Does the threat of business disruption keep you awake at night?
Posted by Emma Keates
The pervasive nature of Everything as a Service (XaaS) has put people-based companies on notice. Those that elect to stick with their traditional business model could rapidly become obsolete. In our 2018 independent global study on the rate of adoption of XaaS, we found most services organizations are making the transition a priority. For example, 21 percent of top execs reported having moved to a full subscription pricing model, 52 percent have moved to a partial subscription pricing model, and 69 percent expect to adapt their income model within three years.
In a new paper focused on our [Unit4’s] Value Framework and how we deliver outcomes to customers, industry analyst Cindy Jutras takes water filters as a good example of a XaaS business transformation. “The desired outcome is pure filtered water. The manufacturer might give the physical product away to provide the service and is invoiced based on the amount of water filtered. Of course, this means the water filter needs to be able to monitor (sense) the water volume and (digitally) transmit that usage back to the provider.”
XaaS has the potential to disrupt industries. However, many traditional companies, particularly those with a long history of success doing business a certain way, have balked at the thought of revamping business models. The potential risk of getting it wrong and damaging a business that performs well today is a major deterrent. With the rapid pace of business change, however, this is simply not practical. It’s no longer if, but when companies will change over.
Reviewing current business processes with a XaaS lens can help identify entirely new opportunities to grow revenue and drive efficiency. This information is key to choosing where and how to expand services. As they look at new business models, organizations must thoroughly examine their capabilities, as well as the benefits that can be realized by replacing their existing enterprise systems.
Cindy Jutras cites findings from the 2018 version of the Mint Jutras annual Enterprise Solution Study, which assesses the risk of the respondents’ industries being disrupted. 90% of respondents felt there was some level of risk of their industry (and therefore their business) being disrupted. While all but 10% acknowledged some level of risk, the majority (84%) feel the risk is low to medium rather than high or imminent. The paper goes on to say: “Yet we feel compelled to ask the question: How do you think the taxi industry would have answered this question on the eve of the launch of Uber? Do you think the hotel industry anticipated Airbnb? Did Blockbuster foresee the devastating impact Netflix would have on its business? Nobody saw these disruptions coming. The Internet and the digital economy made all of them possible and none were decades in the making. Compared to slow, evolutionary changes of the past, they literally happened almost overnight. The moral of the story: You need to be ready for anything.”
Of course, technology, and enterprise applications in particular, play a vital role in your ability to respond to change and transformation. Applications architectures are changing. We are seeing a solidification of cloud computing’s role as a gateway to new things — and not just as the latest IT strategy, or as a cost-containment mechanism. Thanks to cloud, there will be many things people will be able to do that they simply couldn’t do before. They can experiment, test, and pull data and applications from many sources.
At the same time, software architectures are yielding to microservice architectures. Big monolithic software applications – the ones which still dominate many large enterprises – will be replaced by architectures far more flexible, distributed and scalable than older ones. Irrelevant of the cloud service in the background, loosely-coupled microservices provide the ability to build out from core enterprise systems with custom and differentiating extensions. This supports rapid changes in the way organizations operate, delivering the infrastructure for new revenue streams and services. We’re seeing the emergence of a new enterprise software architecture that leverages new and emerging technologies to support business transformation and the shift to new XaaS business models.
As Cindy Jutras says: “We live in an era of disruption and digital transformation, from which the concept of XaaS has emerged. XaaS raises the level of expectation of constituents of all types of service-based organizations. Students of higher learning expect a personalized digital experience. Nonprofits are expected to create a greater social impact. Professional services organizations are expected to charge for results not hours. Citizens demand better public service. If you expect to deliver any of these services, you can’t afford to be encumbered by enterprise applications in your front and back offices.”
Read the full paper here