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Is Technology-as-a-Service the same as a Lease?

Last updated Sep 22, 2022 | Published on Sep 20, 2022 | News, Technology as a Service - TaaS

The short answer is NO!

Technology-as-a-service, hardware-as-a-service, device-as-a-service, and related-as-a-service solutions are not the same as a lease.

Many think they are the same it is just marketing or leasing rebranded. However, there are two dramatic fundamental differences when comparing technology-as-a-service and a traditional lease. First is the outcome, or manner in which the payment option concludes. The second is in the performance or how the payment option operates or functions. Let’s unpack this in more detail.

01. The Outcome

Most technology leases are designed to conclude with ownership at the end of the term. With technology-as-a-service, it is just as it states in its name, a service; it is impossible to own services. Therefore, like most of the services you consent to receive, there are two options at the end: you can continue/renew the service or cancel the service.

When it comes to the hardware included in a technology solution, many ask, “Wouldn’t I want to own the hardware?” The answer here is, again, no. But why not?

First, ask yourself, “is the solution I’m buying revenue-generating?” If it’s not, you should question the validity of owning it at the end of a term. Historically and currently, physical security, audiovisual, and related office technology solutions are not revenue-generating.

Secondly, you have to peel back the components of what makes up these solutions. Once you do, you see that hardware represents an average of less than 30 percent of the sale price. The other 70 percent comes from a combination of licensing, warranty, installation labor, software, and other hidden costs. These are known as non-recoverable costs. Basic financial principles and financially astute experts advise that if there are greater non-recoverable costs than recoverable costs, avoid ownership.

Lastly, if the hardware within the solution has a high potential for obsolescence within two to four years, ownership is not a conducive business, technical, or financial strategy. Based on historical industry data and estimates, the rapid advancement of office and facility technologies is already moving at that pace and beyond.

02. The Performance

The other dramatic difference between a lease and a technology-as-a-service offering is its tactics and function. One of those tactics is flexibility within the term. A true technology-as-a-service offering allows you to migrate to new technology anytime during the service WITHOUT a financial penalty. You should not have to roll over any existing balances. A lease will only allow you to take the existing stream of payments and add that to the new solution. This is not the same. By doing this, you are still financing the old solution but with the new one as a new lease. You get the benefit of the new technology, but you are still paying for the old technology. A true and pure technology-as-a-service allows you to move to new technology anytime without any financial repercussions, releasing you from the original term.

The other component of performance in need of mentioning is the ability and relevance of layering multi-year maintenance/service into the offering every month. With a lease, these services are choppy and often proposed as an afterthought; it is not offered as an all-inclusive service offering. However, with as-a-service, it is just that, an all-inclusive offering that includes the technology and services for multiple years into the future. Today’s service plans are being reimagined with proactive checkups and concierge services and supported with traditional service level provisions. The service portion of the offering truly supports the pivot of these solutions being procured under the subscription consumption model. It really puts the service in technology-as-a-service.

As you can see, a true technology-as-a-service is not the same as a lease.

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