Shortly after the pandemic hit, many leading clothing brands noticed a significant increase in sales of tops but without any increase in sales of bottoms. The reason?
As more and more people started to work from home, they started adapting their work attire for new work conditions in which meeting rooms were quickly replaced with Zoom meetings.
This is just one example of market changes occurring over the last couple of years, well before the pandemic. Customer requirements and preferences are continuously evolving and are starting to outpace companies and their abilities to recognize and respond to the changes.
Today's customers not only want to be treated as individuals and receive personalized offers. They want to pay only for what they want and when they want. They also want to eliminate unnecessary waste.
As more and more customers ask for flexibility, customisation, and sustainability, new business models such as subscription-based economy are starting to emerge and spread into the non-traditional industries.
The subscription-based economy is nothing new, and it has been used for years in industries such as publishing, where they have been offering their magazines to customers for a monthly or yearly fee.
More recently, however, other industries have replaced their standard go-to-market approach with the subscription-based approach. Netflix, Microsoft, Disney, HBO, and Spotify are just a few well-known brands that are offering subscription services for their products.
Now, the hardware and electronics industry is starting to do the same with the device-as-a-service and hardware-as-a-service business models.
Device as a Service: A Quick Overview
The device as a service, or simply DaaS, is a business model where computers, mobile phones, and other hardware are offered on a subscription basis.
Customers, in this case, companies, no longer need to worry about upgrading and managing their hardware because these are the responsibilities of the provider of the devices. Additionally, there are no costs associated with a device refresh since customers can upgrade their equipment at the end of the subscription period.
The device as a service and hardware as a service provider sign a contract with their customers to define the hardware, software, services, quantities, and the duration of the subscription period. The payment is typically formed around the number of devices.
Other providers offer their hardware as a service with a limited number of options from their overall product offering, which prevents customers from replacing the hardware they are using with something different.
The typical contract duration is from two to five years when it comes to device replacement. Most DaaS providers also offer a semi-automatic upgrade method that customers can use to upgrade their devices with the latest patches and updates.
Although still new, the device as a service business model is quickly gaining ground. According to a market analysis conducted by Grand View Research, the global device as a service market size was valued at $31 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 37.8% from 2021 to 2028.
This staggering growth rate is mostly attributed to the growing demand of customers who ask for a subscription model as it allows them to switch from a capital expenditure-based to an operating expenses-based model while using the latest technology.
Another reason for such a CAGR is the fact that developing countries are quickly switching to cloud services. Last but not least, the pandemic which significantly changed global work dynamics, started compelling businesses to adopt cloud and remote working practices.
Regarding the actual revenue share, North America was leading in 2020 with 29%. As one of the first adopters of technologies such as IoT and cloud computing, North America is also a pioneer in the device as a service. Favorable market conditions that benefit both startups and large enterprises, coupled with increased demand from the IT and telco industry for using hardware as a service, are expected to foster market growth.
Home to some of the fastest-growing economies, such as China and India, the Asia Pacific is also expected to expand their hardware as a service market. With an extensive IT and telco workforce, many medium and large enterprises are expected to add the device as a service model to their existing revenue streams.
Additionally, the constantly increasing penetration rate of the Internet, the rise in the number of small and medium enterprises, and the increasing awareness of the benefits that DaaS offers will undoubtedly lead to the growth of the subscription business model in the whole of the Asia Pacific region.
Key Companies in the Device-as-a-Service Market
The DaaS market is becoming more and more competitive, and it is characterized today by the presence of several large market players.
Companies such as Acer, Apple, Cisco, Dell Technologies, Intel Corporation, Hewlett Packard, and Lenovo are all using different strategies to strengthen and increase their market share.
For example, in 2021, Lenovo started with a device as a service model in the United Kingdom where customers can get their hands on their whole portfolio through a monthly subscription model. Some of the biggest companies using a device as a service model are:
- Acer Inc.
- Apple Inc.
- Dell Technologies
- Intel Corporation
- Hewlett Packard
Acer now offers a Windows-based DaaS that provides customers with a cost-efficient all-in-one solution to source, create, and manage a modern and secure workplace with just one simple contract.
Acer's very simple device as a service model has several different versions to better serve the variety of its customers and provide them with cost-effective access to solutions for teleconferencing, collaboration, security, and virtual workplaces from any location.
Apple devices are incredibly popular, especially with millennials who, according to Ernst & Young and Accenture research, will make up over two-thirds of the global workforce by 2025. Both millennials and Gen Z don't prefer Apple devices only for their personal lives, however.
As per research conducted by Jamf Pro, 72% of millennials will choose Mac over a PC, and 75% will choose iPhone over a mobile phone with an Android operating system. It's not only that adopting Apple's device as a service model can help businesses attract more workers. They can now do so without making significant upfront investments.
Recognized for their award-winning design and amazing audio and video quality, Cisco's devices are now even easier to obtain with their Webex Hardware as a Service. With Cisco Webex HaaS, businesses can now get the latest Cisco IP phones and Webex devices with an affordable monthly or yearly subscription. What's more, the subscription which has a minimum term of 36 months, includes Cisco's Technical Assistance Center (TAC), which is the support that covers both their hardware and software.
Dell Technologies Device as a Service mitigates the risks. It lowers costs associated with managing and refreshing a fleet of hardware devices by taking them and bundling them with a variety of software, accessories, and services for a monthly subscription fee.
With most businesses adhering to a 36-month device refresh cycle, Dell Personal Computer as a Service, or PCaaS for short, gives these same organizations access to newer and more modern devices while bringing them the newest features, functionalities, and security standards.
What's more, Dell PCaaS supports costs for older devices down across the whole organization.
With the Intel vPRO DaaS solution, businesses can provide their employees with powerful workstations that, besides great performance, offer different manageability tools that reduce downtime. New Intel Evo designs have an ideal balance of performance, graphics, and mobility, making them suited for today's ultramobile workers.
Combining Intel vPRo and Evo platforms creates a class of devices that give business-class performance and comprehensive security while helping businesses to reduce their cost by 17% and IT workload by up to 16%.
HP's Device as a Service helps businesses address the strained resources and downtime associated with deploying new technology and updating existing solutions.
HP does this with their Analytics and Proactive Management, a premium service experience providing actionable analytics and fleet insights that boost productivity by optimizing uptime for devices.
According to a survey conducted by HP in April 2020, 84% of today's IT decision-makers agree that IT is crucial to business success but is often stretched thin across essential initiatives such as digital transformation, remote working, and security.
With HP DaaS, companies can get the right devices, repair services, and AI analytics in a predictable subscription payment with flexible terms.
Lenovo's DaaS allows businesses to simplify and enhance their organizational IT assets, services, and support resources. With different DaaS solutions designed to be customized, every customer can create the right mixture of Lenovo devices they need.
Backed by Lenovo's Financial Services, customers have flexible finance options and get a predictable monthly fee for the contract term. At the end of the term, Lenovo will manage asset disposition in compliance with local governance and environmental regulations while customers continue to have an uninterrupted workflow with a regular device refresh.
The tech industry has indeed faced business obstacles the past years: the supply chain disruption, the pandemic, and the economic downturn to name three. However, challenges can be turned into opportunities. Nou doubt, the business or product development department of these tech giants have looked in to innovative business models to address these challenges and see DaaS as a circular and sustainable solution that meets not only the business needs but also the ESG.