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sharing economy

The Internet of Things and the March of the As-A-Service Economy | Sherpas in Blue Shirts

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The irresistible force paradox asks, “What happens when an unstoppable force meets an immovable object?” I think it’s the opposite when it comes to the Internet of Things (IoT) and the already booming as-a-service economy: “What happens when an unstoppable force befriends an unstoppable object?”

Most of the discussion to date around the as-a-service economy has been focused on cloud services, SaaS, and the likes of Uber. At the heart of this economy are the fundamental premises that customers – either business or consumer – can “rent” rather than own the product or service, and can do so, on demand, when they need it, paying as they go.

Although wishing for the utopian as-a-service model may be a futile exercise, the IoT can initiate meaningful models for heavy investment industries and quite a few consumer-focused businesses, and as technologists we should continue to push the envelope.

Let’s step back and think about how the IoT can push the sharing economy to its potential. Can product manufacturers leverage IoT principles, and create a viable technical and commercial model where idle assets are not priced, or are priced at a lower rate, thus saving customers millions of dollars? This would, of course, require collaboration between customers and product manufacturers to enable insight into how, when, and how much a customer consumes the product. But consider the possibilities!

One example is the car-for-hire market. Could a customer’s wearable device communicate with a reserved car, notifying it of approximate wait time until it’s required, enabling the vehicle to be productively deployed somewhere else, in turn enabling the business to offer lower prices to the customer and reduce the driver’s idle time? I think the technology is there, and although the task is humongous and with uncertain returns, I am sure someone, (ZipCar?) will experiment with this model at scale in the near future.

Another example is the thousands of small healthcare labs that cannot afford to own a blood analyzer. Innovative manufacturers of these machines could leverage IoT principles to analyze the blood test patterns of individual labs, and offer them a subscription model by which they are charged per blood test executed, or offered a bundled price of $X per 100 blood tests (much like HP’s Instant Ink offering.)

The IoT has the potential to really bring upon us the power of a sharing economy. In the near-term, businesses face challenges in developing a viable commercial and support model. However, they must overcome this in order for society at-large to truly benefit from this once-in-a-lifetime opportunity. They must remember that most industry disruption these days comes from outside the industry. If they don’t cannibalize themselves, someone else will. Thus, as the traditional competitive strategy levers are fast losing relevance, the IoT most definitely should be an integral part of their strategy.


Photo credit: Flickr

The Sharing Economy and the Airbnb of Outsourcing | Sherpas in Blue Shirts

By | Blog

The ideas are not new – for many years people have been sharing spare capacity or capabilities with each other, for example carpooling, holiday home swaps. etc. New channels, such as Airbnb, which enable sharing on a larger scale, have drawn the attention of governments, which in turn are looking for new ways to boost their economies. For example the UK’s Department for Business, Innovation & Skills (BIS) is currently running an independent review of the sharing economy led by Debbie Wosskow, CEO of Love Home Swap. I expect some aspects of the model to be deployed by BIS to help startups.

The question is can the sharing economy get a foot hold in the business-to-business (B2B) world? Other concepts such as e-commerce marketplaces have crossed the business-to-consumer (B2C) and the B2B divide. We have had sharing of resources and capabilities in the enterprise world for decades too, from shared service centers to shared office facilities. Cloud computing and the various “-as-a-service” models are also about sharing. What is different about the sharing economy is the many-to-many relationships. For example, through Airbnb many home owners offer rooms to many guests. While there will be some many-to-many examples of sharing in the enterprise too, the prevailing model in outsourcing is one-to-many, one service provider pooling its resources and capabilities to deliver services to many clients.

The sharing economy concept could lead to enterprises doing more sharing among themselves, offering their spare capacity and resources to each other. This could potentially reduce demand for outsourcing to service providers, in certain scenarios, for example sharing of resources for common business functions with partners. The trouble is that setting up such arrangements could be complicated and there would need to be solid governance procedures in place to ensure performance. It would be different if there were channels through which formal sharing arrangements could be made easily. This represents an opportunity for outsourcing service providers to augment their own services by providing such a channel.

There is already one operating in the UK: The Liberata owned Capacity Grid connects 140 local authorities in the UK to provide spare revenue and benefits processing capacity to each other. Liberata provides the network and the connectivity and charges a fee on the transactions performed. It also offers its own processing services to local authorities on or off the grid. It is looking to expand its Capacity Grid portfolio.

Looking at the company’s financials, it has got over a pension-liability black hole which dragged it down for a few years before it was acquired by Endless in 2011. Today it reports steady revenues of circa £90m per annum and an operating profit margin of 7% based on its 2012 and 2013 results. Capacity Grid has helped it maintain its revenues and Liberata is looking for complementary acquisitions that add to it. In September 2014 it acquired Trustmarque, a UK-based IT services provider. The additional IT capabilities are likely to boost Capacity Grid’s infrastructure. The acquisition also boosts Liberata’s public sector clients, including UK government and the National Health Service (NHS). There are many common services across swathes of the public sector, e.g. primary care administration in the NHS, where the enterprise sharing economy is likely to get more traction than in other sectors.

The Capacity Grid shows that a sharing channel can work in the government-to-government (G2G) setting where the parties are not in competition with each other. There are also many complementary businesses in the private sector, such as partnerships, where the model could work in a B2B setting. This could see large enterprises, or their global in-house centers, or new entrants create a marketplace for overflow business capacity. Many service providers already have the network connectivity and the platforms to enable this kind of capacity or resource sharing. The model could also open the market for services to small and medium companies that make up more than 90% of businesses.

The traditional outsourcing market is already under pressure from other disruptions such as the business process as a service model (BPaaS) and automation. Pricing and delivery models are already changing and the enterprise sharing economy could add an alternative to the mix.

With digital transformation helping an increasing number of portions of the economy better match demand with capacity through sharing mechanisms, it would appear to be only a matter of time before enterprises are applying this to some of their business needs.


Photo credit: Carlos Maya