Ingram Micro has launched a new offering that will allow Australian resellers to bundle hardware, software and services and sell them to customers on a single monthly bill.
Ingram Technology as a Service, or ITaaS, is underpinned by agreements between the distributor and third-party finance providers so that customers can pay for hardware, software and services as a recurring annuity and the reseller gets paid upfront for the hardware component.
The new offering is particularly geared toward the smaller end of the customer market, Felix Wong, Ingram Micro's chief country executive Australia and New Zealand, told CRN.
"If you think about the SMB, they start business today – they go and ramp up their cloud services on Azure, then they get their Office 365, Adobe and Dropbox in the cloud. They don't have to pay for anything up front: it's all X dollars per month.
"Then they get back into the office and need $50,000 to buy the equipment. Now they don't need that anymore," Wong added.
The distributor has already built a major stake in the subscription software sector through its online cloud marketplace; allowing the same level of scale-up, scale-down flexibility with hardware is significantly more challenging.
"SaaS is a change in billing, there is no underlying physical asset that needs to be funded," said Wong.
"Device-as-a-service requires someone to own the equipment that is being used by the end user. Resellers typically don't have balance sheets to support that, so there needs to be someone who can do the financing.
"When we move to SaaS, we realise that not every reseller can afford this change in billing. Rather than get a whole years licensing up front, you have to wait a whole year.
"If you expand that across your whole hardware business, it would significantly change the financial model and cash flow for resellers."
Wong hopes the ITaaS launch will give Ingram Micro an edge over competing distributors. "What this does is strengthens Ingram's total offering to our resellers massively. It is another string to our bow.
"It gives resellers another way to do more business. We hope that in making our partners more successful it will make ourselves more successful."
Tom Atkinson, general manager of Think Technology in Wagga, was one of several partners who attended a pre-launch event in Sydney on Thursday morning. He told CRN he was impressed by Ingram Micro's ITaaS.
"We are offering hardware as a service for PCs and we are financing it either ourselves, depending on the size of the deal, or going through another finance provider," Atkinson said.
"You lose a little bit of control. Working with someone like Ingram Micro to be able to do the licensing all together rather than having multiple billing platforms where the customers paying the finance provider for the hardware and us for the managed services and software, this bundles it all into one."
To access ITaaS, resellers need to sign a new participation agreement with Ingram Micro, which will be separate to their existing agreement and credit facilities with the distributor.
The credit risk on the hardware sale sits with Ingram Micro, which ultimately owns any physical assets and effectively becomes the billing and collection agent.
"The credit risk is directly with the end customer and that is an important point," said Steve Kerr, general manager, Ingram Financial Solutions. "That makes it scalable. If we took credit risks around the resellers, irrespective of how strong and big they are, they would eventually become saturated with risk."
If a customer stops paying, any ongoing software licensing or services payments would cease, however, the reseller is at no risk of losing the initial hardware payment – that risk rests with Ingram.
ITaaS will be available across the $2 billion distributor's entire portfolio, including servers, tablets, smartphones, however, Wong expected the biggest demand to be for notebooks and laptops.
"At the desktop there is a lot of interest. If we can reduce the replacement cycle by offering the end consumer a solution that is priced by the month, so they don't have an upfront cost to have the latest and greatest, we believe there will be an opportunity," Wong said.
"We believe that will be a huge benefit for end users, and Microsoft gets their Windows 10 replacement faster, Intel gets a better faster, newer CPU in the PC, and all the PC manufacturers are really keen because they will look at how they can get the latest products into the consumers' hands," Wong said.
According to Chris Bright, OEM director for Microsoft Australia and New Zealand, the current average fresh rate for devices across ANZ is 4.4 years in the enterprise, 6.3 years for small to medium businesses, and five years across the public sector.
Ingram's internal analysis suggests that by allowing customers to upgrade devices on a monthly device-as-a-service model could cut the refresh rate by five months, representing hundreds of thousands of additional devices sold across Australia.
More than leasing
Ingram's Kerr said ITaaS is a "plug and play solution" that allows resellers to avoid the "huge amount of complexity" of setting up device-as-a-service themselves.
He drew a distinction between ITaaS and leasing.
"The main difference between what we are doing and a standard lease is that with a lease, you have fixed amount over a fixed term with no variability. What we have tried to do is build as close to a consumption model as possible."
It is straightforward to flex up and add additional devices and licences, Kerr added. Flexing down – for instance if a customer downsizes – is more challenging but will also be an option.
"We will build in the ability, in certain circumstances, to flex down and we are going to try to make that as accommodating as possible," Kerr said.
The ITaaS portal was built internally by Ingram Micro, which has a global workforce of around 700 software developers, many hired through its 2015 acquisition of the Odin platform from Parallels.
It will launch in July as part of Ingram's new Partner Central portal, which will sit alongside Ingram's Techlink e-commerce system as a single point for resellers to access content such as marketing assets.