providers.

It gives the reseller a recurring revenue stream, and it requires less cash investment from the client, according to Xeretec's Smith.

"We position it as the total payments you make over a three-year plan would be less than you would pay for that tech [in a lump sum]," he said.

"Finding that budget in a squeezed economy is tough, so the conversation about paying for tech as-you-go on a monthly tariff really does resonate and avoids the investment of big lumps of capital."

Smith claimed that Xeretec is experiencing a rapid DaaS adoption rate from clients, as well as an increasing number of manufacturers expressing interest in employing it as an offering.

As a result, the company expects it to play a "large part" in its continued growth, which will be partly driven by the large migration of customers to Windows 10 as a result of Microsoft's cessation of support for Windows 7 in January 2020.

"We are seeing Microsoft recommend people migrate to new hardware, and we are seeing the customers themselves thinking that, with all the disruption, it is a good time to explore a software and hardware migration," said Smith.

O'Connor, Hall and Smith all agree that the future is bright for DaaS and that it presents partners with monthly recurring revenue, as well as an opportunity to add value through wrapping other services around the offering.

As more vendors hitch their wagon to the model, and as a new mind set enters the workplace, it could increasingly become the new norm.

"In productivity alone, I think people will get into a faster refresh cycle once they move into this model, and it will help IT teams because they won't have to spend time and money supporting legacy equipment," said Smith.

"I genuinely think that the market will move to this model as the de facto standard; it will take time, but it will get there."