Why the “as a Service” Model Changes Everything

by Kevin Price on January 4, 2012 · 0 comments

in Business,Cloud Computing,Culture,Management,Mobility,Sales,ScanSource Communications,ScanSource POS & Barcode,Technology

I call it an alignment of objectives. The “as a Service (aaS)” business model, in the information technology space, has been slowly taking over applications and sectors for the past decade. Now, cloud computing and the explosion of mobility are dramatically accelerating the pace of that conversion.

The aaS model is much more than just a change in how software is paid for. It’s about taking the real total cost of ownership and converting that to a predictable expense, with a highly predictable outcome. It’s about delivering products that evolve and add continual value, versus projects that miss their mark and never meet the needs they were intended to address. This is a very different approach than what the IT industry has historically embraced.

Today, designed obsolescence is a fundamental component of every hardware manufacturer’s strategy in every sector. Traditional, on-premise software is the same. Both are designed to require on-going support, parts, and maintenance, and at some point the manufacturer says to every customer, “you have to upgrade.” This approach is integral to the business objectives of all of these technology suppliers. Their financial objectives require that every customer has to do an upgrade every 3-5 years. I would be interested to know how much of the average organizational IT budget is spent every year “doing it again” – replacing a legacy system (that still works well enough) with a new and “improved” version because some vendor in the architecture cannot or will not support some component anymore. My guess is it’s thirty percent or more of the annual budget.

The customer, on the other hand, just wants to know one thing, “how much is it going to cost for you to take care of this?” They would really like for the solution to work reliably, everyday, forever, and for the cost of that to be very predictable. That is what they have always wanted.

Therein lies the conflict. The IT industry’s core financial objectives are in direct conflict with those of their customers.

Conceptually, the aaS model can deliver just that. I can build N-Tier scalable solutions in the cloud that can deliver 99% up-time, for pennies per user per day. However, the end point computers, the network between, and the cloud were never designed for this approach. They were designed to be owned, capital assets with a dedicated team working daily to support, manage, and maintain them. In the aaS model, the service provider now wants the same thing the customer has always wanted. They want technology that can be broadly deployed into a wide range of environments and use cases, for economies of scale. There are no more small, specialized device populations. They want technology that works reliably for years and never breaks and, when it does, is easy and cheap to repair or replace. This should be designed from the ground up to be managed from the cloud, in a managed services model. Predictability becomes the most important design feature. The service provider now makes the most money by ensuring the lowest possible cost of ownership for their customers, which leads to an alignment of objectives.

This is why the aaS model ultimately will lead to a redesign of virtually every aspect of the IT infrastructure. We are already seeing it. From mobile devices that automatically update their own applications and operating systems, to wireless networks designed from the ground up to be managed in the cloud. Ultimately, every application, every network component, the end point computing devices, and all of their supporting accessories will be redesigned.

Some pieces will just go away. There will be a lot of organizations that have no need for on-premise IT resources, other than Internet connectivity and end-point computing. All the servers, storage, telecom, and networking that are such a huge part of infrastructure costs will just become part of a monthly subscription.

Others, like end point computing, will morph into something entirely new. I expect highly versatile, module designs focused around tablet and wearable form factors to win the day. They will be much more durable and configurable than today’s offerings. They will likely be running open-source releases of Google Android that can be supported for five to ten years and across multiple hardware generations. The network is already changing to adapt to this model; check out a Google-backed venture, called Meraki, for a view of things to come.

The technology and designs are just the tip of the iceberg though. This new model fundamentally changes how technology is acquired and used. We will need to move from an event driven, project model, to a daily transactional business. That will require broad organization and cultural changes.

What are some of the things you see that need to change?

Kevin Price, AccuCode
This post was written by

Kevin Price is the founder and CEO of Accucode. At 19-years old, Accucode is one of the largest privately held companies in Colorado, with customers all over the world. Today, in addition to its' original VAR business unit, Accucode includes three commercial Software-as-a-Service (SaaS) product offerings, a nationwide professional services practice and a managed services division. Kevin is a true entrepreneur. He loves technology, business, science, finance and just about any other nerdy topic you can think of. He believes that within every problem there is an opportunity. He’s spent 19-years refining the art of bootstrap entrepreneurship and loves to share his insights with pretty much anyone willing to ask or listen.

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