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Cross-Practice

What is XaaS? | A Quick Guide

How to Succeed in Your Everything As-a-service Transformation

4 min read
By Thomas Lah
XaaS is at the heart of the as-a-service movement and a key piece to a successful digital transformation. But what is the official XaaS definition?

What is the XaaS Model?

XaaS can stand for anything as-a-service, everything as-a-service, or technology as-a-service. In essence, the “X” acts as a stand-in for whatever your solution is.

XaaS provides technology solutions to customers as a recurring service. This is a shift from the one-time purchase of a product. The “x” in XaaS allows companies to think outside of the box and expand their solutions to all forms of technology.

Examples of XaaS Offers

Now that we understand what XaaS is, let’s look at some specific operating models you might implement for your XaaS solution.

Platform as-a-service (PaaS)

A PaaS solution allows your customers to create their solutions on a platform that they don’t have to build themselves. This can save them valuable time and manpower and allow them to focus their efforts on the outcome they’re reaching for.

The tools you provide through PaaS give your customers the ability to develop, deploy them, and monitor their product’s impact. The use-case for PaaS is broad, but in all cases it allows you to give your customers the basis to build out their product.

Infrastructure as-a-service (IaaS)

IaaS offers companies framing to build out their app or other tech solution. IaaS acts as “the backbone” of the solution, holding it up through virtual machines and scalable storage. If you use it correctly, it can also be a great tool to expand your solution through a more developed framework.

Acting as  an integral part of their technology stack, it is important to note that your customers will be reliant on your IaaS deployment to keep their business up and running. Make sure you build out an IaaS solution fully before offering it to your customers.  

Managed XaaS

Managed XaaS is one of the fastest growing revenue streams for companies that historically sold on-premise, disconnected hardware. This is a solution comprised of product (hardware and/or software), professional services, support, and operations elements. They are bundled into a single per unit per month price governed by a managed services agreement.

Services are delivered from a remote network operations center. Delivery resources are typically shared across multiple clients. Product elements may be hosted and/or on premises. Product may be single tenant or multi-tenant.

These examples are just a few of what XaaS offers can encompass. Others include analytics as-a-service (AaaS), database as-a-service (DBaaS), desktop as-a-service (DaaS), communications as-a-service (CaaS), functions as-a-service (FaaS), and more.

You might have noticed one key example missing: software as-a-service (SaaS). This is because the two often get confused for one another, and so we are going to take a look at how they’re similar and what are the key differences.

XaaS vs. SaaS

Software as-a-service (SaaS) is on-demand access to ready-to-use, cloud-hosted, application software. SaaS allows you to deliver your software solutions to customers through cloud services. Customers can deploy your software to help them reach their outcomes, saving them the time and money it would take to create the software on their own.

Like all XaaS offerings, SaaS is built on the subscription model and takes your solution offsite and into the cloud. This lowers the cost of installation and maintenance for companies, and allows them to access your solutions from anywhere.

When it comes to sorting out the differences between XaaS and SaaS it’s fairly simple: SaaS solutions are XaaS solutions. XaaS is the umbrella that houses SaaS and the other models mentioned above.
“XaaS Offerings”
XaaS Offerings

Benefits of XaaS

Whether or not you’re currently implementing XaaS solutions, there is no doubt you soon will be. Digital transformation has changed the way we do business and forced us to reimagine products and services for the digital age. While this might cause upheaval in your product offers and financial model, there are benefits to the XaaS model that make it impossible to ignore.

Moves your solution offsite

With the rise of remote work, customers want solutions that aren’t based onsite and can be accessed from anywhere. When searching for solutions, this will be a key factor in your customer’s decision making process. At this point it’s not a differentiator, but a necessity.

Creates solutions that are flexible and adaptable

Being cloud-based allows you to react quickly to market changes and innovations and make updates as needed. If your solution is solely onsite, it will cost you time and money to physically go to every company’s location to make those updates. Given the lightning-speed turnaround of the tech industry, get ready to make quite a few trips.  

Maximizes your solution’s value

Digital transformation is focused on easing the customer’s path to value and doing away with unnecessary complexity and lowering your operating expenses. The operational simplicity that XaaS solutions give to customers accelerates their adoption and time-to-value. The sooner they are able to effectively use your solutions towards reaching their goals, the more likely they are to see the long-term value you can offer.

These are just the high-level benefits we see from members who make the XaaS shift, and is something I went into more detail in my keynote on the eight compelling attributes of XaaS offers.

The XaaS Transformation (Switching to XaaS)

Making the switch to XaaS affects every corner of your business. It is a complete overhaul of your internal product development, offer building, sales and renewal process. More than just changing revenue streams, you are changing the foundation of what you’re offering your customers.

