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Unit4
Leveraging the Xaas Business Model for Success
Yujin Evered
In today's economy, the ecosystem for technology businesses requires a change in mindset. There is a strong focus on engaging and delivering continued value to the customer based on their needs more than ever now, especially as the trend of consuming services continue to grow.
Such an approach requires more than simply bolting on services and repackaging products for sale on subscription instead, the focus has to be on continuous engagement with customers to achieve a positive outcome and build ongoing relationships that deliver value. To do that, there needs to be a fundamental change in the way businesses operate across processes, people, and systems. It is not so much about just delivering Software as a Service (SaaS) but instead it is about delivering Everything as a Service (XaaS).
Think Service and Deliver Results
The difference between a product and service is blurring. Products are getting turned into pay-as-you-go services and offered for a monthly fee. As technology matures, the focus has shifted from ensuring customers have access to the best technology to deploying technology in the best way possible to help customers succeed.
In fact, recent findings from a global study on organizations embracing the XaaS business model conducted by Unit4, an enterprise applications company, found that 78 percent of respondents believe that XaaS will influence their industry, with 74 percent stating that the influence will be positive. 85 and 82 percent respectively believe the XaaS economy has influenced changes to their products and services and their pricing models.
Essentially, customers in the service economy, regardless of the nature of their business, demand two things:
1) A deep and thorough understanding by the vendor of their business and critical success factors
2) The ability to deploy technology in innovative ways so they can seize the opportunities or protect themselves from potential threats
Innovation is Key
The enterprise technology industry is moving to one where innovation is delivered in real-time in small doses, right at the time when the customer needs it most. At present, data driven business models, where customers no longer pay for software functionality but rather for the content and insights –– created using the software, are already evolving and defining a whole new set of differentiations and customer opportunities. In the next few years, we will see business models which are data and insight driven, and customers will buy and pay for results instead of code.
In addition, cloud computing and the prevalence of mobile and digital technologies have accelerated the shift towards the XaaS economy, effectively giving every company the opportunity to differentiate their offerings.
The enterprise technology industry is moving to one where innovation is delivered in real-time in small doses, right at the time when the customer needs it most
77 percent of businesses according to the study have experienced an increase in customer retention from adopting the XaaS business model while 75 percent have introduced more standardization to their products and services, and 80 percent have introduced more personalization in marketing their services. As customer retention and recurring revenue are critical to the success of a business, service-focused organizations need to evolve their underlying business architecture to better support their people and service delivery.
Redefine your Offering
New digital technology gives us a unique opportunity to rethink how work is done and how people use their skills as well as talent to complete critical tasks that a computer is unable to do.
As the market around us has changed and customers’ expectations have changed, business models need to change which requires a fundamental rethink of customer offerings. For software vendors, the technology offering should define which business functions at the customer site are impacted and how. The service offering should define how fast we can help customers to improve their results and how we continue to improve and innovate together with them in the future. Thus, intensive dialogue with customers and the market is essential in understanding the requirements and challenges to deploy the right technology and design state of the art solutions to empower businesses.
Build Loyalty and Create Value
The cost of acquiring new customers is way higher and generating more revenue from existing customers is a more viable approach for businesses today. To maintain high customer retention rates, it is essential to prioritize the customer's experience. Businesses need to start asking themselves, “Are my customers really succeeding?” This is a change of mind set and it needs to be complemented with an organizational change too. By creating a customer experience that is outstanding, service companies can increase their chances of acquiring new customers and retaining existing customers for the long term.
From a systems point of view, it is important to deliver the “software that customers want” first, loosely integrated with the “software that customers need.” Front and back office disciplines need to be combined to support this. Software that customers want adds that special factor which helps them stand out and be a differentiator.
The real value of self-driving business applications is to serve people using the reams of data we collect every day, not in the back-office infrastructure. Self-driving business applications will learn from the past and actively make use of the data and knowledge that is captured to provide context-sensitive support for mission-critical tasks. People will have the data and the time to make a real impact for the companies that they work for. The ultimate objective is to reduce the time and energy spent managing non-differentiating processes that every business has to go through, but which do not create a competitive advantage.
As a result, organizations are adding services including professional services and SaaS apps to complement their core product offerings. This helps to create new value for customers by focusing on their needs, and building relationships based on trust as customer excellence is the way forward. Customers also need to gain value from their interactions and their purchases, at all points throughout the lifecycle. To sustain customer renewals, service companies need to consistently work towards increasing the right value of their service offerings for customers.
The Last Word
The future will migrate towards tasks humans are uniquely skilled at, with automation taking over tasks that are rules-based, predictable, and of lesser value. We are already seeing this come into effect as more industries understand that in order to serve their customers better and compete effectively, they must adopt a XaaS mindset. Businesses also need to contemplate and challenge the way they are doing things across many aspects of their organizations, especially if they are new to services.
