Monday, October 12, 2015

Beware: As-A-Service Snake Oil

In 2011, my team at CSC began using the term “As-A-Service Economy” to characterize a transformation we detected in the buying strategies and service integration approaches of our largest clients. Today, almost every tech vendor and outsourcing service uses the “As-A-Service” moniker to describe their offerings. 

The hard facts reveal that this transformation is far from complete and will likely entail more disruption than seamless transition.  New behaviors take time, and often require some degree of force.
I am privileged today to be at the intersection of the buying and selling of “As-A-Service” propositions. Most enterprise buyers have mastered the art of contracting for outsourced services of some flavor, with staff augmentation models prevailing in their portfolio. This means the services under contract are largely limited to generating benefits via lower-cost labor. 

The universe of service providers includes both old guard and new age players. All are using the same terminology, but many lack consistency in application. Sitting recently with a client listening to the pitches of hopeful service providers, I realized that both the buy-side and the provider-side need help in making the shift to a new form of commercial contracting.

To illustrate, think of your experience as a consumer. As a cable or satellite TV subscriber, you pay for access to TV programming. You don’t need to know how many servers the provider is running, or what level of training they apply to their staff, or the tools they use to configure their services.

The same should be true in business settings. In fact, it is for some classes of service.  If you contract with Amazon Web Services or, you aren’t invited to prescribe “how” they deliver the services that they offer.

Yet, with most business functions – both IT and IT-enabled business services – the parties are still struggling with the vestiges of yesterday’s “lift and shift” outsourcing approach.  Clients don’t trust that they will receive market-proven services.  Providers can’t resist customizing their “offerings” to the point of bespoke uniqueness and associated loss of leverage.  These are self-reinforcing behaviors that will defeat breaking away from all that we dislike of outsourcing’s version 1.0.

Here are some of the top matters of misalignment that I’ve seen from recent marketplace encounters:

The net of this: more often than not, the parties are talking at cross-purposes and a potentially beneficial deal falls apart.  Or, devolves to a more-familiar instance of “lift and shift.”

Buyers need to be firm on their intentions, and be willing to trust (once verified) in the integrity of market-based offerings. That shift is not trivial.

Providers need to move beyond the hype and show their conviction to market-based services across the dimensions of terms, pricing, service models, and transparency.  The sales teams know the language; now the rest of the organization needs to line up to deliver industrial-grade services.

We ask prospective providers to show up with defined terms of service, a service catalog and well-established service levels, transparency around their services roadmap for future innovations (including committed investments), a clear sense of the market being served (and metrics for demonstrating effectiveness in market penetration), and evidence of alignment with the overall business strategy. 

After all, the "As-A-Service Economy" is all about the power of leverage that comes through serving a market, not merely adding another logo to the marketing deck.To scale “as-a-service” successfully, from either a buyer’s or seller’s perspective, you need to be clear: what value is at the center of this transaction? If it’s a mystery, you might as well be bickering over snake oil.


Peter Allen has many years of operating experience as a top executive and strategic advisor for companies of all shapes and sizes, with focus on technology-enabled business services. He is now a Boston-based Managing Director at Alvarez & Marsal.









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