The services industry has expanded significantly over the past several decades, and now it stands at 70% of the global economy. This worldwide trend is expected to continue, and many companies believe that by 2020, they will be primarily competing on service level. This major shift represents a full-scale restructuring of the economy, representing both opportunities and threats for companies that manufacture and sell tech products. Manufacturers of industrial equipment, computing devices, and scientific instruments are expected to continue seeing their margins shrink compared to the relatively prosperous services sector. It is no wonder that such traditional manufacturing companies are now searching for a service strategy. Take the example of Netflix, which experienced a major database corruption in 2008. This event made it impossible for the company to ship DVDs to members for three days. This convinced Netflix to withdraw from vertical-scaling and be susceptible to single points of failure like service centers and shift towards more reliable, horizontal-scaling that is involved in cloud-based services.

Now Netflix’s technology stack is completely cloud-based, and it has allowed the company to scale its operations in over 130 countries across the world while providing data-intensive services. Several other companies have also already made the shift, which includes Amazon, Airbnb, Adobe and Comcast, etc. These forward-thinking companies are all utilizing an operating model known as Technology-as-a-Service (TaaS). This operating model threatens to replace old-fashioned, hardware-based networking. The growing “commoditization trap” is seemingly impossible to escape for hardware companies without a product strategy such as TaaS. TaaS represents the growing dominance of services and disruptive innovations in software, which are the two main trends shaping all tech businesses in the next decade. So, let us discuss what TaaS is and what it presents for the future of the tech sector.

What is Technology-as-a-Service?

With the emergence of cloud computing on the scene, more and more users are considering thinking outside of the box of on-premises technology. What TaaS essentially means is that through the use of cloud-based services, users can transfer all of those processes being handled onsite to the internet. This is obviously a serious undertaking, which involves all stakeholders and entails transferring all your vital data to the cloud, training your employees, and getting clients onboard. This is where TaaS can help customers make the shift to the cloud with the help of IT departments or IT service providers. Your tech services then become a mere maintenance expense like a utility bill. You get all your data and tech needs met and supported by upgrades and professional help while running your business without hefty infrastructure or massive capital expenditure. TaaS providers develop and own proprietary technologies, which means that users can benefit from new updates and improvements as soon as they arrive. By using a TaaS provider, companies can utilize services without full ownership of the assets. Services can also be tailored for the customer or company’s specific needs. These may include privacy and exclusivity from the interference of other customers. TaaS is on-demand, which means that specific resources or functions can be tapped into whenever your business requires it. This also entails that services will only be charged when used, which means a big relief on the wallet when compared to owning and managing proprietary technology that has overhead and maintenance costs. TaaS services are usually delivered by a system involving devices or machines, data, software applications, people, and processes. This often means freedom from geographical location constraints and increased ease of scaling operations. Since TaaS is on-demand, the delivery of functions and services is rapidly responsive to changing business contexts.

How ‘TaaS’ can Benefit Companies and Customers

TaaS has created an amazing opportunity for both service providers and their customers. It allows customers to access technology and tech services on-demand, which means that clients don’t need to make hefty purchases of large technology assets. Avoiding the vast capital expenditure means that as needs may change, the access to services can be quickly and efficiently scaled up or down depending on the demand. Increasingly, businesses are already utilizing advances in technology that make TaaS possible. These include near-ubiquitous, high-speed optical fibers and broadband, simple payment solutions, affordable data storage, containerization, micro-services, and growing acceptance of subscription-based models. These changes have altogether meant that platforms and services can be fully moved out of office data centers and into reliable and efficient server centers that host the cloud. For companies that offer technology products, TaaS can benefit them by allowing the tech to move to the cloud. As buyer behaviors keep changing and customers are buying fewer off-the-shelf software products and instead relying on tech services that allow them to scale their specific usage with a low-cost of entry. Similarly, IT service providers can consider the TaaS model because it can offer them the ability to add features and send automatic updates to users, all the while capturing recurring revenue and making business more predictable. This represents a tremendous advantage for IT service providers who use TaaS in terms of increased flexibility and scalability.

‘TaaS’ Means Revamping Much of Your Business

Making the shift to a TaaS model is not easy for either customers or suppliers. If you want your company to migrate critical functions to TaaS, you will have to restructure your offering in order to take advantage of efficiency and cost gains that micro-services or containers may provide. Cloud providers such as Amazon Web Services and Microsoft Azure provide a sensible scale-out alternative to traditional data centers. Aside from this, you will also need to remodel your business from reduced redundancy and increased scalability. If you’re considering making the shift to a TaaS offering, note that your entire organization will be impacted, well beyond the IT and developer teams. It will affect the structuring and compensation of your sales team, and your finance team may have to adjust to new revenue recognition models. Your services team will also have to reshape its approach to solving customers’ problems. This will even affect your marketing team and its approach. Nevertheless, TaaS is expected to become the dominant model for commercial use of technology. More and more companies in diverse sectors such as solar and 3D printing are turning to TaaS to go to the market. Likewise, more established companies like Siemens and General Electric are converting their monitoring and diagnostics technologies into a TaaS model as services. This trend is expected to continue as more companies start recognizing the sensibility of TaaS and what it can offer them.

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