Technology Enabled Services: Now and the future

Over the last ten years, software-as-a-service has been automating, digitizing, and optimizing some of the most mundane and painful corporate tasks.  With the rise of SaaS and the dominance of technology companies, many have predicted professional services firms’ demise.  But that has not played out.  Many services firms have thrived as the leading firms have evolved, and the markets have grown.

What is Technology-Enabled Services (TES)?

The definition of TES is amorphous.  Emergence Capital wrote in 2011 an article titled What the heck is TES?  They defined TES are information service offerings that technology companies develop and operate on behalf of their customers.  Index Ventures in 2020 defined TES differently: Companies offering tech-enabled services bundle software and humans to provide “superhumans-as-a-service” as a turnkey solution.

The confusion arises because, on the spectrum between pure services and pure software, there is a lot in the messy middle.  At times, some technology companies look a lot more like services companies than they would like the public markets to believe, and sometimes services companies use and sell a lot more technology than many want to believe.

My view is the test of a software product should be how autonomous it is without the value devising from human use.  It’s not complicated, but the deeper the tools are in the stack’s back-end, the more they are pure technology.  The more the software requires a skilled and trained operator to extract value continuously, the more the opportunity for technology-enabled services.

Examples of successful technology-enabled services:

The inflection point:

We’ve arrived at the inflection point, which seems more gradual than dramatic.  As more and more no-code and low-code products become more ubiquitous, more digital natives reach the workplace, and software has actual, functional AI, the necessity for technology enablement will become more acute.

What does it mean for evaluating businesses?

The key to evaluating businesses that have a TES component is understanding where cost for the labor sits and how it is compensated and incentivized. I see four models for TES:

  1. Large services firms with formal and exclusive partnerships or proprietary technology e.g. Uber and Spotify
  2. Large services firms with informal technology partnerships e.g. IBM
  3. Freelance or solo-practitioners with deep domain expertise using the best tools available.
  4. Technology firms with in-house services. Sometimes these services are embedded in sales and customer success.  One hypothesis is that sometimes unprofitable SaaS companies embed services in their sales cost lines instead of including them in Cost-Of-Goods-Sold.

No matter how you cut it, there will be more merging of SaaS and professional services.  But there are many open questions on what models will prove dominant.  The SaaS or the Service?  Who owns the relationship with the payer/customer?  Who has the most competition?  Which product or service is a commodity?  The most likely outcome is that there will be a mix.

The critical pieces for technology-enabled services to get right. 

When will the future arrive?

Like most things, it’s both already here and will take longer than we expect. But what’s obvious is that the most profitable, most enduring services will need to be enabled by the best technology.

Latest news and articles

Easier and More Efficient Float Loading on Yo! Payments!...

19 October, 2023 by admin

Yo-Uganda Limited enters into grant partnership with United States African Development Foundation to deploy Mastercard F...

26 March, 2023 by admin

Yo! Commitment to FinTech in Uganda; FITSPA Conference 2021...

by admin