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DaaS – the benefits are clear but beware how you contract for Device as a Service

17 June 2020

Devices as a Service (DaaS) is fast becoming the new normal way to purchase IT hardware. This ‘off-balance sheet’ solution is especially fitting in Covid-19 times where cash preservation is key.

Based around the 'as-a-service' model, instead of buying a device (such as laptops, desktops and tablets) for your workforce and managing it yourself, DaaS providers source, support and manage your devices and certain software for you. Benefits typically include:

  • providing your workforce with cutting-edge hardware
  • getting IT purchases off your balance sheet (as you pay monthly via an ‘opex' model)
  • streamlining IT support by removing the non-strategic tasks from your IT team, such as device back-ups, asset tracking and end of life disposal
  • access to analytics solutions that provide insight into usage patterns, thus facilitating efficiency and productivity gains
  • avoiding the security risks of BYOD (bring your own device)

However, DaaS agreements are usually legally complex (if commercially pretty straightforward).  Intermediary co-ordination, financing agreements and ensuring that the service is tailored to your specific requirements, can present a landscape that is complex to navigate. 

Benefits

DaaS is the repackaging of a familiar concept: think of mobile phone contracts where you pay a monthly sum for the use of network service and the use of a handheld device (which you can upgrade) without shelling out capital. DaaS adopts a similar model. DaaS providers provide hardware, software and technical support, paid for in instalments throughout the contract. DaaS offers flexibility to scale up or down the service on the basis of employer need.

Another DaaS benefit can be the freeing-up of IT teams to focus on strategic development while the day-to-day support work is outsourced. The constant headache of updating software can become the responsibility of the DaaS provider; the same is true for maintaining systems, all of which helps to mitigate cybersecurity risks and limit work disruptions resulting from tech malfunctions.

One hallmark of ‘digital natives’, think ‘Millennials’ and ‘Generation Z’, is their affinity, or rather their expectation, for new technology. These tech-savvy workers (our future) are consumers of high-end ‘technology as a service’ in their personal lives. Their regular use of social and collaboration tech on the go and tendency to upgrade their mobile phones every two years, leads, unsurprisingly, to the expectation that their employers will provide the latest tech tools. In numerous future of workplace surveys almost all digital natives state that workplace tech influences their decision on whether to accept a job, and at least half would quit a job with bad technology.  Prioritising tech investments can help employers to attract better talent.  In addition, with so many staff now working remotely, something permanently accelerated because of Covid, cutting edge technology is absolutely vital to efficient virtual work and collaboration.

Contracting Pitfalls

All that said, the legal side of DaaS agreements is not straightforward. 

DaaS providers tend to be ‘intermediaries’ in the broadest sense of the word, and finance is usually involved (rather like a vehicle lease or PCP).

So, the contracting chain tends to include 1) customer; 2) DaaS provider; 3) finance house (often part of the manufacturer’s group); 4) provider of software support (which may be another entity in the manufacturer’s group); and 5) (possibly, but less often) the device manufacturer. 

As you have probably guessed, it’s not easy to obtain adequate contractual recourse against the right entity if things go wrong. Think of ‘contractual flow down dilution’ and consider the risk of ‘finger-pointing’. Typically, a customer who contracts on ‘standard terms’ will be left with little contractual remedy if devices turn out not to be delivered on time, or if the devices, software and/or services don’t function or perform as expected.  Here, the customer can be reliant on the goodwill of the manufacturer and others, and don’t expect much recourse against or help from the finance house. 

One way to de-risk your DaaS purchase is to negotiate some direct recourse against the device manufacturer, but this is not always possible.  Either way, see if the DaaS provider is prepared to offer you some meaningful remedies.  In addition, and even more importantly in Covid-times, ensure that the balance sheet of the DaaS provider is adequate, especially if the money is flowing through them.  All of these issues should ideally be considered at tender stage (alongside price), so you know what you are letting yourself in for. 

Conversely, DaaS providers should ensure that they have adequate protection from the device manufacturers and other suppliers so that they are not left as ‘piggy in the middle’ with a profit margin that doesn’t justify their risk.

If you need help with your exciting new DaaS purchase, or structuring the basis on which you sell DaaS solutions, just get in touch!

 

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