Here’s the dirty little secret about the Internet of Things: The Things might not work, and you might not use them.
As a consumer, many of your gadgets will collect dust tucked away in a drawer (I must admit, I have a large box full of wearables and other things with which I don’t know what to do). As a business, many of your devices will not perform as well as expected, turning into maintenance-heavy money pits.
This is because it’s hard to gauge the usefulness of a new, innovative hardware Thing. Some won’t be useful; others will stop working. Even the ones that you love, the hard-working devices that serve you every day, will soon become obsolete, replaced by newer, better, shinier Things.
And so we keep buying these new Things, seduced by their promises — and later often find ourselves saddled with buyer’s remorse.
But soon, thanks to a concept called Hardware–as–a–Service (HaaS), we’ll have fewer of these regrets, because we’ll own fewer of these Things. Thanks to HaaS, the way individuals and businesses consume hardware products is changing.
Hardware–as–a–Service, which clearly has roots in Software-as–a–Service, is a business model where companies sell packages that include hardware, software, maintenance and, sometimes, installation, for a monthly fee. Under HaaS, customers pay for services, not Things; consequently, HaaS contracts often include a service-level agreement (SLA).
Here are some examples:
Vivint is a smart-home company that offers security sensors, smart locks, thermostats, installation, servicing and 24/7 customer support for a monthly fee. Most of this hardware is made by the company. Plans start at around $60/month, with a free trial period and minimum contract length. With more than 1 million customers and $650 million in revenue, their strategy seems to be working.
Hitachi recently announced a “trains as a s ervice” contract with Virgin in the U.K. for 65 new high-speed Hitachi trains. Under that deal, Hitachi maintains ownership of the trains, and is paid based on their trains’ reliability.
In fact, transportation is the leading edge of HaaS. Bike-sharing programs like NYC’s Citi Bike provide access to bicycles for as little as $15/month. In many cities, car-sharing programs like Zipcar and car2go have replaced the need to own a car. Uber recently launched $5 rates to provide an everyday transportation option for commuters, further reducing car ownership needs.
Even the large tech companies are starting to get on board. Earlier this month, Microsoft launched “Surfaces- as– a– Service,” allowing business customers to pay a monthly fee for a Microsoft Surface, unlimited phone/in-store support and hardware upgrades. HP is reportedly exploring HaaS plans for their device product lines. And some analysts believe that an “Apple- as– a– Service” subscription-based revenue model is the answer to that company’s woes.
Hardware–as–a–Service is here because it makes sense. Almost all hardware is a depreciating asset: why would we want to own it? For example, a new car loses nearly 10 percent of its value when driven off the lot. In these cases, it makes simple economic sense not to own.