Businesses and IT teams are well acquainted with the advantages of tapping managed service providers for Platform-as-a-Service, Software-as-a-Service or Infrastructure-as-a-Service solutions. The XaaS trend combines them all in the cloud, in which each tool, function or system shall be provided as-a-service. XaaS can also be seen as a golden opportunity for businesses to market their USP and a way of innovative differentiation. So what is the Golden Goose question? What are the emerging trends and what solution can address those needs? Lean Accelerate Consultancy can help you generate the means in which to assess the viability of your XaaS concept, along with its delivery into a robust, compliant and cost-effective XaaS product.
The US National Institute of Standards and Technology NIST (2011) issued a report, while this doesn’t use the XaaS acronym, it establishes the as-a-Service pattern with its three primary service models of cloud computing.
XaaS is the proliferation of these concepts where X stands for anything or everything. The drivers for this in terms of adopting the cloud for workloads benefit from lower operational costs, no upfront capital investments, simpler access to up-to-date technology, faster implementation, and ability to extend beyond the software model, and to integrate with IoT as recently seen with Rolls-Royce using XaaS solution monitoring their jet engines using IoT sensors as reported by Forbes(2018)
There are many examples of XaaS – Database-as-a-Service (DBaaS) provides access to a database platform through the cloud. Public cloud providers like AWS, GCP, Azure have DBaaS offerings. Another example is DRaaS, also known as DisasterRecovery-as-a-Service, is the replication of an application or data so as to provide failover in the event of a catastrophe.
To stay abreast of the digital trends shaping Industry 4.0, as documented in Wikipedia 2019, enterprises are looking to optimise their processes and achieve greater flexibility and performance efficiency. Anything-as-a-Service / XaaS has disrupted the market in this context offering an all in one package aimed at enhancing every element of enterprise IT, from the software, networking, platform, security, applications, and business value. So with some clever re-architecting of solutions to offer a distributed API model, XaaS can both reshaped organisational offerings both internally to their staff/business partners and or externally to their clients.
Businesses and users are both increasingly adopting XaaS models, given some very clear benefits.
Despite there being many benefits, XaaS may need to contend with issues of resilience and internet reliability. Some enterprises also want more visibility into their service provider’s environment and infrastructure so they can better gauge service health and assume a more proactive role, in particular, if the service was providing a solution inside a highly regulated industry, where compliance stipulates a “need to know” in order to vet regulator compliance.
XaaS is heavily network-dependent because all services are accessed via the Internet. As such, there will be increased costs for maintaining highly performant and robust networks – although the savings incurred by transforming to XaaS are much greater. Also, implementing a XaaS strategy can require a substantial amount of transformation and may initially meet resistance within the existing organizational model. Lastly, there are still perceptions regarding the security and reliability of cloud services, and this is why it is vital to establish a trustworthy partnership with technology consultants to help mitigate these obstacles in the early stages of the as-a-service lifecycle.
The global Anything-as-a-Service / XaaS market is expected to grow at a CAGR of 24% during 2019-2024 as reported by Research And Market (2019).
And Grand View Research (2019) expects the BigData-as-a-Service market to reach USD 51.9 billion by 2025. That’s a compound annual growth rate (CAGR) of 38.7 per cent over the forecast period 2019 – 2025.
Big data opportunities Unstructured data lying in legacy siloed infrastructure brings additional storage concerns. These data silos need to be transformed into structured storage objects that other platforms and applications can use for generating meaningful business insights. The XaaS market is evolving to deliver a Content-as-a-Service solution to help enterprises organise these data repositories and improve application agility. It also allows enterprises to build a scalable storage infrastructure that can intelligently allocate resources across multiple domains.
Data-Protection-as-a-Service (DPaaS) is an innovative service that empowers organizations to transform legacy data to create a secure, application-aware data repository that can address data management challenges present in the complex networked storage environment. Featuring a centralized console, the data protection and retention service allows organizations to safeguard their data for future use but without burdening their active infrastructure. The enhanced feature sets also help in optimizing storage thus reducing the total cost of ownership (TCO).
BigData-as-a-Service (BDaaS) has been instrumental in allowing clients of all sizes and types become more dependent on big data analytics and how it could help them reach goals. More BDaaS companies will cater to the financial sector.
