This week, HP launched HP+, one of the more interesting as-a-service efforts I’ve seen so far. What makes this service more interesting than most is its heavy focus on sustainability. This focus, given current world views, is likely to be emulated because most of the larger companies are reporting billions in additional revenue from their corporate social responsibility efforts. Revenue that has been generated indirectly from customers appearing to select vendors based on corporate responses to social responsibility efforts.
Let’s talk about the historical foundations of as-a-service, the changes that this new model will bring, and HP’s unique HP+ attributes.
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As-a-Service Founded the Tech Market
One of the fascinating aspects of the move to as-a-service solutions versus a more defined purchasing method is its role in the origins of the IT industry. In the world defined by mainframes and large telecom companies that existed from the 1950s through the 1980s, most everything was provided as a service. You didn’t buy your phones or phone services outright; they were part of your monthly fee, much like cable boxes still are. Mainframes weren’t sold; they were rented and came with services that you collectively paid for by the month.
In IBM and AT&T’s case, this created a huge benefit: a reliable revenue source that was mainly able to ignore changing economic conditions that adversely impacted purchases. However, AT&T problems started when the competition was allowed in. AT&T had lost the ability to compete, or in IBM’s case, they, over decades, started taking their customers for granted, and those customers revolted. In addition, once IBM became dominant, growth stagnated. The company came up with creative and tactical ways to generate growth, including creative billing (for things like fixing product defects that appeared intentionally created) and selling the hardware, which collapsed the service revenue and also opened IBM up to the competition.
As a result, this as-a-service model reduced customer churn, but also destroyed customer loyalty and competitiveness over time. These adverse effects happened over decades and has remained a problem for the long-term success of the effort.
Proper execution of long-term as-a-service models has been problematic in the past. Without mitigation, it will be a problem in the future when the market saturates, and revenue growth stagnates. And, because these problems emerge over decades, mitigating them is problematic. Thus the strategy for providers is to keep a sharp focus on customer loyalty and satisfaction. The strategy for buyers is to avoid lock-in and choose solutions that aren’t so invasive you can’t switch to another provider if your provider misbehaves. This switching provision alone should better assure vendors remain focused on retaining you as a higher priority than mining you for additional funding.
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The HP+ Program
HP+ is a printer-focused as-a-service platform that contains an impressive and substantial corporate social responsibility component. The program is also unique because it includes consumables; most as-as-service programs are software or hardware-based, but because, other than electricity, there are no consumables, the related programs don’t encompass them.
Like other, as-a-service offerings, this one is comprehensive, at least concerning printing. In addition, like other existing and coming programs, it relies on cloud technology for patches, updated security, and management. Sustainability features include an increasing closed-loop process for ink cartridges and a forest-first feature that more than overcomes the ecological impact of HP printer paper use. The program builds on HP’s Instant Ink subscription, which has recently grown at a 60% growth rate with savings to those consuming the ink of up to 50% over the more common per unit ink purchase costs.
Anticipated Changes to the As-a-Service Model
Moving from a purchase and support model to a subscription service, including a support model, will significantly change the related ecosystem. These changes include a generally higher level of long-term engagement with the supplying vendor, changes in hardware design, and a substantial shift from CAPEX to OPEX. The resulting increase in the ability to attribute costs more granularly down to a user level.
This shift also changes the financial motivation for the provider from churning installed products to increase their service life, which is an inherently greener process. The move to subscription services should significantly reduce the waste from the computer industry and lead to more sustainable product designs over time. And, you can still do things live to provide cosmetic options to fit interior home and office interior designs better.
The cloud will increasingly have a significant role in this massive pivot, suggesting eventual advantages to firms with considerable cloud efforts. This cloud focus should provide Amazon, Google, and Microsoft, and their closest OEM partners with advantages in the coming years. It could also turn these vendors into disruptive elements depending on how they evolve their service offerings over time.
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HP+ Sets an Example
As-a-service models are moving aggressively into the market. HP+ stands as one of the more interesting examples as it takes physical supplies and rolls them into a comprehensive program. HP is hardly alone in this effort. Other companies are implementing this model with advantages in economies of scale, OPEX rather than CAPEX funding, and potentially far greater sustainability.
The as-a-service model also has long-term risks, including vendor abuse and lock-in that may take decades to emerge. Assuring the benefits while avoiding the eventual problems can be better done with analytics and a tight focus on customer satisfaction and loyalty — common with the major vendors. In short, I think we can do it right this time and avoid the negative outcome IBM experienced in the late 1980s and ‘90s.
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