Everything-as-a-Service or Anything-as-a-Service (XaaS) is the flavor of the season. 

XaaS represents the pay-for-use consumption model associated with the cloud. The traditional consumption model entails buying the product or service to consume it. The subscription model first became popular to consume software. 

Software-as-a-Service (SaaS) offerings enable the use of software without the hassles of download. Soon the concept spread to infrastructure. Infrastructure-as-a-service (IaaS) offers computing power, storage space, cloud servers and other services.

XaaS extends the concept of the pay-as-you-go business model to other enterprise functions. The broad XaaS umbrella co-opts SaaS, IaaS, analytics-as-a-service, backup-as-a-service, network-as-a-service, content-as-a-service, testing-as-a-service, and about every other business function.

The concept of XaaS dates back to over sixty years ago when Xerox leased copier machines instead of making outright sales. Xerox supplied the machine, the consumables, and the support for the machine. They charged businesses on the number of copies. The recent popularity of XaaS is the fallout of the spread and popularity of the cloud.

The COVID-19 pandemic sped up the pace of cloud adoption by a decade. At the start of the pandemic, businesses found themselves locked out of their offices and showrooms. Even when they could operate, they found very few customers willing to take the risk of visiting their premises. Resilient businesses migrated their applications and resources to the cloud to work from anywhere. Most companies now streamline their cloud adoption. They embrace the “as-a-service” model to maximize agility and leverage their cloud investments.

Here are four specific ways XaaS helps businesses become more agile.

1. Converting Capex to Opex

XaaS enables shifting capital expenditure (Capex) to operational expenditure (Opex).

Setting up traditional on-premises systems or resources is costly. Often, outright purchasing becomes too expensive and complex for the customer, forcing them to abandon the scheme. XaaS subscription models spare businesses from investing huge capital or other scarce resources. They may use the product through affordable monthly subscriptions.

Opex cost-based subscription services enable the enterprise to:

• Attribute costs to specific services or consumers. Businesses may make accurate cost estimates of the service offered and bill the customer. They no longer have to make guesstimates to capital costs for different services and customers.
• Pay only for the specific functionality they use. Empirical evidence suggests 80% of customers use only 20% of the functionality of any product. Businesses no longer have to spend scarce resources to set up infrastructure they may never need. They may add cloud capacity at short notice when business peaks, without delay.
• Experiment with new services before committing long term. They may make course corrections and shed services they do not need.

Rolls Royce, one of the early adopters of the XaaS model, charges aerospace customers for turbine engines based on the number of hours on-air. The costs cover maintenance and all other associated costs. In-built IoT sensors send data to Rolls Royce’s advanced analytics engines to track engine performance.

2. Enabling Flexibility

Today’s businesses struggle to balance value and price. Customers tighten their purse strings in a tough economy. Enterprises have to decrease complexity and reduce service costs to keep service costs to a minimum. Many customers are ready to sacrifice functionality to access the product at low prices. But, many customers are still prepared to pay a premium for speed. They demand shorter innovation cycles, which increases the complexity of the product and raises the cost.

XaaS enables:

• Adaptability through modularisation. XaaS providers break down the product or service processes into simple modules.
• Deploying custom components as per the needs of the customers.
• Fixing prices depending on the usage of the service. Customers may pick the functionality they need and pay for the service.
• Consider WHOOP Strap, a provider that servitize fitness devices such as FitBit. Customers subscribe to the integrated analytics platform that offers critical insights. Such a business model spares customers from the upfront cost while delivering more long-term value to the consumer.

3. Delivery of Innovative Services

XaaS’s subscription-based model suits the present business ecosystem, where disruption is the norm.

The fast-paced changes in technology leave products with a low shelf life. The C-suite is reluctant to invest in technology that, though useful for present needs, may become obsolete. Unpredictable maintenance and service costs may render ROI calculations awry. The business may get stuck with outdated technology. They become unable to match fast-changing customer preferences.

XaaS enables:

• Single-click deployments. Product managers may make changes and deploy them fast. The resources from XaaS often become central to new business models that deliver a competitive edge for the business.
• Flexibility to choose services as needed. Businesses may shed a service if it falls out of favor and subscribes to the new in-thing. They may, conversely, access the latest technology to speed up innovation.

Here are seven impediments to IT innovation and how to overcome them.

4. Ensuring Simplicity and Process Integrity

The scope of XaaS goes much beyond the standard leasing or renting model.

A successful XaaS helps the business avoid downtime and ensures continuity of operations. Consider an innovative HR-as-a-service, an advanced version of outsourcing. In-house employees, working from the office, work within fixed hours, and take breaks. In a XaaS model, the business distributes the work to remote agents and pays for the job done, not the effort. The XaaS provider distributes the work globally and gets the work done in real-time.

With XaaS,

• The service supplier assumes responsibility for maintenance and other facets of the service. They may use IoT or other methods to provide real-time upgrades and improvements. Businesses focus on their core business activities without worrying about their supporting infrastructure.
• Resource optimization kicks in. XaaS allows the company to retain ownership of the product and reuse valuable materials. For instance, Rolls-Royce recycles 95% of decommissioned aero engines for new aerospace components.

Everything-as-a-service is fast becoming the preferred business model. Seven out of ten companies consider XaaS as “very important” or “critically important” for business success. Several brands such as Uber, Netflix, Google, and more operate on on-demand ‘as a service’ business models and reap rich dividends. As digitization marches forward, the popularity of XaaS will increase even more.