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As-a-Service: Commercial Model of the Future

Posted by Tim Cummins, President of IACCM, Professor, Leeds University School of Law; Chair, International Commercial & Contract Management | Sep 17, 2019 2:42:00 PM

Almost 90% of Procurement and Contract professionals expect major growth in ‘as-a-service’ offerings, with a quarter believing they will rapidly come to dominate the market.*
 
Is that a far-fetched prediction? In many ways not. As-a-service offers the buyer many benefits - eliminating capital outlay, providing greater flexibility, avoiding redundant or outdated systems and equipment. It is therefore very much in tune with our age, providing rapid gratification through on-demand, affordable access to products and services.
 
Suppliers in some cases face high set-up costs, due to the need for asset investment. But often they don’t - for example, in the case of platform providers who draw on the assets of others (Uber and Airbnb being the frequently cited examples). As the range of as-a-service offerings increases, it will become more and more difficult for traditional businesses to compete.
 
As IACCM’s recent study on as-a-service indicated, there is variability in offerings. They range from a one-size-fits-all standard, to mass customized, to fully custom design. This has a major impact on cost and commitment, hence there are significant variations in contract terms and negotiability. At the lower end, the contract is potentially fixed and non-negotiable. At the upper end, the customer may be looking for a guaranteed outcome and dictating many of the terms.
 
One key lesson from IACCM’s research is that many sectors of the market are not yet fully conversant or aware of the implications and practices associated with as-a-service offerings. This is in part due to the inexperience of buyers, but also suppliers have in many cases failed to think through key aspects of the capabilities needed to support such a fundamental shift - in particular the implications for Sales skills and the ability to ‘educate’ their customers.
 
As-a-service in many cases creates longer term relationships and an increased level of interdependency. Having appropriate contracts and contract management competency is therefore a critical component of these offerings.
 
Based on polling over 180 participants in a recent IACCM webinar (webinar recording available at www.iaccm.com)

Topics: negotiation, contract /commercial management, sourcing, communication, IACCM

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