Every product is a service. Both B2B and B2C sales models revolve around giving customers exactly what they need how and when they need it. Whether it is a monthly sock subscription service, selling compressed air as a service, or renting engines to airlines on a usage by hour basis – everything is a service (XaaS).
Every company regardless of industry is focused on digital transformation and this means harnessing the opportunities that come with the XaaS, subscription, and recurring revenue economies.
The strength of emerging technologies including cloud computing, 5G, machine learning, AI, and intuitive user interfaces and customer willingness to rethink how they consume and pay for products has shifted transformation from a maybe to a must-do.
This is an exciting time. The XaaS economy allows anyone to sign up and pay for a service with a flexible subscription and usage model that meets their needs and those of the service provider. Adoption rates by B2B and B2C customers are setting up the XaaS market for a compound annual growth rate of 24% between now and 2024.
But for company leaders who are uncertain about the financial stability and risk that comes with a shift from a traditional sales and revenue model to a subscription service model or a hybrid model– many questions remain. This is completely normal and expected. As Deloitte underscores, companies must be ready to ask key questions about their business including: “… are you prepared to transform your business capabilities to market, sell, deliver, support, and manage these types of offerings at scale? Once you have undergone the process of defining your strategic guardrails, business model, capabilities, and operating model requirements—no small accomplishment—it is time to fuel the transformation engine and put in place the people, processes, and technologies to scale with XaaS in the market.” (Scaling Up XaaS, Deloitte Insights)
XaaS in 2020 and Beyond Means Thinking Outside the IT Box
For SaaS companies, the subscription economy is not new. These companies lead the charge to a new way of selling, buying, and maintaining customer relationships. This new way of business puts a heavy emphasis on agility, flexibility, innovation, and the customer experience.
The shift in the XaaS economy comes down purely to accessible technology. Technology service providers recognized that their products could be repackaged as services, opening the door for a range of companies across every vertical to transition to the XaaS economy.
Now manufacturers can monitor product usage in real-time, to quickly innovate new features and to prevent product down-time. Consumer-facing retailers can quickly introduce new products and collect data on how, where, and when customers use products.
Every company is capable of being responsive and delivering outstanding customer service. Savvy companies who take advantage of the data that comes with the XaaS economy are able to anticipate customer needs, enhancing customer and brand loyalty. Companies must remember that thanks to technology, there are no borders on where people subscribe and spend.
Understanding the Challenges in the XaaS Economy
To succeed in the XaaS economy, companies need to rethink every aspect of their business model. Companies must think beyond the immediate and develop real strategies that position them for the future of XaaS.
To do this company leaders must be prepared to ask hard questions about their business, goals, customers, and ability to transform.
- What software and platforms are required to manage recurring, subscription, and flexible billing?
- What is the strategy to maximize the depth of data available? How will usage monitoring data be used to innovate new products and service packs?
- How can a priority be placed on maximizing customer relationships and support? How will B2B and B2C customers get a seamless experience?
- What tools are available to take advantage of third-party product offerings, specials, and add-ons?
- What is the customer on-boarding strategy?
- Are the correct people, processes, and technologies in place to ensure customers do not suffer a drop in service, product availability, and satisfaction? What are the fallback plans?
- How will data security and privacy concerns be managed and questions around these be answered?
- Is the company ready to be agile, flexible, and innovative? How will business processes change to ensure transformation happens?
- How can the current product offerings be repackaged as a service and billed on a subscription model? What changes need to be made in the short- and long-term?
- What are the new product-as-a-service opportunities?
- What do customers want today, tomorrow, and next year?
Success in the XaaS economy is not a given. To succeed, companies must do the work in advance to understand how they fit today in the subscription economy and where they want to be in the future economy.
The XaaS Economy Opportunities
Customer demands for personalized and customized products and services makes it possible for any company to thrive in the XaaS economy. Now more than ever, customers are receptive to unique service offerings, flexible billing models, and new ways of using and accessing products.
This translates into innovative and dynamic opportunities for companies who invest in and focus on maximizing their XaaS and subscription based products and service offerings:
- Faster Time-To-Market. According to research from Deloitte Insights, 75% of companies say that the XaaS model makes it easier to bring new products and services to market faster.
- Improved Productivity. More specialized tools, platforms, and software solutions are available to companies working within the XaaS economy. These cloud-based solutions are designed to optimize data, streamline processes, and to provide insights that translate into improved customer satisfaction.
- Use Big Data. Now, companies can optimize the data that comes from millions of transactions. This data tells companies which products are working, how customers are using products, and identifies gaps in performance.
- New Product and Service Opportunities. Companies are no longer locked into traditional sales and business models. Customers are receptive to not physically owning a product and instead paying for access to it as a service.
- Strengthened Brand and Customer Loyalty. When XaaS offerings are done right, customer and brand loyalty increases. People want to develop lasting relationships with businesses – companies who are responsive to customer demands and use their data correctly can maximize loyalty.
XaaS based business models allow companies to be agile, flexible, innovative, cost effective, and improve operational efficiencies.
Trends Driving the XaaS Economy in 2020 and Beyond
The XaaS economy has graduated from an IT focus to spanning all industries from automotive, media, healthcare, manufacturing, and retail. Companies who capitalize on these key trends in the XaaS economy are setting themselves up for future successes:
- Customer experience comes first. A good product or service is no longer enough. Companies need to utilize the latest in mobile and digital technologies to give an intuitive user interface and seamless experience.
- Realizing the value of customers. The subscription and recurring revenue models do not work without a reliable and consistent customer base. Competition is tighter than ever, and companies need to work hard to communicate their value to customers.
- Loyalty programs and reviews matter. Companies are only as strong as their latest online review. One of the best ways for companies to generate user-based marketing is with loyalty programs that reward customers for writing reviews and using social media to show their brand loyalty.
- Big data analysis rules. Companies must take advantage of the insights and analysis provided by big data. This data can be used to validate new product ideas, billing models, target markets, and identify new market opportunities.
While technology has created the opportunity in the XaaS economy, it is paramount that companies look beyond technology and focus on the customer. When any product can be found as a service, customer satisfaction and superior customer support is a key market differentiator.
Contact us to learn how the RecVue platform gives companies the agility and insights that make it easy to put the customer first. Know what your customers want. Understand how customers are using your products. See where you have room for improvement. And make it easy for customers to do business with you.