By Rob Starr, Big4.com Content Manager
Accenture has new research on companies adopting an As-a-Service model for conducting business. According to their findings, seven out of ten enterprises with revenues of $10 billion or over don’t expect core operations to be delivered As-a-Service for at least another five years. Small and medium enterprises and Asia Pacific organizations are moving more quickly and this trend pits larger incumbents in danger of being left behind. Michele Martin, managing director at Accenture Operations, explains:
Can you define exactly what As-a-Service means?
Accenture sees the marketplace moving quickly towards a new era of service delivery where applications, infrastructure and business processes are brought together and delivered in a way that clients can quickly access (or “plug into), scale, and generate business outcomes supported by analytics, cloud and automation.
Some of the qualities and benefits of the As-a-Service business model include:
- Consumption-based; companies pay based on what they use rather than committing to assets that may or may not be needed
- Outcome-oriented; providers work as part of a value-based relationship in which both buyer and provider are committed to specified business outcomes
- Vendor-agnostic; companies benefit from the knowledge of multiple providers
- Cost reduction; for a lower total cost of ownership, buyers gain access to updated software
platforms rather than having to switch out or reengineer the entire platform.
Why are so many enterprises with over $10 billion in revenues lagging behind with implementation?
A recent report from Accenture and HFS Research, “Beware of the Smoke, Your Platform is Burning,” surveyed 716 enterprise service buyers, advisors and service provider executives about As-a-Service. We found that 53 percent of senior executives recognized As-a-Service as critical for their organization, yet 68 percent of enterprises report that their core enterprise processes will not be delivered As-a-Service for five or more years. Only three percent indicated that they have already achieved their organization’s goals.
Larger enterprises still believe they can get continuing mileage from their current outsourcing model, this is especially true within the middle management level. There is no “burning platform” that would force their hand. Small and mid-sized enterprises (SMEs) under $10 billion are often less resourced and have fewer opportunities with their labor arbitrage model. As-a-Service provides an opportunity for these companies to be more nimble and grow quickly. Take for instance the rise of the sharing economy with music and transportation startups where smaller companies with little infrastructure are embracing digital services and disrupting the dominance of established players. That is why SMEs have pulled ahead larger companies with As-a-Service.
Why are divestitures and acquisitions within this industry so important?
Divestitures and acquisitions create a need for large enterprise to consider As-a-Service. Currently we are undergoing a boom in M&E activity. Entire industries are consolidating as companies look to buy the capabilities and market share that eludes them. Against this M&E backdrop, comes increasing complexity and the cost of integrating and maintaining an extensive operations infrastructure. It is added weight that can slow companies down and in the end make them less nimble in the market. As-a-Service can shave the weight off their infrastructure and make better use of their assets.
Why are automation and analytics so important when it comes to engagement?
Analytics and automations underpin the entire As-a-Service model. Success with As-a-Service means maximizing the available data to better identify trends and opportunities, to streamline processes, to innovate and improve competitiveness. Embedding descriptive, predictive and prescriptive analytics in business processes opens the possibility for these business outcomes. According to that Accenture/HFS survey, 61 percent of senior vice presidents and up named investments in analytics tools and skills as the most important step to realizing an As-a-Service model. Hand-in-hand with analytics is automation. Analytics are most effective after processes are streamlined, standardized, and automated. It produces higher quality data sets from which to derive reliable insights.
What do you see as the future here?
2016 will see a notable uptick in enterprises considering the As-a-Service model as they look to broaden their focus on business outcomes that increase revenues, improve margins, enhance customer service, and drive new innovations. The financial value proposition of As-a-Service is especially compelling when it comes to technology upgrades or changes. For a total cost of ownership that is significantly less, buyers gain access to continuously updated software platforms that is far less disruptive than traditional upgrade projects.
We predict a number of companies delving deeper into As-a-Service, starting off with small pilots and scaling up from there. Most of these engagements will start with an overall roadmap, and then proceed to move individual functions into an As-a-Service model. The first implementations will likely be in non-critical business areas, where a safe bet can show success and win over senior and middle management. By the end of 2016, these processes will have grown in sophistication as analytics and automation strategies gradually blend into daily approaches to enhance their effectiveness.
The role of the As-a-Service provider will also change accordingly. As-a-Service is far more fluid than traditional outsourcing models where buyers were generally locked into long-term contracts. Providers will need to demonstrate world-class capabilities and then continue to demonstrate their value to maintain their relationships. Providers will position themselves more as consultants, advising and driving programs that reengineer and unravel processes, not just offer incremental improvements.