Everything as a Service? Please, No
It happened again today. Conventional wisdom told me — once again — that the entire IT market is moving to everything as a service (EaaS). Sorry, but I still don’t believe it. And I won’t completely rent it, either.
The news hook: Wipro Inc. — the India-based information technology business — is buying Viteos Group, a Business Process as-a-Service provider. As part of the $130 million announcement, Wipro Limited Financial Solutions CEO Shaji Farooq said the IT services industry is moving to an “as-a-Service’ model.”
Generally speaking, that’s true. And that’s why I’ve spent the past decade or so of my career tracking VAR evolutions toward cloud and managed services. Yes, the growing shift from CapEx (pay for everything up front and own it) to OpEx (pay as you go without ever owning the service) is undeniable.
EaaS? Not Quite
But somehow, the growing IT as a Service wave has been reclassified as Everything as a Service (EaaS). When I speak with Silicon Valley folks or M&A experts, they claim Everything as a Service is driving buyout activity. Hmmm… Could it be true? Are all IT services moving to the EaaS model? Um… no.
Let’s start with a simple anecdote. When the smartphone came along, everybody said the PC would disappear. When the tablet came along, everyone repeated that the PC would disappear. The reality? Smartphones definitely squeezed the PC market — in a huge way. Tablets applied further pressure — until we all realized that tablets won’t enjoy three-year refresh cycles that PCs historically enjoyed.
The lesson: New IT waves can leapfrog yesterday’s technologies — but they generally don’t completely replace those technologies.
Winner Doesn’t Take All
Now, apply that lesson to the software, where the “growth” industry is the “as a Service” model. But it won’t be everything as a service (EaaS). Not by a long shot.
Consumers will be the first to push back. Corporations will be next. Already, I’m canceling ‘as a service’ contracts that quietly drain me of monthly cash flow. Goodbye cable bill. Goodbye Sling (a cable alternative that doesn’t quite live up to the hype). Goodbye a half-dozen recurring expenses on my credit card that I simply don’t want or need.
On my desktop, I’ve outright owned my MacBook Air for four years. My wife’s iMac and my son’s Chromebook are fully paid for. Pay as you go hardware? Please… no — at least not in the consumer market! That’s why consumers are trying to get rid of expensive cable box rentals — another monthly bill for a smart box that isn’t so smart.
Everything as a Service in the Enterprise? Not
Back in the corporate market, cloud remains the hot topic. IDC expects cloud software will grow to surpass $100 billion by 2018 at a compound annual growth rate (CAGR) of 21.3%.
Awesome. Unreal. Hot stuff. But is that everything as a service (EaaS)? Not… even… close.
Consider this: By 2018, IDC says, the cloud software model will account for $1 of every $5 spent on software. Ummm… that means 80 percent of the software market hasn’t yet gone cloud.
Don’t get me wrong. I bet my journalism and media career on the managed and cloud services waves. As a channel partner, you can likely maximize your business valuation with a recurring revenue model. But the next time somebody tells you “everybody is doing EaaS…” please remind them: It just ain’t true.
Instead, I prefer to call it “Mostly as a Service” (MaaS) — but I’m afraid I likely stand alone. After all, Everything as a Service is a simpler marketing concept to sell to partners and customers.
IT in 2020: Waking Up From The OpEx Matrix
Fast forward a few years. The Mostly as a Service (MaaS) wave will unlock fantastic innovations. But by that time, your corporate IT department AND your financial department will start to wake up from OpEx nirvana — the way Neo eventually woke up from The Matrix.
That’s right: Your company (or your customers) will feel the weight of recurring OpEx expenses. Monthly bills that never seem to end. Some customers will ask: “Can’t we just pay for some of this stuff up front?” Other customers will lean heavily on channel partners — asking them for vendor management services to help reign in recurring monthly IT expenses.
Your big decision: Do you charge a one-time IT project fee to get customers’ monthly bills under control? Or will you roll out a vendor management service — a fixed quarterly fee that makes sure customers are receiving the most cost-effective IT services from their cloud providers.
Hmmm… The OpEx vs. CapEx debate will rage on indefinitely. And that means the day of “everything as a service” will never truly arrive. Whoa.