Tuesday, May 10, 2016

Transforming traditional businesses to as-a-service model

The software industry has been transforming itself with business models like SaaS (Software as a Service), PaaS (Platform as a Service), IaaS (Infrastructure as a Service) etc… In fact, the class and the abbreviations associated with as-a-service model are ever increasing in this industry. There, clearly, are benefits to this model that has made it attractive, disruptive, and literally a game changing paradigm. For example, building a tech startup 10 years back would have started with a fat check to one of HP, Dell or IBM for servers even before the first line of code could be written. Today, it is a monthly bill of few hundred dollars to start with. You could build a business running on state of the art infrastructure provided by the cloud providers like AWS, IBM and Google providing better quality of service(QoS) than you could yourself do.

This proposition of being able to pay-as-you-go (PAYG) has ushered tremendous growth in any industry this model has been applied to. You don't have to look far. Uber is an excellent example of using car as a service. It is better than owning a car if you live in a city.  You do not need to do much math taking in account the parking fees, cost of garage, maintenance, insurance and so own. Isn’t it better than having a car, maintaining it and then keeping it clean and washed vs. just hoping in a car when needed?

Just like software industry has been transformed by the SaaS model, the same business paradigm applies to many traditional businesses. Why not provide everything that the consumers and businesses use today, as a service? How is an equipment or a capital infrastructure that need to be maintained and depreciated different from the servers and the routers? As a service model could be applied to many traditional services that consumers and businesses use like water heating, water filtration, HVAC etc…

Fig 1: Economic value creation by adopting as-a-service model to any traditional business

Before we get into the question of how the transformation of these services will benefit the consumer of these services, we must appreciate the  fact that the benefits are not one sided. As-a-Service model is a win-win for providers as well as the consumers of the service. When we move from buying computer servers and hardware to renting the compute and storage from likes of AWS and Google, we are simply transitioning to a better model that creates advantage for AWS and Google as well as benefits and cost reduction for the consumer of the compute and storage services. Yes, of course there is a disruption and the newer players will dominate the market replacing the incumbent.  This is the beauty of innovation and capitalism that we always move to a better state driven by the economic forces.

This is also an alarm and a call to action to the providers of the utility services to quickly transform themselves into as-a-service model and not be left behind. Luckily for them, they don't have to look far. They can learn from the technology sector and adopt the business models as well as the tools to make the transformation economically viable and strategically competitive.

What are the key transformations for change from “sell and provide support” to “as-a-service” model?  For the sake of discussion, lets take an example of a water filtration, water heater or HVAC business.  All of these share similar traits along with many other such businesses. Any of these businesses will sell a capital good or an equipment and will then sell a support plan providing maintenance and upkeep. These businesses will try to up-sell, and make sure they replace or upgrade the equipment in time to generate new revenue as well as provide good performance to the consumer. 

First key transformation that these businesses need is to make the equipments “smart”. With IoT (Internet of Things), this is not a difficult task. You need to interface the electrical/electronics to a microprocessor/microcontroller combination which is connected to the internet. This way you can capture the field data from the equipments and also be able to remotely interact with them.

Second transformation is to have a platform or mechanism that can enable the “smarts” on the equipment to interact with the rest of the world. You need a platform with core capability to enable integration between diverse devices to send and receive data and  enable command and control  with the software systems on cloud, SaaS or your own data centers.

The third transformation is the operations systems, analytics engines and the business strategy to enable the transformation from  a capital oriented business to as-a-service model. You are no longer water heater provider. You are now provider of hot water. You are no longer seller of water filtration units. You are provider of pure, crisp. filtered water.  This is a complete mindset change for the business as well as the customer. The operations systems need to collect measurements from the smart devices. The  analytic systems will build the models that would drive the pricing and the marketing strategy. Some of the key expectations from as-as-service operating system should be:

    1. Monitoring of health and operational state of the remote equipments 
    2. Ability to remotely control, upgrade or run deep diagnostics scans 
    3. Ability to track usage of output or service/benefit, say filtered water as well as input or cost say electricity
    4. Ability to predict the Time to Maintenance(TTM)  and Time to Failure(TTF) 
    5. Identification and pursuit of up-sell opportunity 

Monitoring of health, diagnostics and remote management is needed to provide superior Quality of Service(QoS) to the customer. This will induce the customers to change to new as-a-service model vs the traditional buy and operate model. 

Tracking of usage of the output and the inputs needed for the service operations will provide the utility provider needed data to correctly bill the customer as well as create economically viable and attractive pricing plans. Effective measurement and smart analytics is required to be successful with the billing and the pricing in this new business model.

The analytics on the measurements of usage, operations and  equipment health will provide predictive models for proactive maintenance. It will predict when to replace the equipment before it fails causing interruption and inconvenience to customer. It will also offers opportunities to up-sell better service plans based on usage patterns and the identification of customer needs.

If you are now thinking, it is all good but how do I make it happen, then we are here to help. At RoboMQ we have build a complete Internet of Things(IoT) and SaaS Integration Platform for helping businesses transform to as-a-service model. We support all devices and software systems to enable measurements, monitoring, remote diagnostics and building of analytics systems and models. We provide an enabler platform for your business to offer your customers an effective and profitable as-a-service model.  If you want to learn more or have us be your partner is this transformative journey, send me a note, visit out website or send an email to sales@robomq.io.

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