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A Golden Opportunity: The Shift to Services

Ho Seong Kim, ASEAN Communication, Media and High Tech (CMT) Lead, Accenture | May 12, 2016
Embracing the As-a-Service model will impact most corporate functions including sales and marketing, research and development, finance and administration, customer support and logistics.

This vendor-written piece has been edited by Executive Networks Media to eliminate product promotion, but readers should note it will likely favour the submitter's approach.

It has become critical that traditional hardware, software and platform companies deliver their offerings as services to business customers and consumers.

This will be a huge strategic and financial undertaking for many high-tech companies. If well executed, they will be empowered to provide service offerings faster, deliver more personalised services, disrupt and enter new markets as well as generate a consistent stream of higher revenues and profits.

As-a-Service business model

"As-a-Service" means delivering value through on-demand, highly scalable, plug-and-play services. In the Software As-a-Service business, for example, instead of manufacturing software on disks and shipping them to brick and mortar stores, that same software can be placed in the cloud. Customers can subscribe to the service by paying a subscription fee. By doing so, companies no longer have to maintain costly onsite computer servers or grapple with multiple software versions.

Though software and content industries have already moved in this direction, many hardware companies are just getting started.

This is a problem. But it is also an opportunity.

Most of their product features and functionalities are defined by the software embedded on top of the hardware. Using this new model, companies can roll out new functions after the product has been taken into operations.

Facing a sluggish high-tech device market, providing value-added services offers new opportunities and revenue streams critical for their near- and long-term success. Accenture has released a new report - "Scaling to Succeed in New Business Models" - about this transition.

Underestimating costs

Accenture has learned that many underestimate how much this will cost. Embracing the As-a-Service model will impact most corporate functions including sales and marketing, research and development, finance and administration, customer support and logistics.

Many hardware companies will be challenged to catch formidable companies already well entrenched in this business model such as Amazon, Facebook and Google. In order to offset declines in market growth and compete in this expanding and lucrative market, these hardware companies have to make this quick shift.

Driving the move to services

Widespread and multi-dimensional disruption is the key factor that makes the adoption of a services model necessary for these companies. Accenture identifies three disruptions of paramount importance:

  • Disruption #1: Internet and Social Media

High-tech companies that operate on pure digital platforms have transformed their markets and are continually entering and disrupting adjacent markets. Providing news- as-a-service, music-as-a-service, and video-as-a-service are prime examples. Operating as all-digital businesses, they gain unlimited scale and versatility to launch new offerings quickly at minimal costs. As such, they thrive in established markets. To compete, the only viable option for a traditional high-tech player is to embrace the As-a-Service model.

  • Disruption #2: Consumer Technology Products Become Platforms

 

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