Tuesday, August 21, 2018

Everything as a Service is a Great Notion; How to Service Providers Make Sense of It?

It probably does not help communications service providers much that some believe the future of business is "subscriptions," not products as such. After all, that is what "service" providers already do.

The notion is more useful for other businesses that traditionally sell "products." The shift from shrink-wrapped enterprise software to cloud-based subscriptions obvious makes sense to software industry suppliers. How well, and how extensively it works in other industries will have to be worked out.

Internet service providers, telcos, cable companies, satellite service providers and other "service" providing entities will have to work much harder to figure out what this might mean.

To be sure, there are other ways to characterize the shift: product focus to customer focus; linear to interactive and dynamic relationships; product to service; products or ownership  to outcomes; one-time revenue to recurring revenue; owning to renting, as described in Subscribed.

Of course, communications service providers have to figure out what to do if their core business always has been “services” rather than “products,” using rather than owning, recurring revenue rather than one-time product sales.

That is why “everything as a service” possibly is more challenging to apply in the communications business, as in the airline, some media or content and many other “services” companies.

“X” as a service might portend bigger business model changes for the auto industry, which always has sold cars (products), as some big auto companies might--or will-transition to a focus on being “transportation” companies, possibly combining many modes as a seamless offer (cars, trains, planes, local transit, lodging, other amenities).

Perhaps you have pondered the phrase “communications as a service,” used to describe enterprise or business hosted voice services. It works as a way of describing hosted voice rather than ownership of a private branch exchange (business phone system).

It is almost nonsensical as applied to consumer services, which always are services.

It perhaps is obvious to former product suppliers in the computing, application and other intangible product areas that the shift to cloud-based software, from seat licenses, also means a shift to recurring revenue rather than sales of shrink-wrapped software. That is the big “shift to subscriptions” thesis.

How subscriptions (renting rather than owning; on-demand usage rather than ownership; monetizing latent resources) apply to physical products continues to develop). In a sense, Airbnb and Uber make more efficient use of latent resources, with digital interfaces, but still are similar to taking a taxi ride or renting a hotel room.

But there also are other nuances. The big shift described in Subscribed is that traditional product suppliers do not really have much actual knowledge about their actual users. “Subscription companies know their customers,” it is said, have “ongoing one-on-one relationships” with their customers.

Few communications suppliers would agree too much with that argument. Communications services are sold to customers as subscriptions, but there is little one-to-one relationship, little serious knowledge of end user behavior and preferences beyond the use of communications of various types at various places and times.

Nor is it too clear how communications service providers, in their communications roles, can create more one-to-one relationship intensity. That might arguably be true for service provider owned content services, to customize and target advertising. But that is a function of the media role, not the communications role, as such.

In fact, traditional service providers might well find that there is not so much value to be created by intensifying the “subscription” business model itself. What might matter is the ability to bundle products (sensors) with analytics, to create information products to sell to third parties. In other words, creating cross-selling and upselling opportunities.

But that is not the same as saying there are many easy ways to create more “one-on-one intimacy with customers” in the communications sphere, per se.  

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