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:
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.
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.
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:
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:
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:
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:
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:
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:
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:
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:
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 be to 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:
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
Product and operations
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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.