The short answer is NO! Technology-as-a-service, hardware-as-a-service, device-as-a-service, and any other related as-a-service solutions are not the same as a lease.
Many think they are one and the same it is just marketing or leasing rebranded. However, when comparing technology-as-a-service and a traditional lease there are two dramatic fundamental differences. First is the outcome, or manner in which the payment option concludes. The second is in the performance or the manner in which the payment option operates or functions. Let’s unpack this in more detail.
01. The Outcome
A majority of technology leases are designed to conclude with ownership at the end of the term. With technology-as-a-service it is just as it states in its name, a service, it is not possible to own services. Therefore, like a majority of services you consent to receive there are two options at the end, you can continue/renew the service or you can cancel the service.
When it comes to the hardware that is included in a technology solution many ask, “Wouldn’t I want to own the hardware?” The answer here is, again, no. But, why not?
First, ask yourself, “is the solution I’m buying revenue-generating?” If it’s not, you should question the validity of owning it at the end of a term. Historically and currently, physical security solutions, audiovisual solutions, and related office technology solutions are not revenue-generating.
Secondly, you have to peel back the components of what makes up these solutions. Once you do, you see that hardware represents on average less than 30 percent of the sale price. The other 70 percent comes from a combination of licensing, warranty, installation labor, software, and profit. These are known as non-recoverable costs. Basic financial principles and financially astute experts advise that if there are greater non-recoverable costs than recoverable costs, avoid ownership.
Lastly, if the hardware within the solution has a high potential for obsolescence within a two to four-year time frame, ownership is not a conducive business, technical, or financial strategy. Based on historical industry data and our estimates, the rapid advancement of office and facility technologies is already moving at that pace and beyond.
02. The Performance
The other dramatic difference between a lease and a technology-as-a-service offering is the tactics and way it functions. One of those tactics is flexibility within the term. A true technology-as-a-service offering allows you to migrate to new technology at any time during the service WITHOUT a financial penalty. You should not have to roll over any existing balances. A lease will only allow you to take the existing stream of payments and add that to the new solution. This is not the same. By doing this, you are now still financing the old solution, but with the new solution as a new lease. You get the benefit of the new technology, but you are still paying for the old technology. A true and pure technology-as-a-service allows you to move to new technology at any time without any financial repercussions, releasing you from the original term.
The other component of performance in need of mentioning is the ability and relevance of layering multi-year maintenance/service into the offering on a monthly basis. With a lease, these services are choppy and often proposed as an afterthought, it is not offered as an all-inclusive service offering. However, with as-a-service, it is just that, an all-inclusive offering that includes the technology and services for multiple years into the future. Today’s service plans are being reimagined with proactive checkups, concierge services, and supported with traditional service level provisions. The service portion of the offering truly supports the pivot of these solutions being procured under the subscription consumption model. It really puts the service in technology-as-a-service.
To learn more about these concepts and more, discover our technology-as-a-service solution or download our guide on technology-as-a-service that covers more details on what it is, why it's relevant and how to implement it, including what to look for in an as-a-service solution and more.