Paradigm Shift: Everything as a Service (EaaS)
I’ve worked in Information Technology a long time. Back in the 80's I developed business software and sold the hardware that went with it. We called these mini-computers and they often cost upwards of $100,000. Some cost over $250,000, and in 1989 I sold a bunch of mini-computers to a well-known Canadian public company for over one million dollars. In today’s dollars, that’s over two million.
The first PC I ever bought cost nearly $10,000 and the first laser printer I owned cost over $4,000 and printed 4 pages per minute.
Can you imagine paying that much for hardware today? Unless you’re a bank or a major multinational, no one spends that kind of money on technology any more. Most technology is commodity priced. A replacement for the PC that I mentioned above would be 1000 times faster and cost less than $1,000. The same applies to that laser printer.
But there’s a new trend that goes beyond improvements in price / performance. We’re seeing a shift in thinking, from IT as a capital expenditures to IT as a pure operating expense.
What do I mean by that?
A few years ago, Microsoft Office had to be purchased for every user in your business at roughly $500 per user. That means - for an office of 20 users - you’d be investing $10,000 up-front. And even if you don’t upgrade every time Microsoft has a new release, you’d still want to upgrade occasionally to keep pace with modern features.
Microsoft Office 365, by contrast, is now a monthly subscription service. With 20 users, you’d pay roughly $250 a month, entitling you to updates for the duration of your subscription. In the long-run it might cost a bit more, but from the perspective of managing cash flow, it’s a lot easier to swallow. This model is called Software-as-a-Service (SaaS). Software companies like Adobe and Intuit have adopted this model and others are following. It’s a “win-win” for both sides. Customers have more manageable day-to-day cash flow, and software companies have predictable revenues allowing them to invest more heavily in R&D.
This is becoming more prevalent. An example is cloud services where you pay a monthly fee for storage. Another is server virtualization. Instead of a large up-front payment, you pay a monthly fee to a hosting company. This ensures your servers are always up and running, and you always have the latest tech. This is known as Hardware-as-a-Service (HaaS). You can even pay for a subscription for computer hardware. Instead of buying hardware, monthly fees entitle you to ongoing service and hardware upgrades every 2-3 years.
The long-term direction, then, is away from ownership of your IT infrastructure. Under the new model you’ll pay a flat monthly fee to a provider who will ensure that you always have the latest, most reliable technology.
Think of IT as a utility, like water or electricity. It’s just one more step on the path to worry-free technology!