Why Enterprises are using XaaS Business Model for Growth?

May 17, 2021
Oracle | 7 min READ
Catalyzing Consumer Behavior
The turn of the millennium brought with it a new and interesting trend that can no longer be dismissed as a fad: the increasing proclivity of people to rent, as opposed to own. This might sound like a simple attitudinal change, but it is actually an epochal change that has begun to alter the way commerce is done fundamentally.
Deepak Gupta
Deepak Gupta

Former Global Practice Director

Oracle MDM, PLM and SaaS/ ERP Cloud Practice


In his seminal work, Future Shock (1970), futurist Alvin Toffler described the growing car rental market in America to note the growing transience of our relationship with "things". His prediction was eerily accurate as a McKinsey report of U.S consumer behavior showed that the purchases of goods and services had vastly declined, only to be replaced by consumer purchases of ‘experiences’. While this might translate to convenience and lesser burdens to consumers, it is yet another ‘reset’ for businesses as they will need to abandon older ways of doing business to appeal to an entirely new pattern of consumerism.
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As the number of renters in the U.S. alone grew from 9 million to 43 million families between 2005 to 2015, this trend is here to stay and poses a massive opportunity for enterprises to rethink the way they package products and services so as to maximize revenues while ensuring they can maintain advantages over their competitors. One of the most popular answers to the rent vs. own quandary has been the Everything-as-a-service / Anything-as-a-service (XaaS) business model, a concept that has been borrowed from B2B companies that have broken previous revenue ceilings by extracting more value out of their clients in the long run.
The XaaS model might seem ludicrous to anyone steeped in the older way of doing business, especially in light of the inevitable vendor lock-in that adopting such a system would bring. However, the upsides to such a model are enormous cost savings, especially for the consumer, and a higher customer lifetime value (CLV) for businesses. When executed properly, the XaaS business model creates a win-win scenario for all stakeholders and warrants closer inspection.
Unlocking Business Growth with XaaS
As markets begin to saturate and growth starts to throttle, enterprises often have two ways to continue to grow: expand their offers in terms of range, or value. Some of them even dare to attempt both strategies. While these are traditional ways of inviting growth, the XaaS business model is a relatively new take on growth that bundles offerings such that convenience becomes the prime appeal.
It takes full advantage of the boom in experiential consumerism by providing everything as an experience instead of a product, essentially becoming XaaS:Anything-as-a-service! The magic of a XaaS solution lies in how it takes any ordinary product, productizes it and adds multiple layers of services to it; a phenomenon colloquially referred to as ‘servitization’.
This subtle change in the conception of a product ensures that transactions are not one-off instances and provides a unique opportunity for building long-term relationships with the customer. Naturally, focusing on the long-term enables businesses to incorporate innovation as a cornerstone of their growth strategy and deepen relationships, both of which are key pieces that ensure the company’s health in the long run. Such an approach has been proven to have a positive effect on company-wide performance.
The biggest promise of a XaaS model is the prospect of assuring recurring revenue from a sale as a vehicle to sustain business growth over a longer time frame. Companies are starting to realize this as a recent study by Deloitte revealed that a staggering 75% of respondents believed the XaaS model fosters innovation and enabled faster time to market, while 39% confessed to using it as a means to close any and all gaps that exist between them and their competitors.
Technology: The Key Enabler for a XaaS Model
At its core, a XaaS model’s thesis stipulates that an offer cannot exist in a silo, but comes bundled with a bevy of business capabilities, products, and services, all of which work together to provide customers with unprecedented levels of value. In a typical XaaS example, this kind of horizontal integration across the product/service portfolio makes it an ‘offer that can’t be refused’ due to the sheer amount of value that could be realized.
However, such bundling is far from simple to affect. For starters, it requires the company to develop a high degree of collaboration and engagement along with its entire product suite and vendors, the mere prospect of which is enough to send many companies scattering from the idea. Yet another problem is with deciding the exact contribution of each product/vendor to determine ownership as well as compensation.
The endgame with a XaaS model is to drastically improve the core customer experience and use that as a tool to drive customer acquisition, and consequently, business growth. Keeping this in mind, enterprises will need to fully understand the kind of transformation that is needed across all verticals to enable a XaaS business model. These shifts are often complex and resource-intensive, which makes it that much harder for incumbents who might find themselves hemmed in by legacy I.T infrastructure and traditional business practices.
For instance, if the front-end systems are not in sync with back-office systems, the chances of failure are fairly high. For an enterprise to be agile, legacy systems will have to be abandoned in favor of newer ones that foster better innovation and collaboration across the company.
Technology is a key enabler in this journey, and it wouldn’t hurt to carve out an entirely new division altogether to experiment with different configurations of a XaaS model to understand which one works best. This learning can then be applied to other parts of the company.
Choosing the Right Technology Partner
Not all enterprises might have the wherewithal to attempt a company-wide transition on their own. Architecting the blueprint for a XaaS business model will require an enterprise to enlist the services of technology experts with industry-specific knowledge. The right technology partner will ideally provide a complete and thorough roadmap to effect a XaaS model transition in the form of a complete technology solution that covers the entire gamut of the operation.
While it is necessary to account for individual nuances in pursuit of building a XaaS model, there are enough similarities amongst most XaaS models that make it viable to opt for a pre-built XaaS solutions that ought to address three-quarters of a company’s requirements directly. For instance, Birlasoft has developed XaaS solutions platform that incorporates the following prebuilt business processes purposefully built to meet the needs of this new business model:
  • Offer Lifecycle Management: This is a key building block of a XaaS model, which refers to the construction of bespoke offers, platforms and/or packages that deliver a suite of products and services in a collaborative fashion.
  • Offer Customer/Supply Chain Management: XaaS models require an entirely new kind of invoicing paradigm that allows for a seamless billing experience, hassle-free subscription management, and smoother order-to-cash (O2C) cycles.
  • Offer Service Management: Understanding customer experience impact sales requires a robust service management system that can track usage patterns and diagnostics to further improve the product. Fortunately, IoT enables near accurate real-time tracking that allows effective service management.
  • Offer Finance Management: A crucial piece to building a XaaS model is deft revenue management. Having such a system in place will ensure the company can understand the viability of certain models and change things up as and when necessary without any major delays.
These are just a few examples of what a pre-configured XaaS Solutions looks like. As a company, if you have further (or more exacting) requirements, it is always a good idea to speak to Birlasoft expert upfront to get a solid understanding of their offerings and capabilities.
Two decades into the new millennium, companies discovered that the strategies that gave rise to industry leaders in the latter half of the 20th century simply didn't work in the internet age. As internet connectivity begins to blur national boundaries and enables companies to reach out to customers in other geographies with much greater ease, companies will have to think deeply about how to leverage the power of the internet to ensure sustained growth levels.
Fortunately, the XaaS model is a tried-and-tested method to unlock business growth and has become a strategic imperative for companies that seek to remain relevant. Choosing a pre-configured end-to-end technology solution could vastly cut down the time taken to transition to a XaaS business model, but it is crucial that it be done by experts and technology vendors who understand your company’s requirements and philosophies so as to deliver a bespoke XaaS solution that works for you.
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