Digital Business Models (Module No. 1403) Summer Semester 2024 PDF

Digital Business Models (Module No. 1403) Summer Semester 2024 This last chapter addresses models that provide or manage resources – often for other models and "under the hood". VI.A.0....

Digital Business Models (Module No. 1403) Summer Semester 2024 This last chapter addresses models that provide or manage resources – often for other models and "under the hood". VI.A.0. OUTLINE OF THIS MODULE I. Introduction to Business Models  Concept and characteristics  Value capturing & value creation models II. Digital Business Fundamentals  Key terms and characteristics  Segmentation & framework for analysis III. Basic/ Core Models  Electronic commerce models  Content(-driven) and service models IV. Platform Models  Marketplaces and crowdsourcing  Service platforms and social networks V. Ecosystems  Consumer-/ End-user-oriented  Business-oriented/ industrial VI. Back-End/ Enabling Models  Cloud computing/ XaaS  Asset managers Source: own work Nils Madeja Page 21  Digital Business Models (Module No. 1403) Summer Semester 2024 Cloud Computing refers to the provision of computing resources – hard- and software – over the Internet. VI.A.1. CLOUD COMPUTING: VARIOUS DELIVERY MODELS Community Cloud Public Cloud  Restricted to a certain  Basically available group of organizations to/ accessible for everyone Private Cloud Hybrid Cloud  Exclusively availa-  Mixed approach: ble to a specific Core resources organization provided by private  Can be operated in- cloud, supplemen- house or ted by public cloud outsourced depending on load or application On-Premise  Computers on own site/ property Organizations do no longer need to own and operate these resources themselves. Source: graphics adopted from clipartmax.com with own amendments Nils Madeja Page 22  Digital Business Models (Module No. 1403) Summer Semester 2024 Virtualization is a technology for dividing one physical machine into several distinct logical machines – as perceived by the user. VI.A.2. VIRTUALIZATION: ENABLING CONCEPT FOR CLOUD COMPUTING Example: Platform virtualization architecture  Virtualization enables a shared, parallel use of App. App. App. App. hardware and software Softw. Softw. Softw. Softw. resources  Division with the help of a so- (Guest) OS (Guest) OS called abstraction layer Virtualization Software Application  Possible at different levels (Hypervisor) Software from hardware to application software (Host) Operating System (OS)  At the operating system level: division into separate Hardware containers Every virtual (logical) machine can be configured with its own OS and app. software. Source: adapted from Keller Nils Madeja Page 23  Digital Business Models (Module No. 1403) Summer Semester 2024 Hard- and software resources can be consumed as services flexibly – i. e. "on demand" and to a variable extent. VI.A.3. CLOUD COMPUTING: XAAS – VARIABLE SCOPE OF SERVICES System layer Target group SaaS: Application software Software End users as a Service System software – OS PaaS: Developers and (often) develop- Platform and ment environment as a Service integrators IaaS: (Network) Hardware Infrastructure Administra- as a Service tors Often virtualization is employed on the server end to deploy the necessary resources. Source: adopted from Keller Nils Madeja Page 24  Digital Business Models (Module No. 1403) Summer Semester 2024 A closer look at the system stack reveals the differing scope of the various XaaS-offerings. VI.A.4. SCOPE OF XAAS-OFFERINGS ALONG THE SYSTEM STACK The "default alternative" is on-site/ on-premise computing (own hard- and software). Source: adopted from Red Hat – What is IaaS; https://www.redhat.com/de/topics/cloud-computing/what-is-iaas Nils Madeja Page 25  Digital Business Models (Module No. 1403) Summer Semester 2024 Beyond the "typical" 3 (IaaS, PaaS, and SaaS), further catego- ries of XaaS offerings are available in the market. VI.A.5. XAAS OFFERINGS AND EXAMPLES  Business processes as a service – outsourcing beyond IT BPaaS  E. g. Capgemini, Cognizant, Avaloq, zenfulfillment, …  Software as a service SaaS  E. g. Salesforce, pipedrive, Asana, … FaaS  Function as a Service  Platform as a service PaaS  E. g. MS Azure, AWS, commercetools, … CaaS  Container as a Service  Infrastructure as a service IaaS  E. g. dropbox, any ISP (Internet service provider), … The taxonomy/ terminology varies somewhat depending on the provider. Source: own work Nils Madeja Page 26  Digital Business Models (Module No. 1403) Summer Semester 2024 In SaaS offerings computing performance is sold, unlike HW products and SW licenses in conventional ownership models. VI.A.6. PRICING MODELS EMPLOYED IN SAAS-OFFERINGS A lower upfront investment for computing resources renders them more accessible. Source: adopted from students' presentation in summer semester 2021 Nils Madeja Page 27  Digital Business Models (Module No. 1403) Summer Semester 2024 The following questions will deepen your understanding of business models based on cloud computing and XaaS. STUDY QUESTIONS FOR GROUP WORK AND DISCUSSION IN CLASS 1. Draw a conceptual sketch of the business model. Which basic/ core model does it resemble? 