What Is XaaS And How Can It Drive Business Growth?

By Jogad Wijoyo, GROW with SAP Marketing Specialist, SAP

From high tech to media and professional services, service-based companies are increasingly rethinking their product portfolios in response to growing customer demand for personalized products and services. One approach gaining interest is the anything-as-a-service (XaaS) model – and it’s not just large competitors looking to make this transition.

According to a recent IDC analyst brief, this trend is also gaining traction among midsize companies –specifically those with annual revenues between $500 million and $800 million. Three-quarters of surveyed companies indicated they’re undergoing efforts related to the development of custom, software-based products and services that complement and augment existing offerings.

However, this new frontier in customer-centric business strategies is not just about meeting individualized consumer needs. XaaS models also usher in a new era of business growth fueled by recurring revenue streams and lasting customer relationships.

How midsize companies benefit from XaaS

XaaS is part of an evolution in business model innovation across most industries, as seen in the figure below. Businesses with a traditional model of offering products and services separately often find advantages when bundling offerings into configurable, adaptable, and personalized solutions. Then after realizing customers want after-sales and value-adding services, they start to offer recurring fixed-price or usage-based subscriptions.

At the peak of this gradual transition is XaaS, which offers a combination of equipment, products, services, and maintenance through subscriptions. Examples include high tech software companies selling a range of ransomware protections and professional services firms providing ongoing consultations for a set number of hours each month after an initial project is complete. Moreover, some media businesses offer access to expert podcasts and personal meetups with business gurus for a quarterly fee.

Each step along this business model innovation journey is a response to changing customer needs and expectations. But it’s only possible with a foundation of product and service digitization and cloud-based technologies.

IDC revealed that more midsize service-based companies prioritize and invest in technologies, such as advanced cloud ERP systems, to boost efficiency and productivity to support XaaS.

Discover the latest anything-as-a-service (XaaS) strategies and insights for midsize service-based organizations. Read the IDC Analyst Brief “Digital Services Can Fuel Growth at Midsize Service-Based Companies

In fact, 81% of professional services firms and 63% of high tech companies, including hardware, software, and information services companies, cite either saving time or increasing efficiency as the top improvement they want to achieve with their ERP solution.

Where critical capabilities for XaaS emerge with ease

An ERP foundation can help companies innovate, support, evolve, and run an effective XaaS business model with greater ease, speed, and agility. But choosing the right one requires an assessment that answers the following questions:

  • Is the cloud ERP ready to run, so you can accelerate processes, data analytics, business operations, and decision-making with the latest best practices and continuous innovation?
  • Are proven tools and methodologies included to expedite a deployment and rollout within a predictable scope and timeframe and with minimal surprises?
  • Is the cloud ERP accompanied by flexible learning and community-based expertise to meet your goals, build skills, and improve adoption – from initial implementation to long-term use?

With an ERP that fulfills these requirements, companies can gain the critical capabilities that IDC research identified as necessary to adopt XaaS, including:

  • Built-in subscription and service contract capabilities to deliver new offerings, such as digital products and solution bundles
  • Tight integration of work in progress, resource management, project billing, and receivables to improve working capital
  • Macro-to-micro analytics to manage the business in real time across every transactional dimension and drive profitability

For midsize companies, these capabilities delivered through a cloud ERP means continuous innovation, modern functionality, and scalability. They can react to innovations in a more-agile way while improving the security of their data, processes, and operations.

Take, for example, able solutions GmbH. The IT services provider reorganized its entire IT landscape with cloud ERP to digitalize its processes. This enabled the company to react faster and more flexibly to unique customer requirements while cutting costs by eliminating the need for a data center, application services, and administrators. Furthermore, the company processes invoices 50% faster, and closes its month-end books with 66% less time.

Through the right technology, XaaS delivers

Customer preferences steer business strategies, and the evolution toward XaaS business models is helping companies deliver them. For midsize businesses, this can be an incredible opportunity to establish enduring customer relationships that drive recurring revenue streams and ongoing business growth – especially when they have a well-supported, expertise-led adoption of cloud ERP.

Discover the latest everything-as-a-service (XaaS) strategies and insights for midsize service-based organizations. Read the IDC Analyst Brief “Digital Services Can Fuel Growth at Midsize Service-Based Companies,” sponsored by SAP.