As-a-service model gets mixed response

Consumption models are clearly changing, but the jury is still out over whether or not that necessarily translates into good news for the channel and customers.

Vendors have been pushing subscription services for a while and that has been accelerated by the coronavirus pandemic, but the issue received a mixed response at the Canalys Channels Forum.

Alastair Edwards, chief analyst at Canalys, urged caution about throwing all the weight behind an as-a-service approach.

“The world is changing clearly and cloud has reshaped things over the last six to eight months,” he said. “That has accelerated the thinking of some of the other infrastructure vendors, device vendors, and they see that customers are looking for new ways to consume in this current situation and, as a consequence, we are seeing strategies change from vendors like Dell, Cisco, HP and device vendors and others.

“But we feel also that there is a tendency to perhaps overplay that trend. The established vendors are looking to lose share and they are following where they think the market is going. To a certain extent, the market is going in that direction – but we also believe that this is partly a response to the current situation and there are still a lot of customers that don’t necessarily want to buy that way.”

Edwards added: “There is a danger if everything moves in that direction that it will miss some, or much of the way, that customers still want to consume IT. So it is very much a combination and you need to have a mix of both types of offer.”

He said some partners were being pressurised to take their business in that direction and vendors wanted it to go that way, but there had to be a balance.

Emma De Sousa, svp EMEA at Insight, said the majority of offerings from vendors were still in their infancy, but were being pitched to meet customer needs.

“Some of these offerings are really exciting, but it is still early days for lots of them and they are absolutely built with the clients’ requirements in mind and helping the clients get to the outcomes they are looking for,” she said. “I think as we move forward, we will start to see huge demand for some of those technologies and solutions.”

Steve Brazier, chairman and CEO of Canalys, said vendors wanted to go to as-a-service because it was a better business model for them.

“Some customers are interested, but some are not,” he said. “So a vendor offers a choice that you could buy it or consume it, then that’s fine. But if a vendor puts all of its efforts into as a service and biases its salesforce towards as-a-service, then they are going to have a problem.”

Mike Norris, group CEO of Computacenter, was one of the most outspoken critics, using his interview slot at the event to challenge the narrative around offering everything as-a-service.

“If I was a vendor, I would want a consumption model,” he said. “I see absolute logic in why I would want to sell as-a-service and not sell capital goods. I do think vendors have to be careful because I don’t think customers want to buy that way if they can avoid it.”

Norris added that unless you had a very strong proposition and could make customers buy as-a-service, then it would be a struggle. “When you’re offering a product in a competitive environment, and you go and buy my product as a service and your competitor goes ‘just spend the capital’, you will lose market share, unless you are very clever,” he said.

“Any business that has a good balance sheet, which most do, any chief executive, any finance director would use its capital to improve its opex, because that’s what improves the share price. That’s what takes the business forward, and that’s what very senior people get paid off. Yet we are an industry that wants to go, reduce your capex, turn it into opex, things that senior people inside big corporates want to do the opposite.”

Graeme Watt, CEO of Softcat, said vendors were becoming more demanding about as-a-service models and he agreed that a balance needed to be struck, but so far, vendors seemed to have taken the right approach.

“I think this is the direction of travel for us all, so I think vendors are becoming more demanding in that space,” he said. “We can, to an extent, choose to focus on which areas we want and where we want to add our own capabilities. But I think there’s a danger here of cloud and as-a-service that if you don’t drive the new while the relevance of the old legacy technologies is decreasing, then that’s dangerous.

“Right now, I think vendors, customers and providers such as ourselves are moving pretty much in sync. Customers do want to consume and do want as-a-service and vendors are pushing it out at about the right rate and the same rates as our customers are demanding.”

Watt said the key was to provide value around that and deliver “optimal consumption” and build on the transactional element with more services.