Transforming your organisation
Transforming your business to market, sell, and transact as-a-service offerings
Everything-as-a-service (XaaS) model transformation allows customers the flexibility to consume and pay-per-use, but transitioning is complicated and challenging. Companies exploring consumption-based business models should think through the implications of the complex and interrelated business decisions they’ll need to make as they transition.
XaaS models aren’t new. Long employed by utility and telecom companies, Everything-as-a-service models have now expanded to businesses in other industries, creating value for both customers and the companies that adopt them. Benefits to customers include flexibility, convenience, and affordability, while vendors can enjoy financial predictability, lower unit costs from aggregation, and enhanced customer relationships.
Companies that have shifted their offerings to a XaaS model have been met with considerable success. They have been rewarded by consumers as well as investors, challenging conventional valuations and placing pressure on industry players that are retaining traditional business models, such as perpetual licensing and long-term contracts.
To make a successful transition to a XaaS offering, companies will not only have to change how they deliver their offerings, but also determine what new capabilities, skills, and knowledge they will need.
XaaS models can take a variety of forms, from subscriptions to subscriptions plus overages, to pure pay-per-use arrangements and other recurring revenue models. They are profoundly different from traditional business models and will require a different set of business capabilities. If you are moving to an Everything-as-a-service model, you will need to look across your entire organization to identify where the capability gaps are and determine where adjustments should be made.
Often the capability discussion focuses on the “quote to cash” cycle, but this is only part of the picture. Depending on the specific type of consumption-based model selected, you will need new capabilities across the entire internal value chain, including the areas of offer management and delivery, pricing, sales and marketing, sales compensation, service operations (including service fulfilment), billing and invoicing, revenue recognition, taxation, contract compliance, and investor communications. Changes to these capabilities will have implications for business processes, organizational design and talent, and both operational and IT systems.
For established businesses, transforming to consumption-based models calls for a fundamental changes in operations. Transforming your organization to execute pay-per-use business models is complex and requires companies to develop a set of critical, interrelated capabilities:
By developing these critical capabilities, established businesses can effectively navigate the complexities of transforming to consumption-based or pay-per-use business models. Embracing operational changes, technological advancements, and a customer-centric mindset will enable organizations to seize new opportunities, drive growth, and thrive in the evolving business landscape.
From our experience, we know where organizations generally have large capability gaps when bringing in a new business model. This experience accelerates identification of which capabilities should be a primary focus of investment in this transformation.
In our experience, a successful XaaS transformation is driven by five key tenets, which should serve as guidelines in developing the necessary capabilities:
