Enhance Business Operations with XaaS Business Model

Jun 16, 2021
Oracle | 8 min READ
Time for a gradual shift in Business Operations
Look around in the enterprise ecosystem, and you are bound to find shifts in the ongoing operations due to technological disruptions and digital innovations. Today, when most businesses are operating on a work from home model, the stakeholders – both internal and external are figuring out strategies to reduce cost and investments in direct and indirect procurement.
Aswanth Vaidiswaran
Aswanth Vaidiswaran

Lead Solution Architect


Manufacturers are impacted by huge disruptions in new equipment sales due to pandemic and competitive pricing. They are taking a focused approach towards opening more unique avenues and seek out opportunities for revenue growth.
Most industry leaders are attempting to shift from cost optimization to speed optimization, profitability to revenue growth, customer satisfaction to delivering exceptional customer experiences.
Manufacturers and OEMs are mapping customer journeys to ensure long-term engagement by delivering the right product focusing on customer’s needs that in time leads to the future growth of the organization. This shift is challenging as many industries are tightly integrated with hi-tech infrastructure and trying to implement the best practice to scale the business. In other words, they are unable to scale their successes across the enterprise if they are keeping to their legacy methodologies. Therefore, there’s an urgency to carve out the foundation of new business models better fitting the current ecosystem and organization goals.
What is XaaS and how does it influence the Business Landscape?
Just like Software-as-a-Service (SaaS), Information-as-a-Service (IaaS), or Communications Platform-as-a-Service, XaaS refers to Anything-as-a-Service where products and services can be purchased as a subscription-based on a “pay as you go” model.
The past 18 months have seen a striking change in the way we work and our overall business operations. Product-based companies started to provide services for goods sold. Products and services are bundled together as offerings. Exploring opportunities for recurring revenue, product companies have started opening Global Support Centers across the world.
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Businesses have to invest based on products, cost, and quality. However, the lack of seamless operations and communication across different business verticals proves to be a roadblock, and there is a high probability of losing a customer due to heavy competition.
Shifting from a product-centric outcome, businesses are focused on creating value-based outcomes. Businesses focus on segments to offer products and costs cut out for each segment, aiming to derive a higher margin on sales based on customer engagement. Most of the companies target B2B customers and enable B2C customers as well through an undiversified business model. There is a greater need to identify investments that will help in cost reduction. Investments are made based on the market trends of the existing products that encompass all modern technologies - OSN, IoT, AI, ML, and predictive analytics.
XaaS model helps generate revenue that can be directed towards the upgradation or cross-selling of the new product that ensures profitability. A XaaS business model keeps up with customer demands while growing profits. Supported by a customer engagement model that drives adoption, expansion, and cost-effective renewal of customer contracts, enterprises can switch towards creating a broader portfolio, including subscription-based offers.
From Hitech to automotive, manufacturing, real estate, and more, everyone likes to operate on a XaaS based business model, embracing the culture across all the operations of their businesses. Here are a few examples of the various XaaS enabled services to give you the flavor:
  • Mobility-as-a-Service offered by the automobile industry
  • IT-as-a-Service inclusive of a wider gamut of services such as SaaS, PaaS, IaaS, DBaaS, DaaS, DRaaS, CaaS offered by Hitech industries
  • BFSI industry enables Insurance-as-a-Service and Banking-as-a-Service offering end-to-end financial solutions
  • Manufacturing-as-a-Service offered by the manufacturing and heavy engineering industry
  • Healthcare-as-a-Service is offered by the medical and healthcare industry
  • Real estate is also developing its own portfolio of Space-as-a-Service, covering the tidbits of everything this sector has to offer
XaaS vs Legacy Approaches – A comparative summary
The following factors differentiate a XaaS based modernized business model from your legacy frameworks:
Revenue Model
XaaS operates on a 20-80 revenue model rule where 20% of the revenue is from one-time billing while 80% is recurring. In comparison, legacy models operate on the 80-20 rule, where 80% of the revenue is from one-time items, and 20% are recurring due to spares.
Enabling automated renewals based on delivery quality XaaS model focuses on process automation to map successful outcomes. On the other hand, the legacy approaches work on quarterly revenues.
Service Revenue
Service costs are a part of the subscription for a XaaS based model, while aftermarket service is the differentiating factor, and additional revenue will be contract-based for the traditional models.
Customer Engagement
XaaS models are proactive in monitoring and leveraging customer feedback to innovate their products, service offerings, and assistance, while customer engagement is a linear approach that is achieved during after-sales support with consecutive account mining and new prospect identification.
Investment Strategies
The XaaS model always drives investment based on a thorough analysis of the revenue growth, while traditional models are based on market needs.
Pricing Model
XaaS works on a freemium subscription model for the trial period, post which there is a fixed user subscription based on the consummation duration. Traditional approaches conform to a linear tier-based volume pricing.
Customer Growth
Customer growth strategies for a XaaS model consider new offers, new contracts, expansion, cross-sell, upsell, downgrade and upgrade based on market needs; it is more flexible to change. While legacy approaches look into the development of new products and creating market needs for them.
Questions to ponder on while implementing XaaS in your business
While shaping the XaaS business model for their organizations, executives need to ponder on a few parameters and factors in certain aspects. Pre-requisites are as crucial as the strategy, plan of action, execution, and analysis of the business outcomes.
Here are a few questions executives at different levels should ask before embracing a XaaS based business model:
The focus of a CEO
  • Is there a focus to bring all the entities together to meet the consolidated success?
  • What are the KPI’s and outcomes for the business? Are they product-centric, service-centric, or outcome-centric?
  • What are the options to become a primary partner or monopoly partner for existing customers?
  • In today’s competitive world, how to partner for a share in customer revenue growth?
  • Is there a way to extend business for B2C customers to increase revenue growth?
Thought Benders for CFOs & VP of Sales
  • What is the go-to-market strategy for XaaS, and how to enable customer transformation for OPEX?
  • What is the investment required for enabling XaaS transformation – customer acquisition cost and lifetime value?
  • Is there a way to control the cash flow for XaaS and direct investment for the right segments?
  • What are the different pricing strategies, cost of sales, and key to KPI measurement?
  • Is there a need to transform the existing business model to XaaS or create the XaaS model as a new business line?
Decision Making Points for CIOs
  • Existing ERP applications are designed for perpetual sales or service-based approaches?
  • Do your current front-end, and back-end support the XaaS model?
  • Identify the XaaS processes that are supported by existing applications and readiness levels.
  • What are the critical business processes required for XaaS transformation?
  • Identify XaaS enabled solutions and applications to scale business growth in the future.
  • How to enable XaaS business model using XaaS IT model (i.e., without any significant investment)?
Evaluators for VP of Product Management, Service & Operation
  • What are the essential product or segments that can be considered for XaaS offers?
  • Identify the list of priorities and complexities in your business?
  • How to identify the right revenue mix, hidden cost, and risk to help your organization grow?
  • How to collaborate with a cross-functional team and reduce the time to market?
  • How to engage the customer as a partner to identify the pains and enable your change management?
Different Pillars for a XaaS Business Framework
Examples of Smart Manufacturing-as-a-Service Model
Different Pillars for a XaaS Business Framework

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A XaaS-based business model is shaped upon the following pillars:
  • Roadmap to achieve productivity or operational goals
  • Top-down commitment, i.e., executive team and investors
  • Identify the dependencies and entities working in silos
  • Finance KPI’s for XaaS model to meet XaaS finance and accounting
  • Focus on funding and cash flow without impacting the bottom line
  • Build compensation model based on revenue, operation cost, acquisition cost
  • Drill down to the lower cost and optimize the cost based on features
  • GTM strategy for migrating B2B customers to B2C customer
  • Gather and analyze customer feedback to identify the renewals, expansions, downgrades, cancellations
  • Factors that motivate customers to switch to a subscription-based model
  • New roles with sales enablement for an internal and external sales team
Product Management
  • Roadmap to migrate product bundle to offer bundle
  • Analyze the impact to initiate change management
  • Collaborate with internal (LoB, department) and external (vendor) stakeholders
  • Process and logistics to support the new model
  • Back-end support without any operational disruptions
  • Shift left to reduce cost and make necessary decisions
  • Enabling IoT to ensure business continuity for end-customer
  • Gather the data and generate a quality plan for product improvement
  • Enable decision making through an improved and comprehensive organizational plan
  • Negotiate with new vendors to meet end business goals
  • Construct a new offer along with your business partner (vendors and customers)
  • Meet your demand and plan your supply
Way Forward
Therefore, offering maturity, organizational readiness, aligning talent profiles across business processes, and timely process automation XaaS models are now emerging popular to drive a successful business. Enterprises looking to enable XaaS - Anything as a Service business model as their growth strategy should initiate the assessment process through the right skilled technology partner and evaluate available prebuilt end-to-end solutions for fitment. Birlasoft XaaS Solution is one of the unique platforms designed to cater to the end-to-end business need of XaaS and is ideal for evaluating. Click here to know more.
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