Connecting your business: Where do you draw the line in the ‘as-a-service' model?

Traditional companies are becoming more serious about following software companies’ lead and considering the ‘as-a-service’ model. Accenture’s global mobility lead Jim Bailey advises on whether to make the leap, and what obstacles your firm may face.

“The as-a-service path is the right one to be exploring,” Bailey says.

“But is a car manufacturer in the business of making cars of providing a transportation service?”

As firms pursue the Internet of Things (IoT) and mobile, digital business values, the lines are becoming increasingly blurred, Bailey says, and striking a balance between compromising your USP and your shareholders and laying groundwork for your future profitability through the IoT is hard.

“The as-a-service question is applicable to many different industries but the key is to question what the impact on the existing model is and whether a firm can continue to be profitable, and acuitive, as a service model.”

Bailey joined Accenture in 1988 and has worked across financial services, communications media and technology and products. Promoted to global managing director for Accenture Mobility in January, He is responsible for advancing the firm’s mobility strategy, sales, offering development, asset management, alliance relationships, and practice building to capture new market opportunities.

Many of his clients are thinking about a move to an ‘as-a-service’ model “really seriously”, but he advises them to consider what their architecture is and how that will transition into the service-based world without disrupting shareholders.

Michelin, Rolls-Royce and General Electric (GE) are examples of firms that have connected their hardware and transitioned to this service-orientated model.

Michelin offers a pricing model where fleet managers pay for tyres on a mile-driven basis. Similarly, Rolls-Royce and General Electric have moved, or are edging toward, preventative maintenance and aircraft fleet optimisation, as well as usage-based fees.

‘Holistically digital’

The IoT is an extension of the buzz that has surrounded ‘mobile’ for several years. But Bailey assures ComputerworldUK that “the hype is real. Mobility is growing geometrically but IoT is growing hyper exponentially.”

Being a digital business is not about appointing a chief digital officer and throwing money behind an app, but becoming a wholly digital company – which can open up new service-style revenue streams.

While moving toward digital, firms’ biggest barrier is a cultural mindset, Bailey warns.

“How do you ensure that the organisation is not just layering ‘digital’ throughout the corporate stack. You need to incorporate it throughout and re-think how business is being conducted.”

“Not too long ago mobility projects would be relatively modest in scale, and now we are seeing enterprises undertake hundreds of millions of dollar digital programs to deal with these issues.

“It’s not about just writing a mobile killer app, but making sure the rest of the business is architected in a way to take advantage of some of that new thinking and capabilities.”

Who will drive customer relationships if you partner with a tech firm to connect your product?

The transportation industry has been the most progressive in transitioning to a digital business, Bailey says. This includes cars, freight, trucks, trains and plane manufacturers and retailers.

But there is a tension between the Original Equipment Manufacturers (OEMs), the vehicle brands and the tech firm that is creeping into the dashboard, he adds.

A major buying decision for consumers is now the on-board technology, and compatibility with their smartphone, market research shows.

“It used to be cup holders,” Bailey muses. “It is no longer anything to do with the automotive engineering but the role of technology in the car.”

There is a dynamic emerging where carmakers want to own their customer relationships and learn more about their drivers. Renault, for example, underwent a global CRM implementation of Salesforce that will connect it to dealerships so it can get a more holistic view of its drivers. But technology firms, like Apple, which are creating dashboard infotainment systems, are after the same data goldmine.

“If you are a technology provider you might view a car as an aluminium skin that wraps your technology platform.

“You might say that car manufacturers should be wary of those sorts of tech firm offerings, what you might be doing is seeding that customer relationship more toward the technology provider.

“It will be consumer driven. Automotive companies are in the business to sell cars, and they are going to contain the features that consumers have, whether those are automotive features or tech features.”

Apple's CarPlay dashboard Credit: Apple

'Like VHS vs Betamax'

Several groups of vendors, consultants and businesses have joined forces to accelerate certain standards – but often the same names appear to be supporting different standards, which may hamper one breakthrough technical adoption.

Bailey says that Accenture sits on various consortia because ultimately, market choice will dictate technical standards. Therefore firms need to be clever about investing in, or committing to certain technical features or firms as part of their IoT strategy.

“It’s a bit like the VHS versus Betamax dynamic. The reason VHS became a dominant standard is because it ended up in more homes. Then Blu-ray took over DVDs because it won out in the marketplace. Is it the quality of the standard or the success of the players in widespread adoption? I imagine the Internet of Things will operate in that way.

“Whichever standard, or subset of standards that the majority of devices use will be the standard that wins.”

Copyright © 2015 IDG Communications, Inc.

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