In my previous article “Everything as a Service” I explored, what will be one of the major trends of the next decade.

Driven by the APIs and sharing economies this trend will change the way we do business. With ever faster times to markets and startups growing at breakneck speed, more and more companies will have to adapt. By focusing on the essentials and buying everything else as a service, they can avoid being outgrown by these startups.

In this follow-up I'll reiterate the main points from the previous article and look what implications the Covid 19 pandemic has on that idea.

Since writing the last article, a global pandemic has ravaged countries across the world. Business are shut down, people are in lockdown and it is uncertain what will be the implications of this black swan event.





What we call here a Black Swan (and capitalize it) is an event with the following three attributes.

First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme 'impact'. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.





Currently the main focus is on how to deal with the immediate implications of the pandemic. Taking care of the sick, dealing with global supply chains and making sure there are businesses left to reopen, once the lockdowns are lifted.





In my original article I laid out that companies would be concentrating on their major business functions while outsourcing the minor ones.

The tools to do that would be APIs, the sharing economy and exponential companies.





What are APIs

APIs are a way to communicate that is modeled after the web pages but instead of pages it is about addressing business functions. APIs are all about human readability and browseability.

The idea is that a normal business person can use these APIs to execute business functions. This allows the integration of businesses on a functional level.

For example a Fintech can offer a function to calculate the risk for a customer. Banks can now make use via APIs of this functionality and no longer need to develop it in-house.





What Role does the Sharing Economy Play

The sharing economy means that businesses are using other peoples assets instead of their own. This enables AirBnB to a $30 billion room rental business, without owning any rooms.

This "sharing economy" is applied accross different sectors.

Startups are enabling businesses to share container space, warehouses and truck rides. With lower asset costs this enables companies to outgrow the competition that has their own assets.

Exponential organizations are a concept introduced by Salim Ismail and others in the book of the same name.

Ismail defines Exponential Organizations as

An Exponential Organization (ExO) is one whose impact (or output) is disproportionally large—at least 10x larger—compared to its peers because of the use of new organizational techniques that leverage accelerating technologies





Exponential Organizations are able to do that by effectively de-coupling growth from labour and assets. Since these organizations have no cost in assets and can scale more quickly they can outgrow more traditional models.





Taken together this means that companies have to focus on their core business functions if they want to survive.

Otherwise they risk to be outperformed by an startup growing at exponential rate and becoming obsolete.

APIs, shared assets and other technologies allow the decomposition of business into core functions. That means they can do what they are best at, buy non-essentials on an open market and integrate them using APIs.





Impacts of Covid-19

What impact is Covd-19 going to have on the de-composition of business functions?

Currently there seem to be two relevant trends emerging.

The first trend is a increasing locality. Businesses and governments alike are blaming the global supply-chains for supply problems. The virus affects cross-border trade. With todays just-in-time manufacturing this leads to major production disruptions.

The second trend that emerges from the current crisis is managers and employees figuring out how to work from home, effectively.





The Trend Towards Locality

Even before the Covid-19 pandemic a growing trend of countries emerged to turn inward. After years of expanding globalization the trend has emerged towards isolationist politics. The people that voted Donald Trump into office, wanted to "Make America Great Again" and "Build a Wall". Boris Johnson promised to "Get Brexit Done". Viktor Orban, the Hungarian Prime Minister, ran on a platform of stopping immigration.

These are just a few example of a world that was turning inwards, even before the pandemic. When the pandemic hit, borders went up. Every country took care of their own.

On a positive note, communities came together to help. That has only further strengthened the trend towards locality.

A pushback towards Globalization has emerged already in the context of Covid-19.

“We already see a lot of populist concern about the merits of globalization as benefiting multinationals, the elite and foreigners, not local people and local companies,”





Globalization is probably not going to be rolled back, because of Covid-19. The financial benefits are too enticing. While clothing brands would like to manufacture locally, the financial benefits of offshoring are just too good to pass up.

On a political level, the trend towards bringing back manufacturing will only become stronger though.

To still remain competitive there are a few strategies that will emerge. Everything as a service may well be one of them.

Everything as a Service claims that exponential companies will focus on their core business. Everything else will be bought from outside and integrated via APIs.

This allows companies to focus on their core business and act more agile.





The Trend Towards Remote

The global pandemic will be remembered for many things. Nurses and doctors working themselves raw. Shelves missing toilet paper and rice. But for many people, the biggest change has been working from home for long periods.

Companies that categorically denied the possibility of work from home have suddenly found themselves having to adopt it.

And for many it turns out, it's probably fine for most people. People sometimes find it actually increases productivity.

Working from home actually worked well for the employees in China who chose to work from home: They were 13 percent more productive, and the quit rates halved.





Not surprising, since by pushing employees towards more collaboration they have actually been pushing them to digital communication.

According to a Harvard study, that examined two Fortune 500 companies that switched to Open Office layouts:

We found that face-to-face interactions dropped by roughly 70% after the firms transitioned to open offices, while electronic interactions increased to compensate.

Ethan Bernstein and Ben Waber in "The Truth About Open Offices"

So people in Open Office layouts are sitting in close proximity and with an architecture aimed to foster collaboration. And yet it pushes them to communicate digitally. According to the Hardvard study "People in open offices create a fourth wall, and their colleagues come to respect it. If someone is working intently, people don’t interrupt her. ".

Not everyone wants to embrace work from home. Some people don't have a distraction free environment at home. Others miss the personal interaction. Also not every function can or should be done remotely. But work from home is here to stay for the foreseeable future. Getting done more while being able to receive a package or throw the laundry in, sign us all up.

Some companies have already mostly shedded offices and moved on to become purely virtual such as GitHub, GitLab and Zapier.

This allows the companies not only to operate with lower costs, but also to scale faster as no office space is necessary. It also makes them more attractive for candidates that enjoy working from home and hardly harms them with the other candidates.

Other factors such as high cost of city living, congested inner cities and climate change concerns are only going to exacerbate the effect.

Beyond working from home meetings between business partnerts have also had to move online. It remains unclear if business travel will ever go back to where it was before the pandemic?

In relation to Everything as a Service this is strongly accelerating the move. Everything as a Service is all about business scalability and outgrowing the competition. Remote Work drives both of these up. It is easier to hire, if the worker doesn't have to live within 1 hour driving time of the office. Even if remote working 2 out of 5 days a week, it will already increase the amount of potential employees, willing to put up with an extended commute.

Also competing for the best employees, this can be a strong benefit. And lastly if less rent needs to be paid in lengthly office rentals, the company becomes more nimble.

This will likely even drive the use of external service providers. A company culture that is remote compatible is much easier to be able to adapt with those providers. Locally and abroad.





Conclusion

In this article I talked about Everything as a Service. By using service providers for non-essential functions and integrating them via APIs, companies can improve the scalability and agility.

If they do that they are abel to outgrow competitors that do these functions in house.

Not only are they able to save money by using less assets and scale better. They are also able to access best-of-breed solutions that they wouldn't have access otherwise.

Two major trends emerging out of Covid-19 are a trends towards locality. This means that companies will likely look more inward than before and the push against Globalization will pick up steam.

That trend may have a positive effect on Everything as a Service.

By using providers for non essential business functions, Everything as a Service allows companies to easily switch to local providers.

The second major trend is working from home. This goes hand in hand with getting rid of assets and allows companies to become more agile and scale faster, thus outgrowing competition.

In the end is Covid-19 not going to be the end of Everything as a Service but going to lay the ground work for its widespread adoption.



