In the notoriously hyper-competitive high-tech industry, companies are continually on the lookout for new ways to differentiate themselves and grow. One promising growth area that’s currently getting a lot of attention from high-tech executives is “as-a-Service.”
As we’ve discussed in previous blogs, high-tech companies are looking to offer more core products as-a-Service instead of selling physical products outright. This could be via subscriptions (e.g., monthly or yearly), or services wrapped around physical products to add desirable functionality, or some other model that generates a recurring revenue stream. This movement is picking up momentum across the high-tech industry, from semiconductor companies to device manufacturers.
A recent, and unexpected, entrant in this space is General Motors. The automaker’s using its Ultifi platform for the company’s electric vehicles to give owners a unique ID number that allows them to set preferences, book services, get software updates, and enjoy tailored features such as streaming services and other apps. The goal is to deliver a more personalized service on top of the core product—cars and trucks—and make money on stronger customer experiences and relationships over the length of vehicle ownership.
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Another emerging hotbed for as-a-Service offering is smart buildings and smart cities. Many governments around the world are looking into how to give citizens and businesses greater access to insights into their programs (take, for example, the massive roll-out of COVID-19 dashboards by cities).
Some are also now making investments in tracking other data points via the Internet of Things (for example, embedding sensors in traffic lights).
A big focus area is monitoring the energy efficiency of buildings, which has spawned new aaS offerings around “energy efficiency as a service.” According to the U.S. Department of Energy, “Efficiency as a service is a pay-for-performance, off-balance sheet financing solution that allows customers to implement energy and water efficiency projects with no upfront capital expenditure.” Customers are relieved of the out-of-pocket expense and the ongoing maintenance and upgrade of equipment, and providers lock in a recurring revenue stream—based on the data the equipment generates—while more effectively managing resource use.
Johnson Controls is one provider getting into the smart building game in a big way. The company combines Microsoft Azure’s IoT solution accelerators with its GLAS smart thermostat to give building owners remote access through web and mobile apps so they can monitor and control features of buildings’ heating and cooling system. This is just one example of Johnson Controls’ ambition to create the largest intelligent building company in the world.
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“Efficiency as a service is a pay-for-performance, off-balance sheet financing solution that allows customers to implement energy and water efficiency projects with no upfront capital expenditure.”
U.S. Department of Energy
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The transition to as-a-Service models has been gaining steam for some time. But it’s only going to accelerate now as 5G networks become more pervasive. With their lightning-quick speed, ultra-low latency, and massive capacity, 5G networks make possible new and more types of as-a-Service models that weren’t possible with 4G.
Initial deployment of 5G has been slow, with only 4% of mobile connections using 5G in 2021. That’s expected to rise to 14% in 2021 and skyrocket to 50% by 2025. Consumers are among the early beneficiaries, enjoying much faster speeds on their devices. But the truly big wave will be business driven.
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Corporate executives believe that 5G will have a ‘Significant’ effect on their business.
Corporate executives believe that 5G will have a ‘Revolutionary’ effect on their business.
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In a recent Accenture survey, 8 in 10 corporate executives believe 5G will have a "significant effect on their business"; 57% think it’ll be “revolutionary.” As 5G becomes more pervasive, we expect more companies to see the opportunities the technology presents to collect and use data in new ways to deliver unique experiences to customers. For example, many retailers are experimenting with 5G connectivity in their stores, to power new ad experiences and collect more data on consumers’ in-store preferences. Manufacturing and engineering organizations are using 5G to connect machines and equipment more effectively to monitor uptime and productivity in their plants. Others are thinking of ways to collect live feeds from videos and turn that into usable data. With an expected doubling down on 5G roll-out and investment this year, the companies that innovate best and go to market fastest will reap the benefits of delivering powerful, compelling, and differentiating customer experiences.
One example that illustrates 5G’s promise is the work Accenture is doing with AT&T to build a private 5G network for Phillips 66. The initiative was spurred by the need to address performance gaps in the existing public cellular network near one of Phillips 66’s refineries in Louisiana. This private network—which includes dedicated cell sites and core network servers—is designed to handle the company’s heavy use of mobile applications in its critical day-to-day refinery activities, such as completing inspection forms for oil distillation units and tracking capacity. In addition to closing current performance gaps, the private network could serve as the foundation for more pervasive connectivity across Phillips 66 that could open up a wide range of new cases based on edge computing and 5G.
The fact is, the one-two punch of as-a-Service and 5G is poised to revolutionize the high-tech industry, and it will be easy for companies to find themselves quickly behind if they’re slow to act. Everyone should at least be asking themselves, right now, what kind of new use cases 5G makes possible for their business, and how new 5G-enabled networks can help them reposition the way they sell products and go to market to enhance the value their products and services deliver to customers. It’s really the wave of future growth for the industry, and companies simply can’t afford to miss it.
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