"The transition from selling technology as an asset to selling technology as a service is incredibly challenging. Why? Because so many things need to change!" - Update: XaaS Transformation

Let’s take a look at what different teams inside of your organization need to do to adjust, and best practices to help them do it.

Customer Success

Customer success acts as the maintainer and grower of your customer base. This becomes of increased importance in the XaaS subscription model, where your revenue depends on getting customers to renew. Contrary to what you might think, the renewal process doesn’t start at the end of the subscription, but the beginning. This is where customer success plays a huge role.

We’ve talked before on the importance of customer onboarding for XaaS companies and how it can set you and the customer up for a lasting relationship. Our research shows that 47% of our members begin onboarding and adoption activities immediately after signing their contract. This makes the first 30 days crucial to your long-term success–especially for XaaS companies with a free 30-day trial.

Arm your customer success organization with the tools needed for a smooth and thorough onboarding process. This will lead to higher adoption numbers and, hopefully, a higher renewal rate.

Sales

The first step to getting your XaaS solution to customers is selling it to them. The subscription model means you need customers to choose you over and over again in order to remain profitable. This all starts with the sales team, and impacts how they should approach XaaS offers.  

Being outcome focused is a key trait of XaaS solutions, which is why your team needs to shift to outcome-based selling. You’ll remember that outcome-based selling focuses on the outcome your solution can give to customers and not your features. This might take some getting used to, as selling a service requires different framing than selling a physical product.

Additionally, it’s important that your sales team be upfront and realistic with what your solution can and cannot provide. Have the sales team vet prospects to make sure you’re able to deliver their desired outcomes, as making false promises on what you can deliver is not a recipe for renewal.        

(For more on this, check out our webinar on the State of XaaS Sales.)

Managed Services

Traditional product organizations lack over 80% of the capabilities required to successfully scale and operate XaaS solutions. This statistic highlights just how pivotal managed services can be for companies making the switch to XaaS. Simply put, many companies lack the know-how required to execute their new XaaS solutions.

The “muscles” needed to operate these solutions are more developed in managed services, but that doesn’t mean there isn’t still work to be done. Take a look at the TSIA Capabilities Framework for how managed services can improve upon and develop the skills needed to better serve their customers. This includes everything from service strategy to operations, and can help make sure you’re ready to handle the influx of customers who will need help executing the XaaS transformation.

Professional Services

Professional services can be a massive accelerator to companies that are trying to run an XaaS business or transform into one. In XaaS, there is high priority on increasing renewals and professional services can be a big driver of success. However, it can also be a roadblock to achieving your goals.

Our distinguished VP of Professional Services Research, Bo Di Muccio, talked about steps professional service organizations can take to prepare for the XaaS transformation in his recent blog. The first and most important step is setting your strategic plan. Polling shows that while 79% of respondents had a strategy around existing services, only 59% have a formal professional services strategy around XaaS.
“professional service XaaS strategy in existing market”
Professional Services XaaS Strategy

In order to succeed in XaaS, companies need to plan for that success. Creating a formal professional services strategy around XaaS gets everyone on the same page and working towards the same goal.

Partner Channels

For those of you delivering your solutions through partner channels, the transformation will be two fold. Not only do you need to make the XaaS transformation, your partners will as well. To deliver business outcomes within the XaaS world, channel partners must shift how they engage with customers and revamp the customer experience.

However, partner performance will fall to the level that they are trained and resourced, and so channel partners may not meet all expectations. This means vendors will need to help partners build new organizational muscles to overcome changes in their financial and engagement models. In short, vendors will need to develop a comprehensive partner enablement strategy.

Remember, when your partner channels succeed, you succeed. For more on how, watch our State of XaaS Channel Optimization webinar.

Bottom Line

Whether it’s SaaS, PaaS, IaaS, or Managed XaaS, the technology industry is quickly becoming a service-based industry. As I stated in my paper, The Three Cs of XaaS Profitability, it comes down to two simple things:
  • Customer Acquisition. You need to get more customers on your XaaS platform.
  • Customer Retention. You need to keep customers on the platform. 
With these simple goals in mind, you’ll need to make complex changes and hard decisions to see the transformation through. It’s more important than ever for every part of your organization to work together to maximize the revenue opportunities that XaaS brings. If not, you’ll continue to fall behind and it will be more difficult to catch up.
 

 June 14, 2022

Thomas Lah

About Author Thomas Lah

Thomas Lah is executive director and executive vice president of TSIA. Since 1996, he has used his incisive analysis, strategic thinking, and creative solutions to help some of the world’s largest technology companies improve the efficiency of their daily operations. He has authored several books, including, Bridging the Services Chasm (2009), Consumption Economics (2011), B4B (2013), and Technology-as-a-Service Playbook: How to Grow a Profitable Subscription Business (2016).

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