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by Zachary Kimball on March 17, 2023
A hardware-as-a-service (HaaS) solution usually consists of two core components: hardware and software. Additional offerings may be incorporated—which might be required services, optional add-ons, or even included as part of a bundled solution. Because HaaS is a relatively new market, most hardware companies that set out to offer subscription “make it up” as they take a new product to market with HaaS. This leads to suboptimal results on go-to-market pricing and product delivery.
A well-designed HaaS program clearly defines the solution to:
- provide the complete answer to the subscriber’s need, rather than a series of one-off or a la carte line items
- incorporate complementary products and services for subscribers to be successful, without requiring unnecessary add-ons
- establish a recurring relationship with the subscriber to drive mutual benefit, through ongoing value delivery (e.g., software upgrades) or touchpoints (e.g., service visits)
Solutions should be defined considering the set of offerings a manufacturer has available, the needs of the subscriber for the new product/service, and any existing market expectations around package and pricing structure. Thoughtful solution design creates opportunities to attract new subscribers who were not previously addressable by the manufacturer.
Eight categories can be part of a HaaS solution
After working with, researching, and reviewing hundreds of HaaS companies and solution models, we have found eight common categories that are often included as part of the solution. Each HaaS company combines some subset of these categories to define their unique offering.
1. Hardware
A piece—or a fleet!—of hardware, equipment, or machinery is the heart of a HaaS offering. Your hardware is the finished good fully assembled, rather than the individual components of the BOM. However, depending on the asset structure, some components that may be replaced or sold separately could be better considered accessories. The hardware itself is usually identified by a serial number.1
Examples of HaaS hardware include:
- Autonomous mobile robots (fork trucks, picking machines)
- Sensors (wall, ceiling, floor)
- Packaging systems (conveyors, palletizing)
- Robotic arms (grippers, co-bots)
- Printer equipment (labeling, additive manufacturing)
- On-road construction assets (maintenance, digging)
- Off-road agricultural machinery (planting, weeding, mowing)
2. Software
Most HaaS offerings include one or multiple flavors of software. This might include firmware on the equipment, a software package installed on the machine itself, software running on a local server (e.g., WMS), or software-as-a-service delivered via the cloud. The software component of a HaaS offering can also include software updates and upgrades.2
Examples of HaaS software include:
- Local control interface (operator firmware)
- Fleet management platform (local automation controller)
- Monitoring dashboards (web reporting engine)
- Remote control software (manufacturer access tunnel)
- 3D printing software (desktop design tool)
3. Consumables
Depending on the type of HaaS program, consumables may or may not be a core offering. Consumables are items that are used up or wear out in the process of utilizing the HaaS solution. If consumables are regularly needed, they must be considered in your solution design. If they are a core part of your product (e.g., for printing use cases), you may want to require consumables in your subscription.
Examples of HaaS consumables include:
- Printer consumables (inks, cartridges, ribbons)
- Additive consumables (resins, powders, alloys)
- Tires (rubber, polymer)
- Repair media (sealant, taping, cement)
- Fluid (dispensers, pipettes)
4. Accessories
Accessories are used to enable the hardware or augment the HaaS solution with additional capabilities. Accessories are often sold separately from the core equipment, even though an accessory may also be a piece of equipment itself (which takes time to reach the end of its useful life) rather than a consumable (which is used up relatively quickly).
Examples of HaaS accessories include:
- Power pods (battery packs, rechargeable cells)
- Chargers (battery charging, docking stations)
- Cameras (low-res, 3D imaging)
- Sensors (ancillary LiDAR, ultrasonic sensors)
- Control screens (in-built, iPads)
5. Installation, setup, and training
For some HaaS solutions—such as deeply integrated systems—the installation, setup, and training is a significant investment for the manufacturer. For other standalone products, there is minimal or non-existent work needed up front to configure the deployment.
