Digital, Commerce & Creative 101: De-risking Devices as a Service (DaaS)!

What is it?

Based around the 'as-a-service' model, instead of buying a device (such as laptops, desktops and tablets) for your workforce and managing it yourself, customers pay a subscription fee to cover the use of, and specific services for, a device and certain software which DaaS providers source, support and manage. 

When is it used?

DaaS is the repackaging of a familiar concept: think of mobile phone contracts where you pay a monthly sum for the use of network service and the use of a handheld device (which you can upgrade) without shelling out capital.  DaaS adopts a similar model. DaaS providers provide hardware, software and technical support, paid for in instalments throughout the contract. DaaS offers flexibility to scale up or down the service on the basis of employer need.

A common use case for DaaS is in the professional services sector. It has become an attractive model for organisations that are looking to outsource and simplify the management of devices used by their workforce, in particular, mobiles and laptops. It can also be an attractive option for larger pieces of office equipment such as printers and scanners.

We are also seeing the business model being used in the health, fitness and transport sectors with respect to medical equipment, gym equipment and bikes and cars.

So what are the benefits?

Benefits typically include:

• Access to the latest tech: providing your workforce with cutting-edge hardware, which is important when attracting new talent and facilitating efficient virtual working and collaboration (with the added bonus of offering a sustainable and circular solution to the problem of obsolescent devices)

• Cash flow: getting IT purchases off your balance sheet (as you pay monthly via an ‘opex' model), thereby facilitating cash preservation, which your FD will probably love!

• Customisation: businesses can customise and pre-configure security and other applications on their devices to meet their business needs
• Software management and support services: streamlining IT support by removing the non-strategic tasks from your IT team (such as device back-ups, asset tracking and end of life disposal), thereby freeing-up of IT teams to focus on strategic development

• Insight: access to analytics solutions that provide insight into usage patterns, facilitating efficiency and productivity gains

• Increased security: avoiding the security risks of BYOD (bring your own device)
• Scalability: offers businesses flexibility to adapt to the size of their workforce or customer base in a cost-efficient manner
• Flexibility: as payment is made on a subscription basis, the service is designed to continue for as long as necessary (subject to any minimum term)

Contracting Pitfalls

All that said, DaaS agreements are legally complex (if commercially pretty straightforward).  Intermediary co-ordination, financing agreements, support and ensuring that the service is tailored to your specific requirements can present a landscape that is complex to navigate. 

DaaS providers tend to be ‘intermediaries’ in the broadest sense of the word, and finance is usually involved (rather like a vehicle lease). So, the contracting chain tends to include 1) customer; 2) DaaS provider; 3) finance house (often part of the manufacturer’s group); 4) provider of software support (which may be another entity in the manufacturer’s group); and 5) (possibly, but less often) the device manufacturer. 

It’s not easy to obtain adequate contractual recourse against the ‘right’ entity if things go wrong. Think of ‘contractual flow down dilution’ and consider the risk of ‘finger-pointing’.  Typically, a customer who contracts on ‘standard terms’ will be left with little contractual remedy if devices turn out not to be delivered on time, or if the devices, software and/or services don’t function or perform as expected.  Here, the customer can be reliant on the goodwill of the manufacturer and others, and don’t expect recourse against (or help from) the finance house. 

One way to de-risk your DaaS purchase is to negotiate some direct recourse against the device manufacturer, but this is not always possible.  Either way, you might see if the DaaS provider is prepared to offer you some meaningful remedies.  In addition, ensure that the balance sheet of the DaaS provider is adequate, especially if the money is flowing through them.  All of these issues should ideally be considered at tender stage (alongside price and service), so you know what you are letting yourself in for. 

Conversely, DaaS providers should ensure that they have adequate protection from the device manufacturers and other suppliers so that they are not left as ‘piggy in the middle’ with a profit margin that doesn’t justify their risk.

If you need help with your exciting new DaaS purchase, or structuring the basis on which you sell DaaS solutions, do get in touch!