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
Salesforce.com, 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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