XaaS and subscription business models | Digitizing your business #10

Will XaaS make all digital business tools subscriptions? Traditional methods of using digital technologies and services associated with one-time purchases and licenses have their advantages. They are stable, proven, and properly tailored to an organization’s needs. With the growing role of subscriptions in business models, the question is whether XaaS – anything as a service – will ultimately transform the way we use digital solutions. Read on to find out more.

XaaS and subscription business models – table of contents:

1. Introduction
2. What is XaaS?
3. How is XaaS transforming business?
4. XaaS and technological innovations
5. The future of XaaS
6. Summary

Introduction

As opposed to traditional one-time purchase models, subscriptions enable users to access digital services through periodic payments. In the era of digital transformation, it’s worth considering whether the subscription model can become the only way to use technology and services. After all, subscriptions help organizations increase their flexibility, change tools at any time, and pay for the solutions they actually use.

What is XaaS?

XaaS, which stands for “anything as a service”, is a business model that relies on providing a variety of technology services and applications on a subscription basis. The history of XaaS dates back to the early days of cloud computing when providers started offering services based on cloud solutions.

The very idea of XaaS originated from the concept of “Software as a Service” (SaaS), which became popular in the early 21st century. Initially, XaaS involved subscription services such as:

• Platform as a Service (PaaS)
• Infrastructure as a Service (IaaS)

They first appeared in 2006-2008, when Amazon Web Services (AWS) introduced its Elastic Compute Cloud (EC2) and Simple Storage Service (S3).In the following years, XaaS evolved to include an increasing number of services based on a subscription model, delivered through the cloud.

In 2016, analysts from Forbes predicted that by 2020, up to 85% of new business solutions will be based on the XaaS model. Indeed, over the past few years, the XaaS market has been growing rapidly. This growth is driven by, among others:

• the need to reduce costs,
• greater flexibility,
• rapid access to new technologies, and
• the global trend of digital transformation.

Currently, XaaS involves a wide variety of services, such as Data as a Service (DaaS), Artificial Intelligence as a Service (AlaaS), and Security as a Service (SECaaS), and forecasts indicate that its role in business will continue to grow.

How is XaaS transforming business?

XaaS speeds up digital transformation by providing services that are easier to implement and integrate with existing systems. The model also impacts an organization’s operational efficiency, allowing it to achieve better results through flexible solutions. According to the report prepared by the Center For Technology, Media & Telecommunications in 2018, using subscriptions significantly increases the flexibility of companies.

The best results were achieved in two areas:

• improving operational efficiency, and
• increasing business agility.

62% of respondents pointed to the ability to better tailor IT services, such as adjusting capacity, performance and cost to meet current business demand. And 65% of business representatives emphasized that the XaaS model opens the path to innovation. This is because it gives companies access to the latest technologies that were not available in the traditional model.

XaaS and technological innovations

XaaS aligns with such technological innovations as:

• Internet of Things (IoT) – that is, a network of interconnected devices that collect and exchange data, enabling automation and remote service management in various fields, such as smart lighting management in smart buildings (Lighting-as-a-Service),
• Analytics as a Service (AaaS) – it allows customers to process, analyze and visualize data through a third-party service provider.
• Edge computing – refers to the practice of processing data at or near the source of data generation, which speeds up data analysis and reduces latency in service delivery. Here, among other services, you can take advantage of Edge Computing-as-a-Service in Industry 4.0.

With these technologies, XaaS enables companies to adapt to new challenges more easily and implement innovative solutions faster.

The future of XaaS

Forecasts indicate that the role of XaaS in business will grow, and the subscription model will become more common. Technological development will contribute to the emergence of more and more XaaS-based services, which in turn will lead to a change in the business models of many companies.

A report by Fortune Business Insights predicts that the global XaaS market will grow from $545 billion in 2022 to $237 billion in 2029, so you can perfectly see the trend where B2B subscriptions, or business-to-business services, are becoming the dominant software usage model in the market.

Summary

Will XaaS contribute to the dominance of subscriptions in business? On the basis of market analysis and the role of XaaS in digital transformation, it can be concluded that the subscription model has already become dominant. With the development of technology and innovation, XaaS will be used more and more by businesses to increase efficiency and flexibility. The question to ask yourself at the end is: in what areas is my business ready to implement XaaS in its operational strategy?

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