What is Technology as a Service?
Technology as a Service (TaaS) is a method of acquisition for any technology solutions; broadcast, media, sports, AV, security, voice, video, data, IoT, etc. It is a way for you to make one monthly payment for all of your needed equipment and services.
TaaS creates a solution you can use or have access to, much like a subscription. Unlike traditional acquisition methods, Technology as a Service doesn’t end in ownership. It allows you to use or access the technology while it is useful and provides added flexibility and scalability when you grow or your organization’s needs change.
Due to the rapid technological advancement and the need to upgrade obsolete technology more frequently, Technology as a Service is becoming a preferred way for organizations to pay for their solutions to stay competitive and agile in the marketplace.
The Drivers Behind “Why” Technology as a Service
Four crucial factors help you understand how as-a-service became popular and why it makes the most sense in today’s environment.
1. Economics of Ownership
Regardless of the technology industry, broadcast, media, sports, AV, security, data, unified communications, etc., technology solutions are non-revenue generating assets because they rapidly depreciate the day after installation. Paying cash with after-tax dollars on these non-revenue generating assets defies basic economics. The use of technology is essential in today’s marketplace, and it is of utmost importance. However, there is a big difference between its importance and its economics.
**So why do technology solutions depreciate the day after installation?**
In every bill of materials, you have a high level of non-recoverable costs (i.e., margin, licensing, installation, and sometimes comprehensive with extensive labor, programming, software, design, warranty, training, etc.) The non-recoverable costs can make up 30-50% of a solution. These costs are non-recoverable because they cannot be returned after the installation.
2. Rapid Advancement of Technology
Technology continues to change rapidly, for the better, with no sign of it slowing down. Look at these major manufacturer’s R&D budgets within the AV & Security sectors:
- Panasonic – R&D Budget = 5.7% of Revenue or $3.25 Billion
- Sony – R&D Budget = 6.24% of Revenue or $5.51 Billion
- Bosch – R&D Budgets = 8% of Revenue
- Barco – R&D Budgets = 11% of Revenue
- FLIR – R&D Budgets = 10.75% of Revenue
- Axis Communication – R&D Budgets = 18.02% of Revenue
Customers are recognizing the challenges of staying at the forefront of technology and having to request higher CAPEX budgets continuously. As a result, customers are embracing and giving more value to the use or subscription procurement method versus ownership.
3. Insuring Essential Use Technology
AV technology has replaced the phone system for internal and external communication and collaboration. Security technology protects our essential use assets; companies, employees, schools, children, intellectual property, confidential information, etc. Today’s technologies are no doubt critical. How can you NOT protect your technology investment with a complete service and maintenance plan beyond the warranty period? It’s negligent not to. It is too much of a risk not to protect mission-critical technology.
We have to mention COVID-19. The economic downturn has placed a lot of pressure on budgets. In a recent survey with top national retail chains, 89 percent stated that their 2020 and 2021 budgets had been greatly impacted. Continued economic uncertainty places pressure on organizations to preserve cash flow.
How Technology as a Service Addresses The Drivers
VidOvation’s Technology as a Service payment program addresses the four above drivers behind why as-a-service is becoming more desired. They include creating favorable economics, embracing technology change, operating with peace of mind, and how not having a budget doesn’t have to prevent you from your technology implementation strategy. Let’s unpack these components:
1. Creates Favorable Economics
VidOvation’s expertise and understanding of the components that make up a total technology solution provides an avenue where system integrators can package and offer you, the customer, a relevant and real Technology as a Service. This specific as-a-service payment program offers a way to absorb the myriad of non-recoverable costs and keep your working capital working. Everything is included and packaged into the offering as one monthly payment for you over a subscription service term of 36 or 60 months.
2. Embrace Technology Change
When considering the large amount of money manufacturers are pouring into R&D, how are you, as the consumer, supposed to manage the rapid advancement of technology and risk of obsolescence? A component of VidOvation’s Technology as a Service is the Solution Replacement Guarantee (SRG) feature. This exclusive feature allows you to migrate or scale up into new technology anytime during the subscription service term without financial penalty. This puts you in control to move in and out of technology on your terms.
3. Operate With Peace of Mind
With essential-use equipment, customers need ongoing service and support. VidOvation’s Technology as a Service has a way to include your ongoing service agreements as part of the monthly subscription. These services include most failure situations that remove additional service expenses throughout the subscription term. Act of God coverage is the most challenging area for integrators to cover under any Service Level Agreement. VidOvation has addressed this and protects customers from unforeseen expenses should an Act of God situation occur.
4. Don’t Let “No Budget” Prevent You From Your Strategy
With Technology as a Service, you can address any budget pressures or lack of budget from COVID-19 or any other economic uncertainty.
Not All As-A-Service Offerings Are Equal
As the title of this section states, not all as-a-service offerings are created equal. When considering Technology as a Service, it’s essential to research and know what you are receiving. Make sure you understand what is and is not included. A true as-a-service should be one low monthly payment with everything bundled in. There should be no need for large upfront à la carte costs. Be fully aware of what you are responsible for and what your solution provider will manage for you. Understand the protocol if something malfunctions at any time throughout the term. True as-a-service solutions will include support services for the entire term and the ability to scale if your needs change or the technology becomes obsolete, without major financial implications. And lastly, know what the financial implications and ownership outcomes are. As-a-service is an operating expense, not a capital expense. Be clear on all of the expenses. Small fees are not uncommon, but you should not have to pay large upfront costs. If your as-a-service solution results in owning the technology, you do not have an as-a-service but a traditional lease in disguise. If the as-a-service subscription model is what you are after, ensure you understand this detail in the agreement.
Learn More: Discover an actual as-a-service payment program that protects you from obsolete technology. VidOvation helps your organization stay at the forefront of technology by fine-tuning our as-a-service offering to meet your technology solutions’ technical, financial, and business needs.
Read my Q&A with Mark J. Pescatore of SCN & AVNetwork SCN: How long have you been with this company, and what are your responsibilities? Jim Jachetta: I have been in the industry over 30 years. I am the co-founder and CTO of VidOvation. My team and I founded...
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