Is AV-as-a-Service the Same as a Lease?

AV-as-a-service (AVaaS), hardware-as-a-service (HaaS), device-as-a-service and any other related technology-as-a-service solutions are not the same as a lease.

Many think that they are one and the same…that it’s just marketing or leasing rebranded. However, when comparing AVaaS and a traditional lease, there are two dramatic and fundamental differences. First is the outcome, or the way the payment option concludes; second is the performance, or the way the payment option operates or functions.

Let’s unpack all this in greater detail.

The Outcome

Most AV technology leases are designed to conclude with ownership at the end of the term. With AVaaS, it is just as it states in its name — that is, a service. It is not possible to own services. Therefore, like most services that you consent to receive, there are two options at the end:

1) You can continue/renew the service.
2) You can cancel the service.

When it comes to the hardware that is included in an AV solution, many ask an obvious question: Wouldn’t I want to own the hardware? The answer here, once again, might be no. Why not? Allow me to explain.

First, ask yourself this: Is the solution that I’m buying revenue-generating? If it’s not, then you should question the validity of owning it at the end of a term. Both historically and currently, audiovisual solutions and related technology solutions are not revenue-generating.

Second, you must peel back the layers of components that make up these solutions. Once you do, then you’ll see that AV hardware represents, on average, less than 30% of the sale price. The other 70% comes from a combination of licensing, warranty, installation labor, software and profit. The term for these is “non-recoverable costs.” Basic financial principles and financially astute experts advise that, if there are greater non-recoverable costs than recoverable costs, avoidance of ownership might be wise.

Last, if the hardware within the solution has a high potential for obsolescence within a two- to four-year time frame, ownership might not be a sound business, technical or financial strategy. Based on historical industry data and other estimates, the rapid advancement of office and facility technologies is already moving at — indeed, is exceeding — that threshold pace.

The Performance

The other dramatic difference between a lease and AV-as-a-service centers on the tactics and how it functions. One of those tactics is flexibility within the term. A true AVaaS offering allows you to migrate to new technology at any time during the service, without financial penalty. You should not have to roll over any existing balances.

By contrast, a lease will only allow you to take the existing stream of payments and add that to the new solution. That’s clearly different. With leasing, you’re now still financing the old solution, but with the new solution as a new lease. You receive the benefit of the new technology, but you’re still paying for the old technology.

True and pure AVaaS allows you to move to new technology at any time, without any financial repercussions, and releases you from the original term.

The other component of performance to mention is the ability and relevance of layering multi-year maintenance/service into the offering on a monthly basis. With a lease, these services are choppy and often proposed as an afterthought; it’s not presented as an all-inclusive service offering. However, with AVaaS, it is just that — namely, an all-inclusive offering that encompasses the AV technology and services for multiple years into the future.

Today’s service plans are being reimagined with proactive checkups and concierge services, and they’re supported with traditional service-level provisions. The service portion of the offering truly supports the pivot of these solutions to the subscription consumption model. It puts the “service” in AV-as-a-service.

Check out the full video

Learn More

Would you like to learn more about these concepts and more? Email me to gain access to a guide on AV-as-a-service, which covers more details on what it is, why it’s relevant and how to implement it, including what to look for in an as-a-service solution.

About the Author

Paul Metzheiser is the managing partner at TAMCO and focuses on revenue generation and business development for the company.