Service as software: what it means for large organisations
Written by Alex Vakhitov, founder of Comonad Limited. Published
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What does the phrase mean?
Foundation Capital uses the term 'Service-as-Software' for a change in what is being sold. In the software business, the customer buys access to a tool and remains responsible for the outcome. In the services business, the seller is responsible for the outcome. Their writing describes AI as pushing software firms towards the second of those.
The phrase is theirs. It is a useful name for a kind of offer you will be sold. It is not a standard, and it does not tell you whether a particular offer is fit to buy.
What is the $4.6 trillion figure?
Foundation Capital puts addressable spend at $4.6 trillion. That is their estimate of global spending on salaries and outsourced services that this model could reach. It is not a measured market, and it does not belong in a business case.
A large organisation does not buy a share of that figure; it decides whether to buy one function. The estimate helps explain why investors are funding these offers, but it says nothing about whether the offer in front of you will work.
What changes in the contract?
A seat licence is priced per person and leaves the outcome with you. An outcome contract is priced, at least in part, on a result, and the seller will say the outcome sits with them. Read that claim against the work. Someone in your organisation still has to accept the result, keep the record, and answer for it if a regulator or a customer asks.
The budget may move. A tool comes from a software budget. A function comes from the operating cost of that function. Procurement, the function owner, and risk all need to be in the room, because the contract is no longer only a software subscription. How to split a fixed fee, a bonus and a capped share is in How to price and govern agent-run services.
Where should a large organisation start?
With one function, and with the team that runs it still there. The operating model is decision rights, controls, a tested rollback, and a pilot beside that team. The write-up is AI operating model for the enterprise.
Software delivery is the natural first function. The work is already specified, reviewed and reversible. That is an AI-enabled SDLC: policy, gates and a record, not a new department. The controls those gates have to satisfy sit with AI governance.
A multi-year programme to reinvent the organisation is a poor way to buy this. There is nothing clear to roll back to, and the outcome measure shifts every time the scope does. A single function under a written scope, with an agreed way to stop, is easier to judge and easier to reverse.
How Comonad helps
If you are being offered an agent-run function, start with the operating design rather than the slogan. That work is AI operations. The usual first function is the AI-enabled SDLC. The control set is AI governance.
Discuss AI operationsSources
Frequently asked questions
Where does the phrase come from?
Foundation Capital uses 'Service-as-Software' for the shift from selling a tool to selling the outcome, and presents it as its own term. Treat it as a name for a type of offer, not as a term defined in law or in a standard.
Should we plan against the $4.6 trillion figure?
No. It is Foundation Capital's estimate of addressable spend, the salaries and outsourced services they think the model could reach. We have not measured it, and it is not a forecast for your organisation.
Does this mean fewer staff?
Not as a starting assumption. The pilot runs beside the current team. Handover is a decision after you have seen the pilot record. A contract that assumes the team has already gone has no way back.
Where does Comonad start?
With one function. The engagement is AI operations: assessment, operating design, a pilot beside the current team, then handover or a managed run you can leave. Software delivery is the usual first function, through the AI-enabled SDLC.