Are you starting to encounter retailer or restaurateur prospects who want to hold onto their capital? It’s not unusual at a time of economic uncertainty. Lee Rozeboom, VP and managing director of sales for GreatAmerica Financial Services, an equipment financing company, adds that in addition to some businesses taking a conservative approach with capital, business owners may be doing the math related to inflation. They’re concluding that it’s better to pay with “cheaper” dollars over time rather than making a CAPEX with capital as it’s valued today. These factors make Hardware as a Service (HaaS) an attractive option for companies ready for an upgraded point of sale (POS) system. In fact, GreatAmerica has seen between a 30 percent and 40 percent bump in business from solutions providers year over year.
Rozeboom points out that businesses view Hardware as a Service as a hedge against falling behind advancing technology. “From a user’s perspective, it’s the easy way to have fresh technology every three or four years.” He adds that although large businesses and enterprises may opt for Hardware as a Service, small and medium-sized (SMB) businesses embrace the model as a way to upgrade their technology.
What’s Changed Since 2020?
The HaaS space has seen some changes since the beginning of the decade. For example, PPP loans somewhat decreased interest in this model because recipients needed to use that money by a deadline.
As the demand for HaaS rebounded, Rozeboom says he’s noticed that the solutions are heavier on soft costs. “The proportion of solutions is less hardware and more software, services, and labor,” he says. “It used to be about 75 percent hardware and 25 percent software and soft costs. Now it’s 50-50.”
However, the basic premise of solutions remains the same. The client pays a monthly fee to use POS terminals, peripherals, mobile computers, scanners, or other IT hardware. At the end of the contract, usually around 36 months, the client can continue using the service or upgrade and enter into a new contract. The HaaS provider takes care of all maintenance, repairs, and service so the end user avoids any unexpected costs related to IT hardware.
The Right Way to Manage a Hardware as a Service Business
A hurdle that value-added resellers (VARs) and managed services providers (MSPs) must cross is determining how to fund Hardware as a Service. IT solutions providers who attempt to self-fund their HaaS offerings may take on more risk than they can bear with cash flow, collection issues, and risk.
A more practical option for most solutions providers is to partner with a third-party financial company. This partner will take the risk, working with you in different ways. For example, they can pay you for the deal and bill the end user, allowing you to collect and make payments on the end user’s behalf. Or the financial company can bundle POS hardware or other IT devices with software and send your client one monthly bill.
Where to Begin
Rozeboom says the bottom line is determining what is best for the client. “What does the end user want to do with the technology in three or four years? A cash purchase may make sense if they want to keep using that same tech.”
“But if your client is telling you they want fresh tech that’s up-to-date and secure and hardware they’d purchase today would have no value in a few years, Hardware as a Service would be a better option.”
To get started with Hardware as a Service, you can complete this five-question as a service Operational Maturity Level assessment to benchmark your company and create growth opportunities from best-in-class technology providers.
Rozeboom says VARs and MSPs who position themselves as trusted advisors will help their clients make the best decisions and use of their cash.
The pay-off for you is more than closing the deal. “It helps you build a sticky relationship with the client that lasts five years or more – what recurring revenue companies want,” he says.
“Do what’s simplest for your clients and best for your business,” he says.