What is XaaS? How do you even pronounce it? It’s (Anything) as a Service, let’s pronounce it “zaahss”, and it’s a market that is absolutely on fire. Consumption and subscription services are taking the world by storm, as evidenced by projected XaaS growth of 40% a year through 2020. Customers are flocking to on-demand XaaS services to fill an endless array of niche requirements, and for companies wanting to grow recurring revenues, XaaS is indeed fertile ground. Here’s four reasons why it will keep seeing massive growth in the coming years:
On-demand services are in high demand
Demand for XaaS services has been growing ever since the term entered the lexicon nearly a decade ago. Comprised of three main categories—Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS)—XaaS services are gaining steam.
The boom is being fueled by many of the same factors that are driving the shift toward usage and subscription models in general. They offer providers predictable, incremental revenues that can really add up. For example, in 2015 the median gross margin for SaaS companies was 78%.
XaaS delivers the trifecta of speed to market, agility, and cost savings. Lower cost of entry, rapid access to valuable capabilities, the ability to scale at will and pay only for what’s used adds to the appeal. Advantages like these are tough to beat, and they’re a big reason why revenue opportunities from XaaS will continue to expand for the foreseeable future.
XaaS is only just now warming up
XaaS has been around for nearly ten years, but it still hasn’t hit its stride. The number of individual types of XaaS offerings are still multiplying at dizzying rates.
To get some idea of the scope, check out the Big –AaS List of As-a-Service Offerings. It covers the big three, SaaS, PaaS, and IaaS, and fifty of their various incarnations such as Desktop as a Service and Network as a Service. It’s a broad overview—and it barely scratches the surface.
Automation as a Service, Inventory Management as a Service and Transportation as a Service are just a handful of the hundreds of services you won’t find on that list. Truth is, pick practically any industry these days and you’ll likely find a bevvy of as-a-service offerings already on the market or in the works.
XaaS is moving far beyond IT
XaaS has evolved well beyond its roots as a provider of IT services. For example, products are morphing into services—and they often have nothing to do with IT. Take commercial trucks. Instead of buying them outright, fleet managers can now get them as-a-Service on a consumption basis. Jet engines are even sold to airlines in a usage-based “power by the hour” model, in which they pay for the engines by the flight-hour.
The same goes for products serving many industries, from business printers to medical imaging equipment. Trains as a Service are now available in the UK. And automakers on both sides of the pond are embracing Transportation as a Service. Have a product? Jump right in and offer it as-a-service.
IoT is putting XaaS in overdrive
With the rise of the Internet of Things (IoT) monetization opportunities from XaaS are soaring to new heights. IoT’s pervasive connectivity is transforming the efficiency of well-established XaaS services such as Disaster Recovery as a Service, while enabling futuristic new ones like Augmented Reality as a Service.
IoT technology also paves the way for another avenue of revenue expansion—the merging of distinct XaaS services into compound services. For example, IoT makes it possible to seamlessly blend Monitoring as a Service with Drones as Service or Artificial Intelligence as a Service with Predictive Analytics. When you consider the thousands of business problems XaaS can address, the number of possible XaaS combinations is truly staggering.
Explore your options
XaaS is a niche-generating machine, offering untold monetization opportunities for those with the foresight to seize them. If you have a service or product that lends itself to an on-demand model, you owe it to yourself to consider XaaS. To make the most of it, make sure your billing, delivery, fulfillment and inventory systems have the digital dexterity today’s as-a-service models require.