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After publishing three books on the topic of migrating a technology business model from selling technology as an asset to selling technology as a service, here is a common question we receive from the leadership teams of technology companies:
“So, exactly how long does it take for a company to navigate this business model transformation?”
“All up and in, anywhere from five to ten years.”
The common reaction from executives:
“That is a non-starter for us! Our investors will never tolerate taking that long.” And, "Why does it take so long?”
Nobody likes our answer. But our answer is based on data. Our answer is based on studying companies that are both succeeding and failing at what TSIA calls “the XaaS transformation.” Our answer is based on reality.
Within the XaaS transformation, there are three specific transformations that must eventually occur:
Within these three transformations, there are at least seven intensive workstreams that impact every function within the company:
For a more thorough review of these workstreams, read The XaaS Transformation.
There are numerous company case studies on the XaaS transformation that TSIA has researched and documented over the past several years. But just this week, Doug Merritt, the CEO of Splunk, was interviewed on this very topic by Christopher Lochhead, a former colleague of one of our TSIA researchers:
In this excellent interview, the following points are made regarding successful XaaS business model transformation:
Even though Splunk’s profitability is being impacted by this transformation, investors are rewarding the progress:
The realities discussed in this interview are completely aligned with the guidance we have been giving technology companies for several years. In the book The XaaS Playbook, we define the four phases of swallowing this transformation fish. In a 2018 paper, we provided members with updated examples: Update: Swallowing the Fish.
Again, nobody likes the answer we give to this question. But visionary, effective CEOs like Mr. Merritt are earning their salaries by successfully navigating their companies through this critical transformation.
Post Date: June 12, 2020
Thomas Lah is executive director and executive vice president of TSIA. Since 1996, he has used his incisive analysis, strategic thinking, and creative solutions to help some of the world’s largest technology companies improve the efficiency of their daily operations. He has authored several books, including, Bridging the Services Chasm (2009), Consumption Economics (2011), B4B (2013), and Technology-as-a-Service Playbook: How to Grow a Profitable Subscription Business (2016).
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The Technology & Services Industry Association (TSIA) is dedicated to helping technology and services organizations large and small grow and advance in the technology industry. Find out how you can achieve success, too. Call us at (858) 674-5491 or we can call you.