Customers demanding to acquire IT-as-a-service (ITaaS) challenges most traditional IT suppliers, across all channel delivery partners. Remaining relevant, as they try to re-engineer their business to the cloud ITaaS model, challenges their conventional thinking about how to differentiate and add value, let alone compete on many other levels. The impacts of this shift are far reaching for many areas of the business as the transformation from transaction to subscription models causes sea changes to legacy business models. In fact, as this shift continues, and casts its wide net, few parts of the supplier ecosystem will remain unaffected. The impact to go to market partners will vary based on the partner models.
Let’s begin with the internal transformation. A business model shift of any magnitude if not well thought out, planned, and executed can and will cause seismic waves throughout the organization. Boiling this down to the simplest and perhaps highest level for some, is cash flow. In a transactional business, payment in full is made in a designated period of time, typically one payment, ex. net 30, net 60… In a subscription model payments may be extended over the length of the service agreement years and remitted monthly. The cadence of cash flow and operationalizing it are completely different from the current model; the period of time to get to a cash neutral position can be about 19 months. Other new rules apply as well; for example how are sales people compensated?
There are some differences between infrastructure, software and services suppliers. All need to make changes to adapt, grow, and profit. Many suppliers such as IBM, HPE, HP Inc & Dell have been working to align with the new model. Further proof of change in the market landscape is the rise of “Born in the Cloud” players and services such as Amazon, Digital Ocean, Rackspace to name a few in the IaaS space, and thousands more in the SaaS market. Suppliers such as Microsoft are re-engineering their businesses to support cloud delivery of IT solutions with Azure. Azure is cloud, but Microsoft is not born in the cloud. Oracle is making changes albeit a bit reluctantly to the cloud. They are trying to ride the wave of the cloud’s growing market share, and at the same time learn to compete in the new economy against companies who are unsaddled with legacy business models.