1. The „as-a-Service' Phenomenon: The
Market is Changing, Are You?
Texas Technology Summit
Stanton Jones, Analyst, Emerging Technology
April 2012
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2. 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.
Option #1: Build It Option #2: Consume It
► Make a decision between traditional hosting ► Go to Flickr.
and cloud infrastructure.
► Upload your images.
► Define a database table with columns for
furniture type and color. ► Tag the black tables with black and table, the
green chairs with green and chair, and so on.
► Create the interface you’ll use to populate
that table with images. ► Find a free jQuery plugin to display results.
► Build an app that queries the table and
serves up sets of images.
“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.”
Source: Jon Udell, What’s In a Name? In the Cloud, a Data Service! http://www.wired.com/cloudline/2012/03/data-service/
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3. 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
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4. The Three Economic Sectors
Primary ► Raw Materials: including agriculture, forestry and fishing, mining, and
Sector extraction of oil and gas.
Secondary ► Industry : takes output from Primary Sector and manufactures finished
Sector goods.
Tertiary ► Services: activities where people offer their knowledge and time to
Sector improve productivity, performance, potential, and sustainability.
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5. 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
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6. 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
Tertiary Sector
Primary &
Secondary Sectors
Source: http://dionhinchcliffe.com/2011/06/29/on-web-strategy, Population Bulletin, U.S. Labor Force Trends, Vol. 6, No. 2
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7. 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…
Trends in the broader US
economy
Raw Materials Manufacturing Services
Sector Sector Sector
Buying IT “raw “Manufacturing” Creating &
materials” custom renting
infrastructures &
apps
services
Trends in Enterprise IT
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8. 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 “Manufacturing” Creating &
materials” custom renting
infrastructures &
apps
services
Trends in Enterprise IT
Disrupting…
• Platforms
• Skills
• Suppliers
• Standards
• Relationships
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9. The “as-a-Service” Market
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10. Characteristics of the “as-a-Service” Model
While there is no “standard” definition of the as-a-Service model, some key
characteristics do tend to stand out…
► 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)
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11. What’s Driving This Trend?
There are several key trends that have converged to create the “perfect storm” for
as-a-Service vendors…
• Virtualization
• Massively-scaled infrastructure
Technology • Always-on mobile connectivity
innovation
Corporate Frustration
cost with
reduction traditional IT
•
•
Capital preservation
Do more with less
as-a- •
•
Projects take too long
Inability to upgrade
• Risk aversion
Service • New breed of providers sell to BUs
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12. 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.
Traditional IT Services Firms (Global & MN) Mid-Market and Telecom Firms
Pure-Play Cloud Providers & Open Source Software and Hardware Companies
Note: logos representative samples only; many providers sell software, hardware and services
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13. …But Caution is Advised
As the hype machine around “as-a-Service” has unfortunately outpaced reality in
many instances.
‘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)
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14. Challenges for Service Providers (Traditional and Emerging)
As-a-Service Providers face different challenges, based on their market position and
organizational maturity.
Competition
amongst
Enterprise
pursuit and support
delivery teams expectations
Cannibalization Technical Technology
Lack of brand
of existing inertia and lack solves a niche
services of skills recognition
problem
Lag Difficult to
continue
behind so double-digit
acquire growth
Traditional Providers Emerging Providers
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15. Challenges for Buyers
Technology buyers also face challenges – primarily centered around legacy
expectations colliding with new, standardized, off-premises solutions.
Technology &
vendor inertia
Legacy Don’t know
policies & how much
compliance they use
frameworks today
Reluctance to
buy; difficulty
integrating
(technology &
process)
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16. What’s It All Mean?
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.
‘as-a-Service’ models
In-House as-a-
IT Service simply become another
way to deliver IT
services, dependent on
workload, security and
Managed other requirements.
Service
(outsourced)
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