Where the Cloud Meets Reality: Operationally Enabling the Growth of New Business

The rapid rise of cloud computing is enabling a wide array of new business models, the most prominent of which are software-as-a-service (SaaS), platform-as-a-service (PaaS), and infrastructure-as-a-service (IaaS).

Indeed, many technology industry analysts have begun using the generic term “X”-as-a-service (XaaS) to describe a future in which almost anything could be delivered as a service.

To compete in this XaaS-driven world, technology companies must significantly improve their understanding and management of the relationship between their “business models” and their “operating models.” Specifically, successful companies will need to answer several critical questions:

• How many, business models will I need to meet customer needs and my company’s growth objectives?

• How many, and what kinds of, operating models will I need to support that business model portfolio?

• What are the underlying critical capabilities to get right for these new operating models?

• How do I allocate my budget, people and overall enterprise effort between supporting our existing business versus building the capabilities required to run the new businesses?

While these may sound like obvious questions, the answers are far from simple. That’s why Accenture has embarked on a significant research effort to explore the challenges facing technology companies as they confront an XaaS-driven future. As part of our research, we will study companies across several industries that have faced a similar crossroads, as well as leading technology companies that already are taking steps to address the operational complexity challenge posed by the array of XaaS models.

Drawing on the experiences of these organizations—as well as on Accenture’s collective work in helping companies implement new operating models and large-scale enterprise transformations—we plan to create both a strategic framework and pragmatic methodology that can help technology companies find the answers to these critical questions.

Other articles in this series:

• Where the Cloud Meets Reality: Scaling to Succeed in New Business Models

Learn more about Accenture’s research for the Electronics and High Tech Industry

The concept of XaaS no longer is the stuff of dreams or futuristic thinking.  It’s real and an increasingly influential part of the technology world, as the growth in XaaS and other cloud-based business models can attest. 

Despite this growth, it is unlikely traditional technology business models will disappear anytime soon.  On one hand, the traditional licensed software model must remain a critical part of software companies’ offering mix for the foreseeable future.  But on the other hand, the market growth is predominantly coming from SaaS, so virtually every software company CEO is planning to have both a traditional licensed software and a SaaS business model in the future.

What’s the implication of these trends?  One of the most obvious—and challenging—implications is the need for technology companies to operate a much wider array of business models in the future. Historically, most technology companies have had only one or two business models, which was sufficient for a business that approached its customers as a large, single, homogenous market.  Going forward, technology companies will need a portfolio of business models—each with different revenue streams, go-to-market approaches and operational requirements—to accommodate a diversity of customer needs and purchasing preferences. 

We fully expect that most of the industry’s largest players will require at least five different business models to maintain their leadership positions, and that virtually all technology companies will need to expand beyond their historic, monolithic model.

Given the amount of change—and investment—needed for a technology company to incorporate XaaS as part of its business, it’s understandable that organizations would be unsure of where to begin.  But begin they must, since fully operationalizing these new capabilities can take years.

Technology companies should start by conducting a diagnostic and blueprint development effort to determine the future requirements of their business. Some of the key outcomes of such an effort should include:

• Identifying the number of business models the company will have in the near future.
  
  
• Deciding on the operating model approach to support these business models and mapping each business model to its operating model approach.
  
  
• Developing a blueprint of the changes to key business processes, people and technology required.
  
  
• Estimating the business benefits from moving to the proper number of operating models and to building any new capabilities.
  
  
• Creating a timeline and migration path to adopt the new operating model approach.
  
  
• Devising an appropriate governance model for making key trade-off decisions.

For most companies, we expect this simple diagnostic will reveal a major concern that the current operations are simply incapable of supporting new business model growth.  If this is the case, the next step should be developing a detailed design of the processes, people and technology changes required to support the expected new needs of the business.