The ‘as-a-Service' Phenomenon: The Market is Changing, Are You?

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The ‘as-a-Service' Phenomenon: The Market is Changing, Are You?

Texas Technology Summit Stanton Jones, Analyst, Emerging Technology

April 2012

2Copyright © 2012 Information Services Group, Inc. All Rights Reserved

Option #2: Consume ItOption #1: Build It

Let’s Start with an Example of Thinking with a “Services” Mindset

The need: a programmable image gallery. The images: tables, chairs and sofas in different colors.

► Make a decision between traditional hosting and cloud infrastructure.

► Define a database table with columns for furniture type and color.

► Create the interface you’ll use to populate that table with images.

► Build an app that queries the table and serves up sets of images.

► Go to Flickr.

► Upload your images.

► Tag the black tables with black and table, the green chairs with green and chair, and so on.

► Find a free jQuery plugin to display results.

Source: Jon Udell, What’s In a Name? In the Cloud, a Data Service! http://www.wired.com/cloudline/2012/03/data-service/

“The quality of *service* you can provide to the ecosystem is a function of your ability to create, and usefully name, collections of web resources.”


What Is A Service?

“A type of economic activity that is intangible, is not stored and does not result in ownership.”

Source: Investorwords.com http://www.investorwords.com/6664/service.html


Secondary Sector

Primary Sector

The Three Economic Sectors

► Raw Materials: including agriculture, forestry and fishing, mining, and extraction of oil and gas.

► Industry : takes output from Primary Sector and manufactures finished goods.

Tertiary Sector

► Services: activities where people offer their knowledge and time to improve productivity, performance, potential, and sustainability.


Growth of the Services Sector

For the last 100 years, there has been a substantial shift from the primary and secondary sectors to the tertiary sector in industrialized countries.

The changing structure of employment during economic development

Source: The World Bank, Growth of the Services Sector www.worldbank.org/depweb/beyond/beyondco/beg_09.pdf


Growth of the US Services Sector

Since 1980 there has been a downward trend in manufacturing employment, while employment in service-producing industries continued to grow at an even faster pace.

U.S. Labor Force by Sector

Source: http://dionhinchcliffe.com/2011/06/29/on-web-strategy, Population Bulletin, U.S. Labor Force Trends, Vol. 6, No. 2

Tertiary Sector

Primary & Secondary Sectors

http://dionhinchcliffe.com/2011/06/29/on-web-strategy

http://dionhinchcliffe.com/2011/06/29/on-web-strategy


Why Should I Care?

Because enterprise IT is beginning to undergo a transformation that looks very similar to the growth of the broader services sector…

Raw Materials Sector

Manufacturing Sector

Services Sector

Buying IT “raw materials”

“Manufacturing” custom

infrastructures & apps

Creating & renting services

Trends in the broader US economy

Trends in Enterprise IT


Why Should I Care? (part II)

And because this massive shift towards services is creating (and destroying) opportunities for both providers and consumers of IT Services…

Buying IT “raw materials”

“Manufacturing” custom

infrastructures & apps

Creating & renting services

Trends in Enterprise ITDisrupting…• Platforms• Skills• Suppliers• Standards• Relationships


The “as-a-Service” Market


While there is no “standard” definition of the as-a-Service model, some key characteristics do tend to stand out…

Characteristics of the “as-a-Service” Model

► Subscription-based, transparent pricing

► Standardized services

► Features are updated often

► Typically built with a multi-tenant, web-based architecture

► Open, web-based APIs

► Active, engaged community supported by Web 2.0 technologies

“This is not just about putting up a pay wall and charging a subscription fee … The ‘S’ in aaS is not an afterthought or tacked on, it is the entire

ecosystem attached to the content.” -- Mika Salmi (2009)


There are several key trends that have converged to create the “perfect storm” for as-a-Service vendors…

What’s Driving This Trend?

as-a-Service

Corporate cost

reduction

Technology innovation

Frustration with

traditional IT

• Capital preservation• Do more with less• Risk aversion

• Projects take too long• Inability to upgrade• New breed of providers sell to BUs

• Virtualization• Massively-scaled infrastructure• Always-on mobile connectivity


Software and Hardware Companies

Mid-Market and Telecom Firms

Pure-Play Cloud Providers & Open Source

Traditional IT Services Firms (Global & MN)

Providers are Investing Heavily in the “as-a-Service” Model

It’s almost impossible to find a vendor that is not offering, or transforming, a key offering into the “as-a-Service” model.

Note: logos representative samples only; many providers sell software, hardware and services


As the hype machine around “as-a-Service” has unfortunately outpaced reality in many instances.

…But Caution is Advised

‘as-a-Service’ Marketing Position Buyers should check to see if…

Only pay for what you use Annual, up-front payment required

Turn the service off whenever you want Multi-year commitment required

Cheaper Everyday workloads are actually cheaper

Faster to implement Inability to customize is a deal breaker

Easier to support The right (new) skills exist internally

Easy to integrate Standard, web-based APIs exist

Highly secure Security is different than risk

Reduce dependency on infrastructure team Apps are architected for failure

Very flexible Standard terms & SLAs are acceptable

No longer need to buy hardware If performance is acceptable

Many others…

Note: some of these questions are applicable to specific delivery models (SaaS, PaaS or IaaS)


As-a-Service Providers face different challenges, based on their market position and organizational maturity.

Challenges for Service Providers (Traditional and Emerging)

Lag behind so

acquire

Cannibalizationof existingservices

Competition amongst

pursuit and delivery teams

Technical inertia and lack

of skills

Difficult to continue

double-digit growth

Lack of brand recognition

Enterprise support

expectations

Technology solves a niche

problem

Traditional Providers Emerging Providers


Technology buyers also face challenges – primarily centered around legacy expectations colliding with new, standardized, off-premises solutions.

Challenges for Buyers

Reluctance to buy; difficulty

integrating (technology &

process)

Legacy policies &

compliance frameworks

Technology & vendor inertia

Don’t know how much they use

today


Even with current challenges, ‘as-a-Service’ models are simply too compelling to not consider. Look for these models to rapidly increase their share of the IT Service Delivery Model. It’s already happening at the mid-market level; enterprises are next.

What’s It All Mean?

as-a-Service

Managed Service

(outsourced)

In-House IT

‘as-a-Service’ models simply become another

way to deliver IT services, dependent on workload,

security and other requirements.

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The ‘as-a-Service' Phenomenon: The Market is Changing, Are You?

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