2. Identify relevant segments and examples for SaaS offerings for business use! 3. What factors are necessary for making XaaS offerings work commercially? 4. What are the advantages/ benefits and disadvantages/ drawbacks of XaaS offerings for a. Customers? b. System vendors? 5. Discuss the market impact of XaaS offerings. Consider various types of players. Why can the provision of XaaS be regarded as an enabling model? 6. Discuss the role of the XaaS model in the digital transformation. Thereby, the far-reaching influence of these models becomes clearer. Source: own work Nils Madeja Page 28  Digital Business Models (Module No. 1403) Summer Semester 2024 In the analysis (not only) of digital business models two fundamental types of factors should be discerned. VI.A.7. IMPORTANT TYPES OF FACTORS (FOR DIGITAL BUSINESS MODELS) Hygiene factors Success factors  Must be given/ present/ maintained/  May (but need not) be given/ pre- fulfilled, otherwise a business sent/ maintained/ fulfilled, a busi- (model) cannot work ness (model) can work without them  Do not have any further impact on  Determine business (model) business (model) success success, "make the difference"  "Necessary conditions" (math.)  "Sufficient conditions" (math.)  Examples:  Examples, depending on context: − Security − Resources (IP, people) − Trust − Capabilities (marketing) − Veracity (accuracy, truthfulness) − Leadership/ culture Missing hygiene factors: strong inhibitors. Present success factors: strong drivers. Source: own work Nils Madeja Page 29  Digital Business Models (Module No. 1403) Summer Semester 2024 Although their acceptance required a mindset change, XaaS offerings provide clear upsides for customers and vendors. VI.A.8. RATIONALE FOR AND AGAINST XAAS OFFERINGS Customers' perspective Vendors' perspective + Ease-of-use: easier to deploy and + Ease-of-use: easier, more efficient manage than on-premise resources and cheaper to deploy/ deliver, main- + Usefulness: automatic upgrades tain and service than on-premise + Accessibility: lower (initial) financial + Accessibility: lower threshold for commitment winning new customers (trial use) + Flexibility: IT resources can be o No more "big tickets" of one-time adjusted as needed revenues, yet more stable and + OPEX instead of CAPEX reliable revenue streams o Data security o Flexibility: revenues per customer o Availability/ uptime may grow or decline o Total cost of "ownership" (TCO) o Customer lifetime − Limited control over resources − CAPEX instead of OPEX(?) The servitization of IT resources has influenced many other digital business models. Source: own work Nils Madeja Page 30  Digital Business Models (Module No. 1403) Summer Semester 2024 We begin today's session by finishing our discussion of cloud computing/ XaaS models and their market impact. VI.A.0. OUTLINE OF THIS MODULE I. Introduction to Business Models  Concept and characteristics  Value capturing & value creation models II. Digital Business Fundamentals  Key terms and characteristics  Segmentation & framework for analysis III. Basic/ Core Models  Electronic commerce models  Content(-driven) and service models IV. Platform Models  Marketplaces and crowdsourcing  Service platforms and social networks V. Ecosystems  Consumer-/ End-user-oriented  Business-oriented/ industrial VI. Back-End/ Enabling Models  Cloud computing/ XaaS  Asset managers Source: own work Nils Madeja Page 3  Digital Business Models (Module No. 1403) Summer Semester 2024 As market figures illustrate, XaaS offerings are broadly accepted, and the corresponding business is rising. VI.A.9. MARKET FIGURES ON XAAS-OFFERINGS Computing resources are increasingly consumed rather than bought and operated. Source: adopted from students' presentation in summer semester 2021 based on data from Statista Nils Madeja Page 10  Digital Business Models (Module No. 1403) Summer Semester 2024 Five "hyperscalers" dominate the PaaS market, which resembles the IaaS market both in size and growth. VI.A.10. STRUCTURE OF THE PAAS MARKET  Market size: − 2020: US$ 47.3 bn. 70% − 2021: US$ 54.1 bn. Top 5 market − 2026: US$ 164.3 bn. share  Market growth – CAGR: 14-20%  Amazon is the leading key player with about 33% market share, followed by Microsoft