DaaS model transforms world of computer makers

There can be few product categories as frustrating to corporate accountants as computer equipment. They go on the books as an asset at their full value but depreciate so fast it is as if the company has created a faultline in its balance sheet.

Now, hardware is borrowing from the software model of subscribing to a product as a service, and always having the latest version available. Both of the world’s top two computer makers, Lenovo and HP, hope that device-as-a-service, or DaaS, will protect them from a market decline that has decimated many a PC maker.

Lenovo, the Chinese corporation that acquired IBM’s PC businesses in 2004 and its servers in 2014, announced last week it would take the model further. Ironically, it was able to make those acquisitions as a result of IBM’s own decision to become a services company rather than being hardware-focused.

However, rather than hardware becoming less important at the expense of services, it will remain at the heart of the business and will in fact be the springboard for expanding Lenovo’s hardware range.

“Devices are important, so we will continue to be committed to the design and manufacture of the best devices for our customers,” said Yang Yuanqing, CEO of Lenovo, speaking to Business Times at last week’s Transform 2.0 conference hosted by the Lenovo Data Centre Group in New York.

“We will also extend our devices from PCs and smartphones to new categories like Internet of Things devices.”

He pointed out that while many customers still wanted to buy devices, more and more were looking for a way of always using the latest devices, along with the latest technology, without incurring the capital cost.

However, the benefit to both Lenovo and the customer went deeper. “We think the DaaS model will help us strengthen our transformation to customercentricity because, if you buy devices, it’s just one-time deals, but if you buy the device as a service, it’s a long-term relationship.”

Luca Rossi, Lenovo senior vice-president, whose regional responsibility includes Africa, said this relationship was as important as the hardware itself. “When you move into a DaaS model you move into a different level of intimacy with your customer. If you think that Lenovo can offer more or less everything, from the server and data centre infrastructure to the device, the device and the service become complementary.

“We also believe most companies want to leverage their balance sheet, so they don’t want to put an asset on the balance sheet, but they want to have it as opex (operational expenditure). It’s a trend, and whoever does it faster and better will have an advantage.”

It also helps to be at the cutting edge of computing. Lenovo supplies almost one in four of the world’s super computers — highperformance machines with the most powerful processing devices on the planet.

It has gained a sizeable lead over secondplaced HPE after declaring at last year’s version of the Transform event that it would take the top spot within three years. Taking a lead two years ahead of schedule is not a bad way of signalling the success of new ways of thinking.

Device-as-a-Service moves you into a different level of intimacy with your customer