Large Enterprises Encouraged to Adopt ‘As-a-Service’ Operations
Today, markets are inundated with rapidly changing customer requirements, increasingly short product life cycles, and innovative competitors. In this context, ‘being lean and responding quickly to market changes’ is impossible to ignore. Large enterprises respond slowly to change due to vast assets, numerous employees, and complex processes and regulations. Though most enterprises appreciate the importance of agility for survival, a report sponsored by Accenture in 2015 reveals that roughly two-thirds of businesses appear unprepared for what’s coming.
For example, let’s assume that you have entered a new field in which the number of customers increases rapidly. How do you scale your customer relationship management system to assure the continuous presentation of high-quality services? During an economic downturn and/or period of shrinking production, how do you reduce operating expenditures in a timely fashion? When competitors force themselves into markets where you have long-established advantages, how do you launch a counterattack? The answer for enterprises struggling with these problems is to access the outsourcing market for As-a-Service operations.
What Is ‘As-a-Service?’
Typical examples of the As-a-Service model include Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS) products, as the As-a-Service model is designed to enable the integration of enterprise-grade intelligent business solutions for companies that are more concerned with running their business than buying and maintaining an in-house IT infrastructure.
The marketplace is moving toward a new era of service delivery in which applications, infrastructure, and business processes are brought together and delivered as plug-in, scalable, consumption-based services supported by Big Data analytics, the cloud, and automation to deliver successful business outcomes at lower costs. Figure 1 shows a stack of components that comprise the As-a-Service model.
Figure 1: As-a-Service Component Stack
Traditional service delivery structures are based on fixed infrastructure, terms of service, and Full-Time Equivalent (FTE) overhead. By comparison, the As-a-Service model is flexible, outcome-oriented, and based on a modular design that allows companies to employ plug-and-play, scalable, and consumption-based services at hourly, weekly, or monthly rates. The result is that companies can scale services up or down based on business volumes or changes in the market with a degree of freedom that would be impossible in a traditional service delivery environment.
The ultimate goal of the As-a-Service model is to provide companies with standardized, end-to-end, business-oriented solutions that enable them to focus on market development, customer engagement, and innovation. Specifically, As-a-Service offers the following major value levers:
- Plug-in: Access services quickly — in days or weeks, not months; modular designs that enable companies to set up and tear down services rapidly when necessary
- Scalable: Ramping up or down to match actual business volume needs
- Consumption-based: Paying for use, rather than committing to hardware, services, or functionality that may not be needed
- Outcome-oriented: Working relationship in which the buyer and provider are committed to clear business outcomes
- Standardized: Shared services model for standardized and scalable processes for production and delivery; achieve repeatability in multi-client and multi-tenant environments
- Vendor-agnostic: Providing deep knowledge and experience across multiple provider offerings to assemble the right combination of solutions appropriate to the desired business and performance outcomes
- Innovation-enabled: Committed to ongoing innovation in business, infrastructure, and application processes
- Future-protected: Shielding the buyer from the potential disruption of upgrades and future changes; services that are always up-to-date and led by buyers who have continuous access to funding and expertise
As-a-Service disrupts existing business processes and supports new business models. For instance, Rio Tinto, a global diversified mining company headquartered in London, England, is moving to a new information systems and technology delivery model that will migrate their legacy enterprise information system to a cloud-based, As-a-Service solution — including pay-for-use pricing to keep costs fully flexible and services properly scaled based on business demand.
Since As-a-Service platforms provide services to multiple clients, platform operators are positioned to enable clients to obtain valuable insights into their businesses. One global food and beverage company saw an opportunity to reach aggressive cost reduction targets and transform an internal process by outsourcing parts of its procurement operations. Adopting an As-a-Service model can bring new insights via digital applications that answer questions for companies like, “Who are the best suppliers to meet our needs,” “What is the fair market pricing for this service,” and “What terms and conditions should be in our contracts?”
Research from Accenture and HfS Research found that most large enterprises have not yet transitioned to As-a-Service infrastructures. Seven out of ten enterprises over USD 10 billion in revenues do not expect their core operations to adopt the As-a-Service model for at least another five years, even though they face pressure to double IT requirements and service resources on an annual basis against limited budgets. Forty-two percent of small and medium enterprises see As-a-Service as either necessary or absolutely critical for their organizations versus twenty-five percent of large organizations.
In China, enterprises are looking for advanced solutions to shift large capital investments into much smaller operational expenditures. To do so, enterprises must transform their management practices and take all measures to clarify new operating models from top to bottom. Executive leadership must be educated about how to purchase As-a-Service resources, as many do not yet know how to buy in this piece-by-piece method. The financial value proposition is compelling, however, especially when it comes to technology upgrades or changes. For a significantly less total cost of ownership, buyers gain access to continuously updated software platforms rather than bear the burden of their implementation from scratch.
One of the many positive aspects of an As-a-Service model is that it allows companies to start small and scale fast in ways that other models do not. For most buyers, the As-a-Service model starts with an overall roadmap and then proceeds function-by-function to examine how the As-a-Service value proposition transforms each function to deliver specific business outcomes. Buyers can consider starting with functions that are less business critical and create the types of small successes that build commitments from both senior and middle management.
The As-a-Service model allows two collaborating parties far more flexibility than traditional outsourcing models in which the supplier must exhibit world-class capability and continuously prove its value to the buyer. The best suppliers are not simply transaction machines; rather, they are consultants to the buyers, doing whatever they can to help the buyers identify and extract more value.