Why modern billing software is needed for hardware-as-a-service (HaaS)

Many leaders in hardware-as-a-service (HaaS) are frustrated with the capabilities in their current tech stack. Despite all the software, there are still so many spreadsheets and so much manual data entry. Usually a large part of the problem is reliance on asset information from the front line, which may require proactive outreach to various field teams. This ranges from challenges for finance teams to difficulty with asset management operations.

While the symptoms are discernible across the business, the core trouble with HaaS usually breaks down in the billing process. This stems from the fact that legacy systems don’t allow asset-aware contracts and don’t enable assets to be contract-aware. Even contract management and billing systems for software-as-a-service (SaaS) have no idea where in the world a piece of hardware is, or its status or condition. For finance teams, this means that invoices can’t be managed automatically based on asset milestones in the real world.

All the additional manual work that HaaS teams perform—tracking down spreadsheets from Inventory, messaging the Deployment team to confirm hardware activity, initiating billing based on an Operations team service update—result from the lack of connection between contracts and assets. Existing billing software doesn’t help HaaS companies because the available solutions aren’t asset aware—whether it’s a CRM, an ERP, or a SaaS billing app. So they can’t update the contract, or the finance team, with automated intelligence about an asset. Until recently, the only way to bridge the gap has been expensive and time-intensive manual data processes.

Why HaaS companies require different billing capabilities than traditional hardware or software companies

Hardware subscriptions are a different beast than a traditional hardware or software company—they require a sophisticated hybrid of hardware and software subscriptions. Billing systems that traditionally handled hardware were not made to support models with a solution that includes software. And billing systems that traditionally handled software were not made to support models with a solution that includes hardware. So their capabilities are inadequate for hardware-enabled SaaS, equipment leasing, machine rental, or any of the modern business models for hardware.

Billing technology for a traditional hardware sales company

Traditional hardware companies have two systems at the core: a customer relationship management (CRM) tool and an enterprise resource planning (ERP) tool. The CRM manages the company’s touch points and relationships with prospects and customers. CRMs consolidate communications, quotes, and contract information associated with a prospect or customer, so the business has visibility into the history of a relationship. The ERP, on the other hand, solves a handful of problems across hardware business processes—primarily production, shipment, and billing. The ERP tracks the parts list (i.e., the bill of materials or BOM), procurement, and the product buildout.

Unlike the hardware-as-a-service model, traditional hardware sales are one-and-done deals. The hardware ships to the customer and the manufacturer doesn’t think about it again. That’s why the CRM and  ERP can handle hardware sales—the vendor doesn’t have to manage milestone-based recurring billing (which an ERP can’t support) or track the location and condition of the asset (which neither CRM nor ERP can support). 

Billing technology for a traditional software-as-a-service (SaaS) company

Software-as-a-service (SaaS) companies also have two core systems: a CRM and a SaaS billing platform. SaaS businesses use a CRM to manage prospect and customer relationships. But because they don’t make hardware, SaaS companies don't require a hardware ERP.¹ Instead, they need the ability to manage subscriptions and handle the complexity involved in recurring billing and accounting. 

Unlike HaaS, SaaS doesn’t require software that’s “asset aware” and knows where hardware is (and what its status and output is) on any given day. That’s why the CRM + SaaS billing platform combined are sufficient for SaaS operations. Neither the CRM nor the billing platform tracks assets in the field—there’s no such thing for SaaS!

Hardware-as-a-service (HaaS) requires a different tech stack

Because of their hybrid nature, companies that offer both hardware and subscriptions need a more nuanced tech stack.  Hardware companies market their solution in many ways—hardware as a service, equipment leases, machine rental, hardware-enabled SaaS—and these businesses need technology that supports both hardware and software. These platforms must integrate and communicate seamlessly with each other, so the billing software can be updated and automated based on the status of hardware in the field.

HaaS companies need customer management capabilities (which a CRM traditionally handles for all companies), asset management capabilities (which an ERP traditionally handles for hardware companies), and billing management capabilities (which billing platforms traditionally handle for SaaS companies).

Why traditional software doesn’t solve HaaS companies’ billing needs

Hardware-as-a-service companies may be a hybrid of hardware and software subscriptions, but this doesn’t mean they can rely on a patchwork of solutions built for equipment sales and SaaS. Nevermind that these systems don’t speak to each other, the elephant in the room is that each solution is missing a key capability that HaaS operators require: asset awareness.

Why an ERP is insufficient for HaaS billing

Finance leaders coming from traditional hardware sales are accustomed to having an enterprise resource planning (ERP) tool track inventory so they can sell hardware outright. That’s because ERPs are sufficient for building and selling hardware outright.

