As-a-Service Business Operations and Transformation
TMT companies are switching to selling their offerings using as-a-service subscription and consumption models. It’s a seismic shift that can generate dramatically higher value – but which also requires profound change throughout the business. EY can help your TMT business achieve this transformation and navigate smoothly to its as-a-service future.
What EY can do for you
Across the world, TMT companies of all sizes and in all subsectors are changing how they go to market. The direction of travel? Away from selling products on a one-time or term-license basis – and toward selling solutions using subscription, consumption and outcome-based models.
Driven by demand
It’s a radical change of business model that’s being driven by one irresistible force: demand from customers. Gone are the days when enterprises would buy all the hardware and software products they needed, then build solutions in-house. Instead, these customers are now wanting to pay only for what they use – and to source vital capabilities in flexible ways that enable them to pivot their businesses at a high rate of change.
The challenge for TMT businesses is to meet this demand. And the vast majority are looking to do so. EY research shows that over 90% of tech companies are planning on shifting to subscription-based models.
Barriers to overcome
Planning this change is one thing, navigating it quite another. Only 15% say they’re fully prepared for the move to a subscription-based sales force. The biggest barriers identified by the subscription laggards are lack of skills (65%), budget (59%) and operating model (45%).
TMT companies need to overcome these hurdles and fast. The migration to as-a-service model, pioneered by cloud application providers and hyperscalers, is gathering pace and scope by the day. It now encompasses software, hardware, services and support. And the subscription model itself is also evolving, with monthly subs giving way to pricing based on usage and consumption. It is gaining popularity across industries right from life sciences to defense.
Major benefits on offer
Experience shows that businesses that successfully embrace subscriptions / consumption models realize major benefits – including better customer engagement, accelerated deployment and adoption of new capabilities, lower technical debt and more predictable revenue streams. All of this adds up to better business performance. Which is why stock market analysts now expect companies to have a strong subscriptions growth story, and may mark their stocks down if they don’t.
Converging from two directions
Little surprise then that TMT companies are moving at pace to subscriptions. And they’re converging on this model from two different directions:
- On one side, large and established hardware, software and media companies are looking to navigate the transition to as-a-service. Their biggest challenge? All the key components of their enterprise go-to-market approaches, business processes, sales and channel strategies, commercial models, supply chain, IT systems, customer and tech support, and more – were never designed for a subscription model. For these businesses, the migration requires a fundamental transformation: a sweeping front-to-back change that includes their culture, product strategy, architecture, business and operating model, as well as their underlying business and technology capabilities. TMT companies rooted in driving traditional business models are finding this transformation difficult and are looking to accelerate it. Some have tried to do this by acquiring smaller players that are already selling subscriptions – but they’ve often struggled to integrate and scale up the acquired business’s operations at sufficient pace.
- The other grouping of TMT companies is made up of smaller and start-up businesses, usually with native cloud and cloud-enabled solutions as their core offering. They already have a subscription “flavor” in their business models. For them, the challenge is how to scale up to their next phase of development and growth, including product-led, channel-led and self-serve models. At root, these companies are transitioning from a start-up mindset to that of a large organization with established policies, processes, capabilities and technical infrastructure to help them operate at scale. They often struggle with developing new go-to-market strategies, given their lack of experience in leveraging new channels to promote and sell their offerings.
Realizing the opportunity
Our As-a-Service Business Operations and Transformation offering is designed from the ground up to help both groups of TMT companies realize the full potential of subscriptions. Drawing on EY’s unsurpassed breadth and depth of experience and knowledge, our holistic solution combines methods, frameworks, normative models, pre-packed technology deployment templates and managed services, all geared and aligned to support the transition to subscription models.
By integrating these elements, our offering spans client’s end-to-end needs – from defining business and go-to-market strategies, to enabling the right operating model, capabilities stack and technology infrastructure. Specific categories within the solution include:
- Strategy and business readiness – industry-proven methods and frameworks to define go-to-market strategy and business models
- Operating model definition – normative models to accelerate the definition of the optimal as-a-service operating model, from customer experience to key capabilities
- Technology development and rollout – predefined industry solution templates to enable accelerated transformation
- Managed services to drive as-a-service operations – from enterprise agreements and deal desk operations to customer usage analytics and licensing management
Supporting your next phase of development
Your TMT business – whatever its stage of development and maturity – is already leading the way with outstanding solutions for your customers. We can support and enable your next phase of development as a subscription-powered enterprise by helping you establish the right strategy and roadmap, accelerate your recurring revenue growth, and increase your market valuation by shifting analysts’ perceptions from a products to platform company.
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