Examples of HaaS installation, setup, and training include:
- Installation (unpacking, construction, alignment)
- Setup (configuration, mapping, programming)
- Training (team tutorials, live demo, interactive session)
- Travel (installer or trainer)
6. Maintenance, support, and repair
Many HaaS programs require regular upkeep to deliver the full solution on an ongoing basis—maintenance, support, and repair. This could be ad hoc maintenance needed if hardware stops running, components that require occasional repair, or software that incorporates manufacturer support. Very few HaaS solutions require no ongoing work during the term of the contract.
Examples of HaaS maintenance, support, and repair include:
- Maintenance (requested visits)
- Support (on-site configuration request, phone software help)
- Repair (reactive or predictive replacements)
- Travel (scheduled or on-demand team)
7. Warranty programs and service plans
Warranty programs and service plans insure the subscriber that the HaaS solution will consistently operate at committed performance levels. These plans are often sold as an additional add-on to the base plan, because they are oriented around risk mitigation. Such plans are most often sold to subscribers trying HaaS for the first time, when a HaaS solution run mission-critical operations, or if the subscriber has a lean in-house team.
Examples of HaaS warranty programs and service plans include:
- Warranty (hardware defects, software precision)
- Extended warranty (beyond base equipment term)
- Hot-swap (new machines, uptime guarantee)
- Service plan (time commitment, 24/7 on-site)
8. Delivery and shipping
Depending on the complexity of the HaaS solution, delivery and shipping can be a significant cost. When charged, these fees may be a fixed rate, invoiced as a pass-through from the delivery service, or direct-billed from the freight carrier. Most HaaS solutions are shipped DAP or DDP, with the exception of a separate delivery/freight assessment.
Examples of HaaS delivery and shipping include:
- Fixed-rate delivery (pre-paid)
- Pass-through charge (assessed after shipment)
- Carrier freight (direct-billed)
Choosing to require a category as part of the solution, or make it an optional add-on
Most HaaS solutions do not include items from all eight categories. More commonly, a hardware company building a subscription program would be expected to include 2–5 line items. Alternatively, manufacturers often choose to include fewer offerings as a “core” set of 2–3 line items for their base HaaS solution, with upsell options for subscriber to add on other components (such as a warranty program).
As the number of required options increases, the more likely a manufacturer should offer a bundle and reduce the number of line items to be discussed and negotiated. In developing your solution, consider what must be included to make your customer successful. Start there. Then as you build out packages, consider whether or not you choose to bundle.
Examples combining items from different categories:
- If software is essential to run your hardware, software should be included in your solution definition
- If your equipment will not be able to deliver for the customer over the contract period without ongoing maintenance, a maintenance plan should be required as part of the solution
- If there is meaningful risk of your hardware breaking down during the contract term, a warranty program should be a required component of your solution
- If delivery cost is a meaningful portion of the contract value, it is common to see a freight charge as part of the solution
Additional complexity to consider when designing a HaaS solution
On first glance, designing a HaaS solution seems simple. As you consider the individual layers, solutions can quickly become complex. It’s important to step back and evaluate your solution in light of the core product, the market landscape, your customer profile, and your own operations.
Some key questions to keep in mind:
Market and customer
- What are the current market offerings?
- What are our buyers accustomed to purchasing?
- How can we describe the new solution for existing customers?
- Which new buyers will be interested in our new solution?
- How clear is the value of the new solution?
Product and operations
- How are we creating more value for our customers through this new solution?
- How simple or complex is this for our team to understand, track, and invoice?
- How will we manage this solution?
- Who will we manage this solution?
- What systems are needed to manage this solution?
1. Accounting note: When deciding on your HaaS solution, carefully consider whether you want to reference specific identifiable assets (e.g., by serial number) or opt to be more generic in your contracts. This decision has important accounting implications downstream about how your business can recognize revenue for your HaaS program. Of course, assets must always be identifiable to you, but they need not be identifiable to your subscriber.
2. Tax note: How you choose to structure hardware/software bundles can have significant implications on sales tax depending on the jurisdiction. For example, some states may tax software that comes pre-installed on hardware, but may not tax software that is installed separately. Other states may tax software that is delivered on premise, but not tax software delivered as-a-service.