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IoT Subscription Economy: The Butler in the Cloud

IoT Subscription Economy: In the alphabet soup of strange IT acronyms, XaaS – which stands for ‘everything as a service’ – is a relative newcomer. Closely associated with services on the internet, it is sometimes described as a “butler in the cloud”. Startups and established players all hope to cut costs through new, consumption-based business models. Are we heading for a Subscription Economy?

by Rudi Kulzer

High-performance, with high- avail networks, cloud computing and the Internet of Things ability, communications are the three pillars of demand-driven services on a global scale. Business, services and data models can be provided and used anywhere they are needed via the cloud. IoT has given rise to new models, collectively grouped under the term ‘everything-as-a-service’, or XaaS. It applies to all services offered for cloud computing including software, hardware, and infrastructure. The most common XaaS services are seen as part of the so-called ‘SPI model’ consisting of software-as-a-service (SaaS), platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS). Other examples of new ‘as-a-service’ offerings are storage (SaaS or STaaS), network (NaaS), desktop (DaaS), data (DaaS or DBaaS), and communications CaaS).

Data always on the move

There are other models which are offered as part of the increasing spread of cloud thinking and are also tagged with an ‘as-a-service’ moniker, though there is some dispute whether these truly fall under XaaS. These include access to high performance computers as a service (HPCaaS) and data intensive computing as a service (DICaaS) which is used to describe certain scientific applications of cloud computing. DICaaS differs from other services in that it uses massive compute power to provide a conduit to move huge amounts of data – petabytes, in fact – to storage rather than transforming the data into information.

IoT Subscription economy: Reducing CapEx

Reducing CapEx: Hardware, software and infrastructureas-a-service aim at turning fxed costs into variable ones.

Even people can be provided as a service. Called humans as a service ‘HaaS’, the term describes the use of human intelligence as the ‘processing’ power behind a web service. Generally, quite a few people are involved to provide ‘processing power’ for tasks, such as image recognition, which humans are much better at than computers. The most common examples of XaaS are those encapsulated by the SPI model: SaaS, IaaS and PaaS. These fundamental offerings go back to the early development of the service economy and, as such, deserve a more detailed explanation.
Software-as-a-Service (SaaS): This model provides software via the internet. It is the most popular and oldest of the XaaS services. Software packages and licenses are no longer sold to a user; the application is instead only made available for use over the internet. This difference is comparable to that of car purchasing versus renting or leasing one, where there is also ‘per use’ based charging. SaaS providers not only make their applications available, they also bear sole responsibility for maintenance and administration of the code base. Examples of SaaS include Microsoft Office 365 and Google Apps.
Infrastructure-as-a-Service (IaaS): IaaS is a business model that contrasts with purchasing hardware and installing software to provide a traditional computing infrastructure on-site (my server is in my basement). It is effectively the use of leased hardware installed at a remote site and using it as needed. This results in a great number of options for its eventual application. Amazon Web Services is probably the best-known provider of IaaS, with products like Elastic Compute Cloud (EC2) for computing performance and Simple Storage Service (S3) to provide a data repository.
Platform-as-a-Service (PaaS): This is broader in scope than IaaS. PaaS providers make complete platforms available by providing complete suites of hardware and software combined as a service. Users are able to develop and operate their own SaaS solution platforms or integrate SaaS services with traditional software applications. PaaS provides an integrated runtime environment as a service (and possibly one for development as well) for which the user must pay. Familiar examples of this are the SAP Hana Cloud Platform, Google App Engine, from Salesforce and Windows Azure.

Definitions of XaaS often overlap and are in constant flux

The XaaS concepts described here are frequently operated in a public cloud which is also available to a provider’s partners or customers. However, services can also be offered on a proprietary private cloud. Many XaaS applications today are still operated in a conventional data center and do not use cloud services. Widespread adoption of the cloud-hosted model will depend on how quickly trust in managed cloud computing builds. Definitions of XaaS models and cloud computing are constantly in flux and can often overlap, since both concepts are driven by different market actors. For software providers, the model is primarily one of hosting business applications, and they usually work together with service providers.

Subscription Economy: A changing economy

There is no doubt that the clearly recognizable trend of leasing many goods and services will change the economy. Thus it is no wonder that initial approaches to these ideas are already to be found in treatises by economists. This also applies to the area known as CapEx, in financial jargon. The abbreviation stands for ‘capital expenditure’; this covers non-consumable elements – where one-off payment secures an asset. It includes investment expenditure for long-term fixed assets such as machines and buildings but can also apply to initial equipment, replacement parts and computer systems. These areas are traditionally well suited to the leasing approach.
The leasing or acquisition of services by subscription moves costs into the OpEx (operational expenditure) area. This covers ongoing costs for running a product, business, or system by purchasing personnel, essential operating supplies, raw materials, and power or for leasing. Market researchers from ABI Research have found the subscription economy to be particularly promising in the service sectors for freight and mobility. The analysts’ forecast that freight-asa-service (FaaS) will account for 30% of shipments by 2030. FaaS shares the same beneftis as the related mobilityas-a-service (MaaS) where modes of transport are hired rather than owned. These advantages include
cost reduction, improved resource utilization and market convergence by establishing models of economic partnership. FaaS streamlines the delivery of cargo and packages by further development of freight marketplaces, on-demand transport, freight brokerage, and transport pooling. With IoT applications, revenues for FaaS are expected to exceed $900bn worldwide by 2030.

IoT: Subscription economy: Advantages in One Picture

IoT Subscription Economy: Equipment-as-a-Service

Transport efficiency can achieve much higher levels by leveraging synergies between FaaS and MaaS. The ABI researchers see potential growth for MaaS in driverless vehicles or shuttles during traffic off-peak hours. The steadily growing deliveries of goods can be improved, and high utilization rates can be achieved at a lower cost per mile Equipment-as-a-service is moving out of specialized niches, such as providing medical and other specialist equipment, to rapidly become a more attractive general solution. The simplicity of linking devices to IoT will increasingly broaden the range of EaaS and make it more affordable.Complex service contracts have long since become the standard in the offerings from manufacturers of high quality, business-critical equipment for production, mining and construction or oil and gas exploration. An interruption of function would seriously impact customers’ ability to conduct business and maintain customer relations, so investment in purchases of equipment are also accompanied by contracts and payments for scheduled maintenance and repair, and emergency service. Market observers see everything-asa-service as the predecessor of the ‘vertical cloud’ – services optimization for a specific market sector, which has already been the subject of some discussions. The growing notion that anything can be migrated to the cloud has already led some companies to start to consider whether many of their operations – but most particularly all their IT estate – should be relocated to the cloud.

Compliance achieved in simpler and more reliable ways

The overarching digital revolution across almost all business sectors means that many things simply cannot be outsourced to the cloud. Companies are kept busy mastering
new challenges like big data analytics and cognitive computing, with issues around continuously increasing mobility arising, and then there is IoT also calling for attention. Security and compliance requirements for all approaches mentioned are extremely complex and demand IT infrastructures and applications that can respond to ever-changing needs. However, the planned vertical cloud can not only help enterprises to grow faster and more consistently, it can also help to satisfy all of these complex rules and regulations in a simpler, more reliable way.

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