In the publication Market Insights (2019) mentions the banking sector will play a role in driving that increase in market growth, particularly as those entities realize the worth of analytics for their operations. In a separate report by Grand View Research (2019) expects the growing adoption of social media analytics is contributing to increased BDaaS demand. Combined with the ever-increasing adoption of Data-Driven Decision Making (DDDM) has helped organisations in making informed decisions with transparency and accountability. Furthermore, it offers increased capacity to scale changes as well as flexibility in modelling change scenario. All of which is significantly boosting the demands for BDaaS.
The precursor SaaS pioneers discovered that continuous digital connection enables a three-stage foundational cycle, which iteratively adds new value to the relationship over time.
This fundamentally transforms how businesses operate and engage with their customers. Instead of merely focusing on throwing as many products as possible across that invisible wall, businesses shift their attention to the customer experience and helping them achieve better outcomes.
This is better for businesses because it’s a more efficient way to build better products and services, and deliver them faster to their customers. And it’s better for customers because businesses are more engaged in ensuring they continue to get value from the products and services they’re paying for, Phil Wainewright (2018).
Without going into a very in-depth conversation about this, let’s streamline the XaaS financial plan to the core basics, which can leverage your argument and business case for internal or external funding.
The financial plan needs to align with the subscription-based revenue model with its recurring nature of revenues. The focus is to help XaaS entrepreneurs spend less time building financial models and more time creating and delivering value for their customers.
The goal of the financial plan is not to demonstrate how great the opportunity is. The goal of an early-stage financial plan, especially for first-time founders, is to show investors you truly understand what drives growth.
Without a proven track record, your financial plan should serve as a tool to convince investors you know what you are talking about. Use it to show where you are going, how fast you want to go and most importantly, explain how you will get there.
Before investors will even look at the actual numbers, they are going to assume you do not have what it takes. They know the biggest risk for inexperienced early-stage founders is the execution risk. How do you convince investors you have what it takes?
In order to convince investors, there is a need to understand what is the Minimum Viable Product (MVP). The first question entails identifying what the market needs and the problem that needs solving. Then before weighing which features to build, make sure the product will align with your team’s or your company’s strategic goals. What are those goals? Are you working toward a revenue number in the coming six months? Do you have limited resources? These are some of the MVP questions that need to be answered.
With no money to build a business, the founders of Airbnb used their own apartment to validate their idea to create a market offering short term, peer-to-peer rental housing online. They created a minimalist website, published photos and other details about their property, and found several paying guests almost immediately.
In a recent Forbes (2018) article, it states that consumer companies eyeing XaaS expansion will need to answer three questions their customers are likely to pose before signing up for a service.
So now there is an understanding for the billing model,subscription-based revenue, we know what the MVP will be and what the product needs to deliver and at what price. The financial plans can be grouped into two categories.
When you build a model for a XaaS business, Monthly Recurring Revenue (MRR) is the most important line on your plan. The real challenge is then to come up with a reasonable, yet ambitious MRR plan. Successful XaaS startups grow their MRR at a rate between 10% and 25%. The key point here is investors will want to know how you plan to establish Month Over Month (MoM) growth.
To predict with accuracy and confident the MRR needs to have growth indicators which are –
Now that there is a clear understanding of what grows MRR, it is possible to start entering numbers and growth rates into the Lean Accelerate Consultancy XaaS Financial Model template. This can be downloaded for free and can help draw up a clear picture of revenue growth and cost structure for a XaaS solution. Once the revenue and cost streams are filled into the template, the growth plan indicators need to be validated. Here you need to put your thinking cap on, and by way of example, we can consider the following.
KPI number of new customers
KPI average revenue per new customer
KPI monthly revenue churn rate
Now factor these KPI’s into your XaaS solution roadmap ensuring they map to your goals. Understand how to extract these KPI’s from your solution using a realtime XaaS monitoring dashboard Phil Wainewright (2018).
Gartner (2019) predicts that by 2023, over 80 per cent of new technology solutions adopted by governments will be delivered and supported using an Anything-as-a-Service (XaaS) model.
The combination of cloud computing and ubiquitous, high bandwidth, global internet access provides a fertile environment for XaaS growth. The pay as you go cloud billing model is excellent for building out multiple parallel PoC’s for your XaaS solution and using Fail Fast to control costs for the unsuccessful XaaS candidates. Are you ready for XaaS? Why not try out Lean Accelerate Consultancy XaaS Readiness Assessment template, to understand your next leg of this journey?
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