To own, or not to own?

In some respects, such services are nothing new, having been around in various forms since the 1960s—but there is no doubt that since the start of the cloud computing age, pay-per-use IT consumption, also known as consumption-based or as-a-service IT, has reached another level. 

In this article, we take a quick look at how pay-per-use IT services have evolved and expanded, explore some of the challenges of public cloud-based consumption-based services, and then look at modern approaches to pay-per-use IT services that go beyond the public cloud.

Pay-per-use over the years

Back in the 1960s, mainframe providers offered access to computing power and database storage to companies on a shared basis for a fee. This was known as a service bureau business. Fast forward to the 1990s and the emergence of the application service provider (ASP) which provided a platform for businesses to access third party applications which the ASP hosted and managed. Typically, businesses would access their applications via a thin client each user would install on their computer and pay for on a per-use or subscription basis.

The next generation of pay-per-use IT services is the one we know today, commonly referred to as software-as-a-service (SaaS), but increasingly including IT services beyond software to infrastructure as well. Again, as with the previous models, the user organisation doesn’t own or manage the IT services themselves, but instead accesses the services on an on-demand basis, over the internet. 

A critical impact of the rise of the SaaS model is that SMBs have affordable access to enterprise-grade services that would typically be out of their reach thanks to cost and the skillset required to install and maintain these services. Because SaaS providers save on the the distribution and installation costs associated with owned IT services, and with economies of scale and global reach thanks to the public cloud, it is now viable to offer these enterprise services to companies of all sizes.

Pay-per-use during the pandemic

Think about the services that have become daily necessities such as productivity (Office 365), collaboration (Slack), CRM (Salesforce) and video conferencing (Teams and Zoom). It’s not an understatement to say that we would not have been able to pivot as rapidly as we did to work from home without these SaaS services. Not only are they affordable for companies of all sizes, but already stretched IT teams could quickly and easily get the services up and running (in hours and days, not weeks and months) and manage the services, such as adding and removing users, quickly, easily and in many cases without special training. And, as the pandemic proceeded, the service providers kept working on their software, improving the service for a by now majority remote workforce, and, critically, closing security gaps as they emerged. These upgrades were available instantly, and at no extra cost, to all users around the world, and with minimal, or no, involvement of customer IT teams.  

SaaS milestones

Even before the pandemic, SaaS was a rising star. Two big milestones for the emergence of SaaS as a mainstream feature of the IT landscape were Microsoft and Adobe’s shift to a pay-per-use in the 2010s. 

1. Microsoft Office 365 Remember having literal Microsoft boxes that its software was shipped in? That feels like another world, as we very rapidly became comfortable swapping our traditional Microsoft licences for subscriptions to Office 365 (now called Microsoft 365, although the Office moniker seems to be difficult to shake.) Office 365 launched in 2013 as the preferred route to Microsoft Office over the typical licenced, “on-premises” version, and by 2017 subscription sales had exceeded licence sales. And Office 365, with its collaboration and cloud-based capabilities, has certainly been one of the heroes of the pandemic.

2. Adobe Creative Cloud Adobe launched its SaaS option Adobe Creative Cloud in 2012, and only a year later canned its perpetual licence option, Adobe Creative Suite. The company resolved two big challenges with its SaaS service. Firstly, the lengthy product upgrade schedule of licenced software couldn’t keep up with the rapid changes in the graphic design and other creative software industry. The SaaS version could far easily be updated more frequently, and customers would gain the additional features and capabilities within their existing subscription. Second, it allowed it to replace its choppy licenced-based income with a more regular monthly or yearly flow of subscription fees. By 2017 Adobe Creative Cloud had 12 million subscribers, and by the end of 2020, this was estimated to have grown to 22 million. 

As-a-service beyond the pandemic

As we emerge from the pandemic, uncertainty and unpredictability are still key characteristics of doing business today. It has become increasingly difficult to predict too far ahead, yet the success stories from the pandemic have shown us that digitally-enabled companies can thrive if they act fast to grab opportunities. Technology, typically powered by the cloud and acquired on a pay-per-use basis, has given these survivor businesses the data-driven insights as well as the operational flexibility to change fast, avoid pitfalls and take advantage of the opportunities that arrive. And while public cloud capabilities have enabled much of this resilience and flexibility, there are also drawbacks and limitations SMBs should be aware of.  Public cloud pricing may lack transparency, and the sheer size of the hyperscale vendors often makes them unresponsive to smaller customers. Many SMBs are rightfully wary of losing control over their data; and finally, there are many core business apps that are not ready or appropriate for the cloud.   

As-a-service without the public cloud

As the pay-per-use model continues to evolve, it is now possible to gain the speed and flexibility benefits of the cloud experience while also maintaining control over data and key applications, keeping them on-premises or in a service provider’s private data centre. All the while paying a predictable monthly fee and retaining the ability to ramp up and down very quickly – avoiding missing out on opportunities and also avoiding paying for unused capacity. And finally, by decoupling pay-per-use from the public cloud, SMBs are free to evolve the consciously hybrid cloud landscape that works for them.