and Google others >300 30% market [Note: figures are estimations, share which vary by source] Market players are typically active in several segments  attribution of revenues? Source: adapted from students' presentation in summer semester 2021; MarketsandMarkets Nils Madeja Page 11  Digital Business Models (Module No. 1403) Summer Semester 2024 At its core, the business model of a PaaS provider is that of a two- sided platform: customers/ businesses and developers. VI.A.11. BUSINESS MODEL OF A PAAS PROVIDER PaaS Provider h o s t s Conveys requirements for the solution Develops the demanded solution Customer/ Developer Business The platform may attract further groups and grow into an ecosystem. Source: adopted from students' presentation in summer semester 2021 Nils Madeja Page 12  Digital Business Models (Module No. 1403) Summer Semester 2024 Asset management models focus on managing rather than provi- ding certain resources of their customers (often at their site). VI.B.0. OUTLINE OF THIS MODULE I. Introduction to Business Models  Concept and characteristics  Value capturing & value creation models II. Digital Business Fundamentals  Key terms and characteristics  Segmentation & framework for analysis III. Basic/ Core Models  Electronic commerce models  Content(-driven) and service models IV. Platform Models  Marketplaces and crowdsourcing  Service platforms and social networks V. Ecosystems  Consumer-/ End-user-oriented  Business-oriented/ industrial VI. Back-End/ Enabling Models  Cloud computing/ XaaS  Asset managers Source: own work Nils Madeja Page 13  Digital Business Models (Module No. 1403) Summer Semester 2024 We will now head into our discussion of asset management models, starting with those targeting physical assets. VI.B.1. ASSET MANAGEMENT MODELS BY TYPE OF ASSET AND EXAMPLES  B2C: Smart home platforms (e. g. nest/ tado, Kiwi, …) Physical  B2B: Machine or plant management (e. g. relayr, Konux, …)  Banking, investing & wealth mgt. (e. g. N26, Moneyfarm, …) Financial  Transaction services (e. g. PayPal, Wise, …)  Advertising networks (e. g. Taboola, outbrain, …) Digital  Ad exchanges/ RTB platforms (e. g. AppNexus, OpenX, …) Also the role of these models for other digital business models will become evident. Source: own work Nils Madeja Page 14  Digital Business Models (Module No. 1403) Summer Semester 2024 Smart home platforms provide various services to consumers for managing different aspects of their homes. VI.B.2.1. FUNCTIONALITY OF A SMART HOME PLATFORM Via apps, the smart phone or tablet turns into a remote control for the home. Source: adopted from students' presentation in summer semester 2021 Nils Madeja Page 15  Digital Business Models (Module No. 1403) Summer Semester 2024 Market players address different aspects of living in a smart home, e. g. access, lighting, HVAC, or personal assistance. VI.B.2.2. SMART HOME PLATFORM COMPANIES They provide technology platforms for specific fields of application. Source: adopted from students' presentation in summer semester 2021 Nils Madeja Page 16  Digital Business Models (Module No. 1403) Summer Semester 2024 Smart home platforms are monetized in terms of several business models, comprising product and service models. VI.B.2.3. OPTIONS FOR MONETIZING SMART HOME PLATFORMS An infrastructure of distributed devices is necessary for the technology platform. Source: adopted from students' presentation in summer semester 2021 Nils Madeja Page 17  Digital Business Models (Module No. 1403) Summer Semester 2024 The business model of a smart home platform company includes retailing for the sale and distribution of devices. VI.B.2.4. BUSINESS MODEL OF A SMART HOME PLATFORM COMPANY Customers both contribute data to and receive data from the platform. Source: adopted from students' presentation in summer semester 2021 Nils Madeja Page 18  Digital Business Models (Module No. 1403) Summer Semester 2024 The higher the age, the more reluctant consumers are to pay for smart home services. VI.B.2.5. CONSUMERS' UNWILLINGNESS TO PAY FOR SMART HOME SERVICES That is a challenge, as home owners typically belong to the higher age groups. Source: adopted from students' presentation in summer semester 2021, based on Deloitte survey (2018) Nils Madeja Page 19  Digital Business Models (Module No. 1403) Summer Semester 2024 A Virtual Power Plant (VPP) is an aggregation of various Distri- buted Energy Resources (DER), managed by a digital platform… VI.B.3.1. CONCEPT OF A VIRTUAL POWER PLANT (VPP) …that acts like a single large generation, load, or storage asset in the grid. Source: adopted from students' presentation in summer semester 2022, sources available upon request Nils Madeja Page 20  Digital Business