Hardware as a Service (HaaS) is not a new concept, but the pricing model is gaining popularity in the IT managed services space. It takes the managed services model a step further in the sense that customers do not need to make an up-front investment in hardware—it’s cost is simply included as a part of the MSP's fee structure.

You might think of HaaS as a hardware lease or rental agreement. The MSP owns the hardware and is responsible for its ongoing management and maintenance in exchange for a monthly fee. Typically, the responsibilities of the MSP and the customer are spelled out in a contract or service level agreement document. A HaaS agreement might include: customer fee and payment schedule; tech support coverage hours; a software maintenance schedule (patching, updates, etc); details on incident response time; and a hardware end-of-life plan, among other things.

HaaS can be very attractive to small businesses that MSPs serve. Frequently, these organizations lack in-house IT staff and rely on MSPs for all of their technology needs. As such, HaaS represents a potential selling point for MSPs looking to differentiate their business from competitors. However, while HaaS has clear benefits for small businesses, many MSPs balk at the concept. Obviously, HaaS requires an MSP to make an up-front investment in technology. Even though the cost is passed on to the customer over the course of the service contract, the upfront investment may not be tolerable to many shops. HaaS places more financial risk on the MSP, while taking it away from the customer. What happens if a customer breaks a contract and the MSP is left sitting on that hardware? Sure, it can be repurposed, but that’s not guaranteed.

Steve Ryder of True North Networks, a New Hampshire-based MSP and Datto partner, occasionally uses the HaaS sales model. “Sometimes I’ll self-finance the hardware because the monthly recurring revenue is so much more valuable,” he said. However, Ryder does not always go all in with HaaS. He takes another approach that minimizes some of the risk for True North. “We sell products at cost and we’re very transparent about it with customers,” he said. “That takes the conversation off the cost of the products entirely. It’s all about selling the value of your services.”

A few years ago, Ryder installed about $600,000 worth of equipment for a customer. “I didn’t make a single dime on the hardware,” he said. “But, I landed a $25,000 a month service contract—that’s so much more valuable. Stop focusing on selling products. Put customer service first.”