Cloud Computing is an example for the X-as-a-Service delivery model. It is said that cloud computing is improving business agility because of the ability to rapidly and inexpensively provision technological infrastructure resources on a pay-per-use basis. So customers are urged not to buy and own hardware and software for themselves but instead they should make use of cloud computing services that are offered by the cloud computing providers.
In essence, this delivery model defies the need of physical ownership of hardware and software. What is the point of owning hardware and software? The only thing you want to do with it is using it at the time you need it. So it looks like that physical ownership is based on the need to have control on the availability of the functions offered by the software and hardware. The cloud computing proposition of on-demand delivery on a pay-per-use basis more or less removes the necessity to possess hardware and software.
The first thing that comes to mind is the question: “is this XaaS wisdom, X-as-a-Service as preached by the cloud computing providers also used by them selves?”.
A datacenter is an assembly of software, computer servers, storage, networks and power and cooling/air handling components. With these means the cloud computing provider assembles its cloud computing services. But is there a need for these providers to own these components?
Can a datacenter and thus a cloud computing proposition be assembled by a set of software, computer servers, storage, networks and power and cooling/air handling services provided by third parties?
The emphasis on services rather than goods is a central idea of the new industrial model, circular economy, that is now gradually taking shape.
Circular economy draws a sharp distinction between the consumption and the use of materials. It is based on a ‘functional service’ model in which manufacturers retain the ownership of their products and, where possible, act as service providers—selling the use of products, not their one-way consumption as in the current industrial model of linear economy. In this new industrial model the goal of manufacturers is shifting; selling results rather than equipment, performance and satisfaction rather than products.
Cloud computing (information technology) is not the only example of X-as-a-Service.
An example of this new approach is Philips, the global leader in LED lighting systems who has recently closed a deal with the Washington Metropolitan Area Transit Authority (WMATA) to provide 25 car parks with a LED lighting service. Philips will monitor and maintain the lighting solution based on a lighting-as-a-service model (Pay-per-Lux model).
As expressed by Philips the implications from a business process perspective are profound. Out the window goes the traditional, linear approach to resource use: namely, extract it, use it and then dump it. Instead, management focus turns to principles such as re-manufacturing, refurbishment and reuse.
Another example is InterfaceFLOR. As part of their drive to increase the inherent level of sustainability of their business, they do not sell the carpet as a product, they lease it as a service. That is supply, install, maintain and replace the carpet.
Changing Supply Chains
In this circular economy model, all materials used in a production process falls into one of two categories: technical or biological nutrients.
Technical nutrients are strictly limited to non-toxic, non-harmful synthetic materials that have no negative effects on the natural environment. They can be used in closed continuous cycles without losing their integrity or quality. In this manner these materials can be used over and over again instead of being waste as in the traditional linear economy process of Take-Make-Waste.
Biological Nutrients are organic materials that, once used, can be disposed of in any natural environment and decompose into the soil, without affecting the natural environment.
The two types of materials each follow their own recycling process.
It is clear that we are moving away from the linear model. The European Commission published a document entitled Manifesto for a Resource Efficient Europe which explicitly stated that “In a world with growing pressures on resources and the environment, the EU has no choice but to go for the transition to a resource-efficient and ultimately regenerative circular economy.”
As expressed by Philips the implications from a business process perspective are profound. Why bothering on the life cycle management of all the components you need? Why the burden of managing the buying, installing, maintaining, replacing, decommissioning processes of these components?
This shift will change the current supply chains and will enforce the idea of an Service Oriented Business model. This also brings the question to the Enterprise Architect how the business proposition of his organisation can be assembled by a set of services provided by third parties, how to manage and control a business service oriented organisation, and also how his organisation can provide services instead of products to their customers. The classical question ”What makes a firm?” is back on the table again. Also the circular economy approach shed some new light on the topic of sourcing and new sourcing models will be needed.
We have to rethink the supply chain and business model of our organisation again.
If you want to know more on circular economy download a free copy of the book SenSe & SuStainability from the Ellen Macarthur foundation or read the book of Braungart and McDonough ‘Cradle to Cradle: Remaking the way we make things.‘