Models (Module No. 1403) Summer Semester 2024 Depending on the situation, the VPP provides its aggregate generation, consumption/ load, or storage capacity to the grid. VI.B.3.2. BUSINESS MODEL OF A VPP: EXTERNAL PERSPECTIVE VPP: acts like a single gene- VPP ration, consumption/ load, or Platform storage resource from the perspective of the grid DER owners are compensated for contributing their assets. Source: adopted from students' presentation in summer semester 2022 Nils Madeja Page 21  Digital Business Models (Module No. 1403) Summer Semester 2024 Overall, VPPs provide various benefits to the grid and its different stakeholders. VI.B.3.3. KEY TAKEAWAYS ON VPPS The challenge for VPPs is to cope with technical complexity and regulation. Source: adopted from students' presentation in summer semester 2022 Nils Madeja Page 22  Digital Business Models (Module No. 1403) Summer Semester 2024 Robo advisors serve as digital wealth managers. VI.B.4.1. CHARACTERISTICS OF ROBO ADVISORS The key idea behind them is to automate the portfolio management processes. Source: adopted from students' presentation in summer semester 2021 Nils Madeja Page 23  Digital Business Models (Module No. 1403) Summer Semester 2024 Various robo advisors serve different geographical regions and market segments. VI.B.4.2. ROBO ADVISORS: MARKET PLAYERS The number of players suggests that competition is quite intense. Source: adopted from students' presentation in summer semester 2021, based on bearingpoint study Nils Madeja Page 24  Digital Business Models (Module No. 1403) Summer Semester 2024 The key benefit for customers is that robo advisors charge significantly lower fees than traditional wealth managers. VI.B.4.3. TRADITIONAL WEALTH MANAGERS VS. ROBO ADVISORS Overall, robo advisors can be viewed as disruptors of the wealth management industry. Source: adopted from students' presentation in summer semester 2021 Nils Madeja Page 25  Digital Business Models (Module No. 1403) Summer Semester 2024 Payment/ transaction service providers enable customers to transfer money online without having to use a bank. VI.B.5.1. PAYMENT/ TRANSACTION SERVICE PROVIDERS: VALUE-ADD Key benefits for customers are lower transaction fees and higher ease of use. Source: adopted from students' presentation in summer semester 2021 Nils Madeja Page 26  Digital Business Models (Module No. 1403) Summer Semester 2024 Various payment/ transaction service providers have emerged, serving different market segments. VI.B.5.2. PAYMENT/ TRANSACTION SERVICE PROVIDERS: MARKET PLAYERS FinTechs are originary players, TechFins are entrants from adjacent online markets. Source: adopted from students' presentation in summer semester 2021 Nils Madeja Page 27  Digital Business Models (Module No. 1403) Summer Semester 2024 Ad(vertising) networks manage inventories of websites with ad space, which they sell to advertisers once a PI is created. VI.B.6.1. BUSINESS MODEL OF AD(VERTISING) NETWORKS Ads can be coupled with additional content in order to increase conversion. Source: adopted from students' presentation in summer semester 2021, based on investopedia Nils Madeja Page 28  Digital Business Models (Module No. 1403) Summer Semester 2024 Ad exchanges are digital marketplaces that enable advertisers and publishers to buy and sell advertising space. VI.B.7.1. BUSINESS MODEL OF AD(VERTISING) EXCHANGES Empty space on page impressions is mainly auctioned with real-time bidding (RTB). Source: adopted from students' presentation in summer semester 2021 Nils Madeja Page 29  Digital Business Models (Module No. 1403) Summer Semester 2024 So what kind of exam questions can you expect? Y.5.1. SAMPLE EXAM QUESTION: TRUE/ FALSE "A business model depicts how a certain type of company creates value, transfers it to its customers, and monetizes it (retains some of it). " o TRUE o FALSE We will discuss the most popular types in the following (not exhaustive!). Source: own work Nils Madeja Page 34  Digital Business Models (Module No. 1403) Summer Semester 2024 […] Y.5.2. SAMPLE EXAM QUESTION: SINGLE CHOICE "Generally speaking, business models based on which of the following value creation models tend to be the most scalable?" o Asset model o Product model o Service model o Solution model o License model o Platform model […] Source: own work Nils Madeja Page 35  Digital Business Models (Module No. 1403) Summer Semester 2024 […] Y.5.3. SAMPLE EXAM QUESTION: MULTIPLE CHOICE "Which of the following DBM represent typical platform models?" [There are several correct answers to the preceding question.] □ E-commerce shop □ Dating site □ IaaS provider □ Social network □ Content provider □ Service provider […] Source: own work Nils Madeja Page 36