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Copyright © 2012 Information Services Group, Inc. All Rights Reserved. No part of this document may be reproducedin any form or by any electronic or mechanical means, including information storage and retrieval devices or systems, without prior written permission from ISG, Inc.
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.”
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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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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.
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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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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
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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
8Copyright © 2012 Information Services Group, Inc. All Rights Reserved
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
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The “as-a-Service” Market
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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)
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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
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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
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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)
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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
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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
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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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