But the ERP was built specifically for manufacturers who sell their assets. It’s not designed to track assets in the field on an ongoing basis, as they arrive at the customer, get deployed and maintained, and potentially move from one site to another. The ERP isn’t asset-aware. And an ERP certainly doesn’t know about the software elements of a connected hardware solution. This has a number of consequences for HaaS finance teams who attempt to use their ERPs for billing:

• Finance can’t answer some fundamental questions essential to getting billing right, e.g., Which customer is the asset currently with? Which contract is it on?
• Linking asset activity to billing with an ERP can only be done manually. If an asset is delivered, installed, or deployed—for example so the business can start charging software fees—the ERP doesn’t know about these milestone events. Finance needs to confirm activity with other teams across the company, review the contract for relevant fees, and manually create discrete invoices in the ERP.
• HaaS companies need billing functionality oriented around assets and recurring deals. Because the ERP doesn’t understand the subscription model (or a pay-per-use or usage-based model), recurring billing can happen—but it can’t be automated.

Why a CRM is insufficient for HaaS billing

The customer relationship management (CRM) tool is where a hardware company’s customer records live. Many modern CRMs also track basic quoting and contracting, and some even include invoicing capabilities. Finance leaders coming from SaaS are accustomed to having a CRM track their deals and sometimes generate invoices for SaaS contracts. But CRM solutions are not designed to capture the level of nuance required in hardware-as-a-service pricing plans—let alone track finished goods inventory, know where deployed assets are in the world, and what condition they’re in.

That’s because CRMs, like ERPs, are not asset-aware. They can’t automate billing based on what’s happening with a piece of hardware in the world: because the CRM system just doesn’t know. So a CRM can’t automatically trigger invoices based on asset activity. CRM solutions also don’t calculate some critical metrics such as the billing KPIs a finance team needs for hardware-as-a-service. That’s because these metrics require a team to know about assets and invoices. If a HaaS finance team wants to use a CRM for billing, it will require a lot of manual data entry.

Why SaaS billing software is insufficient for HaaS billing

Unlike an ERP, a SaaS billing solution can support recurring billing and pay-per-use models for software companies. But SaaS billing apps start and end with software. In some cases, they’re exclusively designed to manage metrics-based billing for software credits!

The fundamental challenge for HaaS companies is that SaaS billing apps are not asset-aware. They can only support the software element of a HaaS company’s overall solution. SaaS billing software can’t initiate a software subscription based on asset activity, at least not without configuring custom milestones, setting up manual data entry, or building out custom data pipelines. So the applications cannot support a HaaS finance team in invoicing for the right milestone at the right time automatically.

A new solution for HaaS Finance teams: hardware financial operations

CRMs and ERPs are valuable and necessary for modern hardware business models. But HaaS companies also require a platform designed specifically to bridge the gap in hardware financial operations between traditional hardware and recurring software. That gap is between an asset (which must be contract aware) and its associated contract (which must be asset aware) so that the finance team can automate invoicing as assets move and operate in the real world.

A hardware financial operations tool such as Hardfin completes the HaaS tech stack. It solves the complexity of hardware-as-a-service for the finance team by:

• Integrating with both the CRM and the ERP, bridging the communication gap currently filled by spreadsheets, emails, and phone calls.
• Associating contracts from the CRM with the relevant assets from the ERP—enabling asset-aware contracts and contract-aware assets.
• Linking billing natively to real-world asset activity and auto-generating invoices—accounts receivable (A/R) goes on autopilot.
• Automating complex revenue recognition—generating revenue journal entries, deferred and unbilled revenue balances, and a connected audit trail.
• Replacing or easily transferring assets to and from finished goods inventory and customer sites—managing vendor fixed-asset depreciation schedules with ease.

Hardfin: completing the HaaS tech stack 

Hardfin is pioneering hardware financial operations. We’re purpose-built to streamline billing and invoicing operations for modern hardware companies. Whatever your challenge—tracking assets, upselling services, managing recurring billing, automating lease accounting, or integrating usage-based models—we’re here to help.

Our platform finally bridges the gap in your HaaS tech stack and supports your billing challenges unique to hardware subscriptions.  Eliminate painful and error-prone spreadsheets to streamline billing and accounting complexity. Save time, make more money faster, and reduce risk during audit season.

Get in touch. We’d love to tell you more.

1. Many SaaS companies do use ERP software for accounting purposes, but not for the hardware-management aspects (such as BOM and build tracking) that are essential for hardware companies.