Everything-as-a-Service (XaaS): Beyond the device
Creating long-term value for customers
The case for XaaS transformation
The XaaS model isn’t new. Long employed by utility and telecom companies, flexible consumption business 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 an 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 one-time contracts.
Adopting as-a-Service business models has become a business imperative for many organizations. Newer companies that launched with these models at the outset are at a considerable advantage. Large, complex, and more entrenched companies face a bigger challenge—both in effecting a successful transformation and in determining the optimal pacing and sequencing of the transition.
XaaS can help solve these challenges:
Why is the shift to XaaS so hard?
For established businesses, transforming to consumption-based modeling calls for a fundamentally different way of doing business. Current organizational capabilities may not support the new model, and entrenched, risk-averse stakeholders may be resistant to the required changes. In addition, short-term performance may need to be sacrificed for the sake of long-term success, which has significant implications both internally and externally.
Transitioning to as-a-Service business models is complex and requires companies to make a set of critical, interrelated decisions:
- What type of business model should we have?
- How will we monetize this model?
- How will we organize operations to support the new model?
- How will we ensure that our technology infrastructure and platform are capable of supporting the demands of an as-a-Service business model?
- How quickly should the transformation occur?
- How will we migrate customers?
- How will we manage the changes to our internal controls, income and sales taxes, accounting systems, and revenue recognition policies?
- How will we incentivize and compensate our employees and partners?
- How will we communicate these changes to the marketplace?
- How will we manage investor expectations?
These are all difficult questions that call for strategic thinking, high levels of coordination, and visionary leadership.
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