Capability‐as‐a‐Service: Investigating the Innovation Potential from a Business Model Perspective

Chair of Business Information Systems

Kurt Sandkuhl Janis StirnaRostock University Stockholm University

kurt.sandkuhl@uni‐rostock.de, js@dsv.su.se

Presented byKurt Sandkuhl

Presentation at DiFENSE (CAiSE 2016), June 2015, Stockholm

Overview

• Motivation: Why take a business model perspective?• Background

– Capability definitions– CaaS approach to Capability Design and Delivery

• Business Model conceptualization• Case Study from Energy Sector

– Analysis of Business Model for Case Study– Innovation Potential

• Summary and Future Work

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Motivation

Capability management is expected to contribute to a new level of productivity in developing and deploying IT‐based business • One of the key features in is to explicitly capture the delivery context of business 

services and to provide mechanisms for configuring IS or generating its delivery according to a capability design 

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Guiding question for our work• What is the potential of capability management in general and the CDD approach in 

particular when it comes to business model innovation?

Aim of the paper• apply an established business model conceptualization as a framework for analyzing 

case study from business process outsourcing • compare the possibility to identify business innovations with and without defined 

capability characteristics• identify the most promising part for assessing the business innovation potential

Background: Capability Definitions

• Many definitions exist in the literature; no generally accepted definition available

– “combination of resources” [Antunes, Barateiro, Becker 2011]

– “capacity to execute an activity”[Jiang, Zhao 2010] 

– “perform better than competitors” [Boonpattarakan 2010]

– “possessed ability” [TOGAF 2014]

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• Several papers suggest that capabilities are provided as Business Services, i.e. they are designed and delivered in a process‐oriented fashion

• EU‐FP7 project Capabilities‐as‐a‐Service in Digital Enterprises (CaaS):

– “Capability is the ability and capacity that enable an enterprise to achieve a business goal in a certain context.”

Capability‐as‐a‐Service in Digital Enterprises  (CaaS): Basic Idea

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Business Service

Potential delivery context of a business service

Components and patternsfor potential variants of the business service

Configuration or adaptation of the business service to meet the delivery context

Based on EU-FP7 funded project no: 611351CaaS – Capability as a Service in Digital Enterprises

Capability Modeling Methodology

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Market role

Patterns

Market role

Enterprise Model

Business Service Model

Context Model

Capability Modeling

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Business Service (Example: Process + Variants)

Market role = energy supplier= water supplier= ….

Context Model

Legislation = Germany / EU= ….

Patterns

Market role

GridoperatorGas supplier

Enterprise Model (Concepts/Goals)

Variation Point depending on

Joint meta-modelsame modeling tool

Capability Design and Delivery Environment

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Busines Model Conceptualization: Partial models of the integrated business model  [Wirtz 2011]

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Industrial Case from Energy Sector

• SIV.AG from Rostock Germany– independent software vendor for utilities industry:

ERP product kVASy®– offers Business Process Outsorcing (BPO) services to utility providers and other 

market roles of energy sector• Typical business services:

– Meter readings and Meter data evaluation– Billing and Accounting for Utility Industries– Customer Relationship Management

• Continuously changing business environment:– Regulations & bylaws– Customer requirements and processes– Technological requirements and deployment environments

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Industrial Case: Energy Market Roles & SIV business services

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Industrial Case: Business Service Example

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Industrial Case: Business Service Example

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Analysis of Industrial Case

Partial models of businessmodel

Business model of MSCONS

Marketmodel

Demand model

Main target group are medium-sizedenterprises from utility industries. Within thisgroup, different segments are distinguished,e.g. energy provides, water providers, gasproviders or grid operators.

Competition model For the MSCONS service, several othersoftware vendors provide platforms whichcan be used as software-as-a-service, but onlytwo of them offer business processoutsourcing. These two BPO providers can beconsidered as competitors.

