Transition to SaaS means crossing the Valley of Death.
Media companies were already gradually moving towards as-a-service business models before Coronavirus hit. However, X-as-a-Service is not a simple transition and it is not for all product or all companies.
The crisis is widely understood to have forced their hands into accelerating cloud-native product and software aaS to support it.
That’s because as-a-service models are more suited to the unpredictability of modern media markets, which has been taken to an extreme by the pandemic. As-a-Service goes together with the softwarization of formerly hardware-based products as well as with the modularity of being able to tailor workflows at a granular level using cloud-based microservices. The absence of trade shows also reinforces a preference among clients to receive regular firmware upgrades rather than wait longer periods to benefit from a new product.
The current remote working scenarios have forced media companies to adopt new technology tools, most of which are provided through as-a-service schemes.
According to IABM’s latest industry report, the transition to SaaS has financial implications for the supply side of the industry as companies moving from large and infrequent inflows of money to smaller and more regular payments, suffer from a painful and lengthy cashflow crunch. IABM research shows that this crunch has been exacerbated by the pandemic-induced shock on technology demand by forcing a move to subscriptions and on-demand billing.
“New product developments need to be offered as a Service,” affirms Julian Fernandez-Campon, CTO, Tedial. “This is good for customers as they can easily try them and decide whether to buy or not and for other vendors who want to integrate their solutions. A good example is the testing of AI services where customers can easily check results without buying the product. Another example is media processing services in the Cloud, where the vendor that is offering the whole solution can 'bundle' those services with a predictable cost.”
Major media technology suppliers such as Avid and Harmonic highlighted this demand shock in their recent earnings calls, pointing to increasing demand in their as-a-service offerings. They also highlighted that their legacy products had suffered from a more pronounced decline in revenues.
“There is certainly a great deal of interest in looking for as-a-service solutions from vendors, but these soft products are far from easily managed,” says Simon Browne, VP product management at Clear-Com. “It requires a fully formed back office and maintenance methodology to be successful. Our own customer experience tells us that only a few customers are ready to handle the licenses and repetition of payments that fall out of this service approach.”
Ciaran Doran, director of marketing, broadcast & media, Rohde & Schwarz, says, “it is often the case, we need to take care not to jump on a buzz in the industry for the sake of it. The X-as-a-Service model serves well in certain circumstances just like moving to cloud technology makes sense in some areas but not yet everywhere. With software defined solutions that are modular, COTS enabled and virtualizable are already here, we’re deploying these right now. I think that one of the most important issues is around the trust that a broadcaster can have in us to deliver the solution they need and support them in the future.”
Avid’s CEO Jeff Rosica says that “without question” the situation is teaching us the deeper value of subscription-based ‘as-a-service’ technologies. He says Avid’s own response to help media companies pivot to working remotely was aided in part by the company’s early focus on cloud-based content workflows, and its transition to providing those tools via subscription.
“This was accomplished by a workforce that’s been defined historically by its expertise in media,” Rosica says. “Going forward it is incumbent on the vendor community to drive the shift at a much faster pace by filling the industry’s talent pool with new kinds of talent including cloud/SaaS professionals and digital natives.”
The issue is best summed up by Graham Sharp, CEO at Broadcast Pix who warns. “Managing this transition has its perils and very few suppliers in our industry have done it. You have to cross the revenue ‘valley of death’ – convert permanent license orders to annual licences at 20% or 25% of the value. The business must be extremely well-funded to cross this chasm and I am not sure many in our industry are.”
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