Everything as a Service (XaaS)!

Over last decade, most of the successful technology companies have transitioned from delivering functionality and value via Products to delivering them via Services – essentially transitioning from building products to building services. While there was always robust services sector in the economy, the technology companies historically delivered mostly products. Services was more of after-sales process of consulting, configuring, deployment, and maintenance. Tremendous fortunes were made by delivering extremely complex technical products that needed armies of specialists to deploy, configure and customize. Many a times, customers just gave up and wasted immense amount of money on unused software licenses and hardware. Many hardware and software vendors, integration and consulting companies made great fortunes.

The rise of cloud computing and delivering technology as a fully managed service has changed this. Let us take a look at how things were Prior to the rise of cloud computing. Most of the corporations relied on their internal IT groups and armies of consultants and contractors to build or buy & configure applications and services. The IT groups spent years building or customization applications for various corporate functions such as Sales, Marketing, Finance, HR, collaboration, and communication etc. They also used a few external services like Credit card Payments, Tax services, Mapping, background checks etc. These were mostly integrated via API. Infrastructure was predominantly built and hosted in-house Data centers or co-location facilities. Technology vendors delivered most of the functionality as products or packaged applications. It was very common for an ERP project to run for 1-3 years and failures rate of these projects were very high as well. Billions of dollars were spent trying to configure, deploy and operate complex technological platforms. Oracle, SAP, Microsoft, RedHat, VMWare, IBM etc. provided some of the core software platforms like OS, Virtualization, Databases, Middles ware, Monitoring platforms,  Cisco, HP, Dell, EMC, NetApp, Hitachi, IBM etc. provided the custom-built hardware platforms. Projects routinely ran for years before delivering any meaningful value. Many just failed. Corporate Technology delivery was very complex, and the vendor ecosystem made fortunes due to the complexity. Compare this to how we purchased and used other things like Car, Phone and other day to products that are practically ready to use and deliver the value the moment you purchase them. While corporate technology is quite sophisticated, some of the complexity was unwarranted.

Financially the model was very capital intensive. Data centers, network equipment, servers, storage, , software licenses costs millions. Every contract was custom contract with no price transparency. Every vendor told you that you are receiving their best price and it is 90%+ discount! The SKU list were so complex that some so-called industry experts were required to just understand what is being sold to you. It took armies to negotiate and structure contract. Given the time required to deploy the technologies, you mostly lost more than 50% of the value you paid for.

Then came cloud and its famous delivery models of IaaS, PaaS, and SaaS. It changed everything! It made people realize how simple it can be to consume technology and they should not just accept the fact that their development teams take years to deliver common business functionality. SaaS and Cloud delivered instant value. You could get a working environment with the right software installed in a few minutes. Convenience and ease of use became business advantage. Pay as you go, full automation with API, rich marketplace commanded a premium. Most of the technology delivery models are shifting to services model. Those that are not are fighting for their survival.

So how does a product become a service. Let us explore what differentiates a service from a product. What makes a service a service? This is important to understand as there are lots of cases where existing products are being rebranded as services – but they truly are not services.

There are some very important aspects of delivering service:

·        On Demand Provisioning: Services are typically provisioned on demand.

·        Self-service: Services are acquired and managed in self-service mode. There is tremendous amount of automation to make it easy to provision, use and manage them in self-service mode.

·        Metering and billing: Services are typically metered and billed at a granular level. You pay for what you use and there is full transparency on usage and billing data. While you can negotiate a long-term contract for better economics, it is usually not required for a small project/experimentation.

·        Automatable: Another important aspect is automation. Services are built on API-first principle and enable full consumption and life cycle automation.

·        Elasticity: The provider of the service manages the capacity and allows easy expansion or contraction of the capacity.  

·        Fully managed: Depending on the type of services, there is clear boundary and understanding of what the service provider will manage vs. what the consumer of the service will. The trend is to move up the stack and deliver fully managed services in SaaS mode.

While a product is predominantly about functionality, a service is a combination of functional and non-functional aspects. In fact, the non-functional aspects of availability, performance, elasticity, useability, resilience and always on, are as important as the product functionality itself. Services like Google search, Facebook, GMAIL etc. have set a new bar for customer expectation. Always on, high performance, infinite scale is the name of the game!

The following is a good simple way to illustrate how a product becomes a service.

To build a great service you obviously need very robust functionality but also need a very strong underlying utility platform of deployment, hosting and runtime services - Platform that allows programmatic instantiation of standardized network, compute, storage, databases, and middleware technologies along with standard authentication, authorization, logging , observability, monitoring and incident management capabilities. These services are commonly referred to IaaS and PaaS and carry the heavy burden to make developer’s job easy – developer can focus on experience and functionality. The hosting platform can be a public cloud or if there is enough scale and expertise a private on-prem cloud that uses the cloud paradigm to deliver the standardized set of services.

The low cost of consumption due to pay as you go capabilities and the ability to stich almost infinite array of pre-built utility services has led to tremendous innovation. The cost of experimentation has decreased and the time to value has shrunk significantly. It has disrupted huge industries including ,ironically, the tech industry itself. Many new tech giants are born in the last two decades. Communication and collaboration, financial, Commerce, entertainment and retail industries have been reimagined. Healthcare, transportation, and energy are ripe for disruption. Tremendous amount of inefficiencies are driven out of the system leading to very high growth and productivity without inflation. Probably the best stretch of productivity boom in last 100 years and we are not done yet!