Procurement model A few elements of the service are contracted toother service providers:

Transaction printing services, ifrequested by the client, are outsourced to aprinting center if the client requires post-processing ofthe transactions and export to specificinformation system, data conversionservices are used from external providers

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Analysis of Industrial Case

Partial models of businessmodel

Business model of MSCONS

Manufacturing model The processing of meter data, businessprocess monitoring and handling ofexceptions by knowledge workers all areprovided from the own back-office of SIV.SIV offers using IT hardware and softwaresystems, but the client may select to hostthe actual application in its own data center.

Service offer model The MSCONS BPO service is offered as stand-alone service or as “accounting bundle” withother services within accounting and billing.

Distribution model Distribution is based on VPN connections anddedicated communication lines. Service deliveryalso depends on the customer’s ability to providean appropriate operating environment for theback office applications needed.

Capitalmodel

Financing model Operating costs are financed by internal fundsof the enterprise.

Revenue model The pricing for the service includes a basic feefor each client depending on the size of thecustomer base. An additional fee is chargedfor exception cases to be handled manually byknowledge workers.If the service is bundled within the accountingbundle, the basic fee is the same as for a singleservice, but the customer-based fee is higher.18

How to identify innovation potential?

Take a value chain perspective• analyze extensions to neighboring parts of the value chain• Example: change procurement model to no longer outsource account printing but 

to do it in‐house would

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Analyze  business drivers in each partial model• what potential alterations in the current status are possible?• what are the effects on the other partial models?• Example: if for the demand model a new target group is identified, this might have 

immediate effects on procurement and manufacturing model. 

Does it make sense to start from the capability design, in particular the context model?

Context Elements for MSCONS

VariationAspect

Context Element MeasurableProperty

Context Element Range

OperationOperating platform kVASy deployment {data center, cloud,

customer}

BSP human resources Schedule {low, average, high}

Payload

Market role Role segment{grid access provider, balance supplier, MDC, MOp, consumer}

Message exchange format Format segment {MSCONS, UTILMD}

Process subtype Subtype segment {VL, LG}

Message version Version segment {2.2a, 2.2b, 5.0, 5.1}

Contract

Backlog threshold Backlog size [0-5]

Exception type BAM notification {list of exception types}

Business Service Process type {list of business services}

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Analysis Results in the Case

Three main business drivers are identified, which cause variations and provide stimulus for changes• contractual aspect

– specifies parameters such as backlog threshold as well as the process variant to be implemented regarding the backlog size, such as “if the backlog size exceeds the agreed threshold, then the case is routed to customer”

• payload aspect– includes information of the service call such as the market role, the faulty 

message and the exception type etc.• operational aspect, 

– related to both SIV Services personnel deployment plan and the kVASy‐operating environment

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Observations from Analysis

• extension from a business service to a capability will not make the established business model invalid or obsolete

• context elements identify potential variations in the business service caused by a change in delivery context

• variation points form starting points for identifying changes in partial business models which eventually will lead to changes in MSCONS / overall business model

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• Example: variation aspect “operation” with its context element “operating platform” 

– context element values are “data center”, “cloud” and “customer”– each of the values can be considered as variant of the existing business model: 

• MSCONS operated in own data center, the cloud, the customer’s data center, or as a mixture between these.

• If it would make sense to actually distinguish the business model for these variations depends on the effects on the other partial models

– the investigation of potential innovations can start from the context elements.

Summary

• Based on example of a business service from BPO in energy industries, we showed how to decompose the underlying business model into different partial models 

• Context model proved to be useful for identifying potential variants of the existing business model (starting point for changes in the partial business models)

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Main limitation • we analyzed only the business model for one business service ‐more services will 

have to follow to develop our observations into clear implications• analysis was done by a researcher from the field, not by a practitioner from the 

company ‐ validation of the results by a practitioner has to follow

Business model analysis resulted in new option for capability modelling• the different partial business models could actually help identifying context 

elements in capability modelling and more complete capability definitionsExample:• use of a different supplier for accounting printing as part of the procurement model• indicates one more variation aspect which should be part of capability definition.

Thank you for your attention!

Time for questions!

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