Unless you’ve been living under a rock, you’ve noticed the shift to managed services, shared services and the everything as a service model for procurement. This is a drastic shift for many organizations, especially if the accounting department prioritizes amortizing assets over a set period of time. While some companies lament this evolution of the procurement model, you will see this procurement model rapidly expand. Let’s cover some of the reasons why this model has become so popular. I believe there are two overarching themes that are driving this change: end users are asking for this model and suppliers prefer a predictable revenue stream. Let’s dive in!
- Wall Street: Investors prioritize residual revenue over one-time payments. Residual revenue is predictable, while one-time projects are volatile by nature. The “as a service” model allows suppliers and manufacturers to predict future revenue more accurately, which allows these organizations to appropriately invest in staffing, resources, product development and support. We’ve also seen a massive shift by Wall Street in which they moved the cheese from prioritizing revenue growth, to focusing on profitability and efficiency. As a Service allows organizations to do that.
- Cost-effectiveness: One of the main reasons for the shift towards service-based IT solutions is cost-effectiveness. Traditional IT solutions often required significant upfront investment in hardware, software, and infrastructure, which could be a significant barrier to entry for smaller businesses. By offering IT solutions as a service, providers can spread the cost over time, making them more affordable for businesses of all sizes. If your organization dislikes monthly payments, you can negotiate a payment structure that works for your business, such as monthly, annual or upfront payment terms. Suppliers are more likely to provide additional discounting if you opt for one of these payment structures.
- Flexibility: Another benefit of service-based IT solutions is flexibility. With traditional IT solutions, businesses were often locked into long-term contracts that could be difficult to change if their needs evolved. With service-based solutions, businesses can often scale up or down as needed, making it easier to adapt to changing business requirements. The focus on agility cannot be undervalued. For example, I rarely meet organizations that are good at capacity planning, because it’s an impossible task that depends on a multitude of variables outside of the control if the IT department. As a Service allows organizations to consume what they need when they need it, without being locked into an initial investment.
- Rapid Innovation: Service-based IT solutions are often delivered via the cloud, which allows providers to rapidly innovate and improve their offerings without disrupting the user experience. This means that businesses can benefit from the latest technology without having to invest in new hardware or software. The onboarding period for these solutions are often much faster than traditional deployments. Supply chain issues can also be alleviated with As a Service models.
- Ease of Use: Service-based IT solutions are often designed to be user-friendly and require minimal technical knowledge to use. This makes them accessible to businesses of all sizes and ensures that employees can quickly start using them without the need for extensive training.
- Staffing Needs: There is a massive shortage of talent in IT. There are far more open jobs than candidates, and the gap will not close soon. For example, there is a 78% gap between open cybersecurity positions and available resources. This is further compounded by remote work. In Alabama, salaries for cybersecurity positions lag far behind those of major urban areas, such as the Bay Area and New York. Resources based in the southeast commonly take WFH positions at higher rates, leaving local companies scrambling to fill these gaps. We will not overcome this obstacle in the next decade, so companies must adopt a shared services/as a service procurement model to meet their needs.
- Automate Redundant Tasks: As a Service models allow your internal resources to focus on driving the value proposition of your business, rather than focusing on maintenance and repetitive tasks. For example, there is a rapid movement to abandon premise-based datacenters. The ROI can be found by avoiding costly upddates to infrastructure, including cooling, power, generators, etc… But, the greatest value is in giving your resources their time back. It’s estimated that nearly 50% of IT resources time is spent on troubleshooting and maintenance; just keeping the lights on. Ask yourself, “Is that truly a good utilization of our time?” As a Service allows you to improve your business and retain staff because they’re not focusing on tasks that they dislike at a fraction of the rate of an FTE.
- Shared Resources: An FTE (full-time equivalent) is much more expensive than a shared service. As a Service allows your organization to take advantage of advanced resources, at a fraction of the rate you spend to onboard that resource as an FTE. To further that point, many organizations are unable to afford the salary of a cybersecurity engineer (insert any advanced position, such as DevOps), but you still have a need to secure your environment. It’s also been my experience that organizations often hire FTE’s that are not fully utilized. Meaning, you hire an FTE to a full-time position, but you don’t have enough work to keep the resource busy.
For the past six years I’ve focused on “as a service.” Years ago I recognized the gap in talent and the great need for shared services. In a leap of faith, I focused my core services on this procurement model and I’ve been shocked by how quickly the need has expanded. With that being said, we’re at the tip of the spear. As a Service is just getting started and you will continue to see solutions offered under this procurement model.
Perhaps you’re still unsure if as a service is right for you. Let’s schedule a consultation to review how it works, how your organization benefits, and how to build a ROI plan.
What about you? Are you seeing more reasons for the rise of as a service?
