Generating Recurring Revenue and Improving Customer Experiences with Device-as-a-Service Business Models

Hardware vendors not looking at DaaS for future growth are going to find it harder to compete in today’s competitive landscape.

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The idea of being able to acquire some type of hardware without having to buy it, configure it, service it and maintain it was not even a reality 10 years ago. Flash forward to today and the device-as-a-service (DaaS) market for PCs enables just that and is growing quickly as manufacturers leverage this new business model.

In fact, according to research from Accenture, 65% of last year’s PC market share was a DaaS offering, up from no market share just four years earlier in 2015. The reason these models are so successful is that they allow companies to transform their businesses from the old way of selling something once to actually being able to dip back into their supply chains and sell the same product up to five times. And, at the same time that they are generating these new recurring revenue streams, they are also delivering a much better customer experience. 

One of the key things that DaaS models have taught us is that some customers want the newest and best devices, and there are also customers that just want the device. Companies that can combine these supply chains together are able to capture many new customers and recurring revenue opportunities. Further, as they digitally orchestrate their various supply chains together, they also gain a new level of intelligence across each of the supply chains that can provide them with detailed information on what customers may want or need in the future. 

For a company that may be experiencing declining revenues, DaaS can offer them the holy grail for future growth. And, while the Coronavirus disease (COVID-19) certainly did not start the trend toward DaaS, it certainly is accelerating its adoption.

DaaS for cable companies

A good example of a successful DaaS model is a cable company. In the past, if a consumer wanted cable services, they needed a technician and new wiring, and if they wanted to change anything or service stopped working, it was equally difficult. By leveraging a DaaS model, cable companies can now ping your router to troubleshoot and they send you a new router that works out of the box. They know the status of your router and if it runs low on storage for example, they can offer you a new router. They can also offer additional value-added services along with that router, such as security or new channels and applications. All of these integrated services make consumers feel well taken care of. 

For a cable company selling millions of devices, getting a cut on these value-added services is financially significant. However, even more important is that it provides customers with a great overall experience. This is the heartbeat of a DaaS model, and one that cannot be achieved through other approaches such as leasing that will only get companies so far. Unlike leasing, a DaaS model enables companies to provide customers with the things they need. Customers pay monthly, and the DaaS providers take care of the customer requests.

DaaS challenges

While there are financial benefits to adopting a DaaS approach, there are also challenges, particularly in the supply chain where a new model is needed that combines device fulfillment, device services and device recovery for a seamless end-to-end customer experience. With these models, there are three primary supply chains, and a company’s success depends on their ability to orchestrate all three seamlessly. If they can do this, this is where they can start selling the same device up to five times. 

1.     Device fulfillment requires careful consideration of how devices are put in the hands of customers which, for DaaS, is not based on a traditional order-based model.

2.     Device services and associated processes require both depth and simplicity not usually found in add-on service models. DaaS providers have to understand the product, its components, and everything that changes with the device over time. Concurrently, the customer interface has to be simple to understand and use—unlike many add-on services models in which customers must navigate multiple portals or service teams to meet their needs.

3.     Device recovery offers the potential to improve return on assets by recovering value through efficient reverse logistics, device repair and re-deployment. Such a process is typically an afterthought in most product distribution models.

Many companies do well with the first and second supply chains outlined above, but it’s the third supply chain that companies are looking at now to get more value. For the cost of manufacturing something once, with minimal refurbishing cost, they can keep selling, and if they surround the device with different types of services, they can generate new and recurring revenue streams on top of that. The combination of these three supply chains is significant, leading to a financial benefit and a better experience for the consumer.

Navigating a successful DaaS model

Recent research from Accenture found that only 10% of high-tech companies globally have the customer-centric supply chains required for resilience during a downturn. These companies’ leaders cite various supply chain challenges, such as inflexible capabilities, lack of ability to collaborate with ecosystem partners and lack of supply chain visibility, among others. In order for them to move to a successful DaaS supply model, there are four primary things they need to consider:

1.      Customer experience. DaaS is first and foremost a customer service model. The delivery design must start with exactly what customers should experience and drive backward into all facets of the supply chain.

2.     Asset lifecycle management. DaaS manages the entire asset lifecycle, far beyond the usual handoff to the customer at delivery. In addition to initial device fulfilment, DaaS manages servicing and recovery of the device potentially through multiple cycles. All dimensions are managed as a unit, with completely new performance objectives. Getting scope and automation right from the outset is critical to scalability.

3.     A flexible network. Many partners are typically involved across the fulfillment, service delivery, and device recovery network. Different partners could be handling initial fulfilment, device activation, specific services provided within the DaaS contract, repair and maintenance. The DaaS model must be highly flexible to adapt the network as products and services are configured to order for specific client service needs and to support product and service innovation over time.

4.     Platforming. The critical connectivity between the fulfillment, services, and recovery phases in the DaaS lifecycle requires a platform that’s tightly and digitally integrated to operate at scale. The platform is the glue that holds the network together— connecting to all operators in the network, providing visibility to all assets across their lifecycle and enabling the customer experience. Companies that attempt to build a DaaS model with distinct non-connected platforms find it a very challenging, manual and time consuming.

After considering the above elements, companies can start navigating towards a DaaS model to create measurable customer and internal value across all phases of the product lifecycle. There should also be an assigned single-point profit-center leadership with clarified goals and governance over all elements of the DaaS model. Once this is in place, a company can perform a high-level benchmark of the intended platform against a DaaS architecture for integration, capability, digital thread depth and scalability.

The DaaS advantage

Hardware vendors not looking at DaaS for future growth are going to find it harder to compete in today’s competitive landscape. This digital transformation can yield many benefits to both the manufacturer and the customer. Customers may pay less up front in this mode, but they most often spend more over time on devices and integrated services being offered to them. 

Just ask yourself…do I want to sell my product once or five times? The answer is obvious.