According to research conducted by IDC, 91% of midsize company leaders, seeking increased revenue and market share growth, prioritize the adoption of new business models and services to meet evolving customer expectations. These companies are embracing innovative digital services, commonly referred to as “everything as a service” (XaaS).
In fact, recurring revenue streams have become a central focus for companies in recent years, particularly those with capital-intensive assets, as they navigate the swiftly changing and highly disruptive business landscape. In response, businesses are actively seeking innovative approaches to offer everything-propositions enabling new revenue streams, a consistent and reliable flow of income, and delivering superior customer values. This strategic shift not only addresses the need for sustainable revenue models but also reflects the adaptive nature of companies in the face of ongoing market fluctuations.
This is why the global XaaS market is projected to grow from US$545.35 billion in 2022 to US$2,378 billion by 2029. In one study, high-tech companies implementing XaaS reported accelerated recurring revenue, highlighting its strategic impact.
With almost a century of experience in the business, this company primarily sold its mining equipment as its main product and offering. However, they discovered that their customers' needs extended beyond operating heavy-duty machines. Most customers lacked the experience and expertise to use these machines in a productive, safe, and efficient manner. Recognizing this, the company shifted its focus towards helping customers increase efficiency and productivity.
Instead of merely offering mining equipment, they began providing solutions and services. These services include minimizing machine downtime, improving operational efficiency, assisting customers in achieving their business goals, and providing financial and insurance services, along with value-added activities.
From this example, we see a fundamental shift in the business model.
Who can benefit from XaaS?
According to SAP insights, XaaS is a broad category of business models in which users access products, tools, technologies, and/or services “as a service”.
XaaS models have been seen to be beneficial to the company delivering the service, and the customer leveraging the service, and results in recurring, predictable and usually increased revenue streams.
Are you ready for XaaS?
According to IDC research, midsize service companies need to establish a solid foundation to provide, support, and monitor these extra services. While XaaS and its advantages are achievable, careful planning, thoughtful selection, and effective execution of suitable supporting technologies are essential. Having the appropriate underlying software is vital, enabling growth and fulfilling the organization's requirements both now and in the future.
For example, monetizing an XaaS model may require a new billing/quote-to-cash process that can be adjusted to subscription and usage-based payments. It is important to know if the billing and accounting environment can consolidate and change billing models and resolve disputes and returns on the fly.
For the as-a-service model to work it is also essential that the front office and back office are seamlessly integrated. If the contract calls for monthly billing based on usage, this data needs to be available, by designing the product to capture and communicate the usage back to the business process, to ensure accurate and timely invoicing, revenue recognition and analysis.
What steps can you take?
Once you have the system capabilities for implementing the XaaS business model, you also have to adapt your business processes. Here's what you need to keep in mind:
Prioritize people through training and collaborative efforts,
Simplifying customer interactions while maintaining cloud security and swift issue resolution.
Invest in infrastructure and technology by emphasizing the importance of scalable cloud infrastructure, strong cybersecurity measures, seamless API integrations, and mobile optimization.
These factors are crucial for a seamless and successful implementation of XaaS within your business strategy.
If you would like to learn more about the secrets of enabling XaaS business models, I invite you to join an upcoming webinar, titled "Your Guide to GROW with SAP: Everything as a Service," scheduled for Tuesday, November 14th.
During this event, a panel of experts will discuss the shift from managing your business operations to innovating your business through the implementation of SAP S/4HANA Cloud, public edition. We will also feature a professional services company that has leveraged the capabilities of SAP S/4HANA Cloud, public edition, enhancing their operations with streamlined services, including automated ordering and billing processes, as well as efficient management of the entire equipment lifecycle.