Saturday, January 12, 2008

XaaS and Innovation

Ignoring the epidemic of confusion that is the web, "Innovation is the first attempt to put an idea into practice" - Jan Fagerberg.

I mention it purely because of the number of times I see that word misused.

This is particularly true in the XaaS (X as a service - whether software, hardware, framework or whatever) field where every rehash of the concepts of commoditisation, commodification, utility services, second sourcing and "computing in the cloud" is described as a some sort of breakthrough.

The reality is that most XaaS concepts went beyond the innovative stage a long time ago and are now on the well trodden path to becoming mainstream.

This doesn't mean innovation doesn't continue to happen in this field, it does, certainly sustaining innovation whether incremental or radical. However for a consumer of these services, any cost advantages gained are rapidly disappearing as your competitors are already starting to use them. Soon you'll just need to use them in order to remain cost competitive. These services will become little more than a cost of doing business.

Unfortunately, in order to have competitive price pressure for the service we need the ability for customers to easily switch between services. Furthermore without that ability to switch providers, we will continue to throw down a gauntlet at the deity of disaster. Learning those second sourcing lessons again is going to become someone's very painful experience of the next year.

So on one hand we are going to have adopt such services (for reasons of cost competitiveness) but we are going to be putting ourselves into a weaker position (due to a lack of portability between providers)

What we really need is some form of organisation to represent the XaaS buyers interest, to put pressure on the providers to have true portability for services. This means multiple providers, ease of transfer between providers, assurance that the primitives remain constant and quality of service reporting.

It's all stuff we planned with Zimki (R.I.P.) a few years ago, however, it is still valid today.

The potential with XaaS is very wide. Not just in terms of replacement of existing industries but also the new opportunities which can be built upon XaaS and the secondary markets in XaaS.

Beyond utility revenue sales, there are a number of secondary markets which include :-

  • Service revenue: sales of technical support to customers own XaaS installation (assume XaaS product is provided open source)
  • Generic utility billing service: providing billing mechanisms for other XaaS products.
  • Market reporting: provision of Quality of Service vs Price reports for different XaaS providers.
  • Marketing Service: provision of a market portal for a XaaS industry with switching service to increase portability between providers and click through revenues to providers or sale of application
  • Brokerage:
  • The other obvious stuff: XaaS conferences, XaaS training, XaaS consultancy

However, the most interesting opportunity is in the XaaS Exchange. With portability between providers, switching between providers and a large number of consumers of XaaS then you have a constant balancing act between supply and demand. This provides all sorts of opportunities for an exchange and the purchasing and sale of future computer resources.