This article outlines a three-part, high-level strategy for developing an XaaS business model.

With this practical approach, even small-to-mid–sized established companies can unlock new revenue streams by addressing industry bottlenecks through cloud-based, as-a-service digital platforms.


The race to digital domination characterizes the current era. As more and more industries undergo digital transformation, businesses and their customers are enjoying the lower costs, faster growth and better results that come with technologically enabled processes, products and services.

While more and more businesses in legacy industries are recognizing the opportunities waiting for them on the other side of digital transformation, many struggle to make the transition. A 2018 study by IDG reveals that, while 89% of organizations plan to adopt a digital business strategy, only 44% have actually followed through.


XaaS Business Model cloud computing
Estimate according to Gartner research: https://www.gartner.com/en/newsroom/press-releases/2018-09-18-gartner-says-28-percent-of-spending-in-key-IT-segments-will-shift-to-the-cloud-by-2022

 


Becoming digital-first can be a daunting and expensive move. For many companies, outsourcing digital services is the only feasible way to make digital-first business a reality.

Enter XaaS: any cloud-based tool, platform or infrastructure sold as a service. Businesses in legacy industries need cloud-based services to facilitate their digital transitions, and XaaS makes that financially feasible.

Now could be the ideal time to join the XaaS movement — not just as a consumer, but as a producer. If your business is one of the 45 remaining percent struggling to go digital-first, we’d like to challenge you to see this as an opportunity. This could be your chance to cash in on XaaS.

How to Tap into XaaS Potential: A 3-Part Strategy

We’re all familiar with the examples of Salesforce and Slack — two cloud-based, as-a-service digital platforms that help businesses operate more effectively for less money than they could on their own.

Consuming cloud-based, as-a-service digital products is one good way most businesses benefit from the XaaS movement. But for some, there may be an even more lucrative way.

Palaterra started as a cloud-based workflow management service that First Crush Tastings created to dissolve the operational bottlenecks they faced staffing and coordinating wine tastings for their customers.

The company soon realized the potential within their platform for new revenue streams. Now, First Crush Tastings sells the use of Palaterra as a service to other tastings companies and retailers — converting former competitors into customers.

Like Palaterra, even mid-sized, established companies can tap into XaaS sales as providers with this three-part strategy:

Step 1. Identify the barriers most commonly inhibiting growth and progress in your business and industry as a whole. Consider areas where digital processes are unavailable, inaccessible, costly or ineffective.

Step 2. Create a cloud-based digital product that removes those barriers and transforms the way you run your business.

Step 3. Make the shift to an XaaS producer mindset. Capitalize on your product’s potential with an as-a-service business model so you can profit from helping other businesses go digital.

>> Related: How to Inject Agility into Your Digital Business. Clint Boulton offers compelling evidence for XaaS as a lucrative IT operating model.

Is the Future of Product Cloud-Based Subscriptions?

Our challenge to businesses engaged in the digital race is this: don’t delay. Make the leap to digital, but do it in a way that will unlock new streams of revenue through XaaS sales to your competitors and other businesses in your industry.

If the subscription economy is any indicator, the demand for outsourced digital services is on the rise. The past five years have seen the subscription economy grow by more than 100% each year (specifically within e-commerce).

As the subscription economy grows, business operations are shifting to the cloud, according to a Gartner study estimating that approximately 28% of the total market revenue for infrastructure, middleware, application and business-process services will shift to the cloud by 2022.

The rising demand for digital transformation, cloud-based tools and outsourced business-process services likely position XaaS as an ideal product model for years to come.

>> Learn how to move from concept to profit with product strategy. Define minimum viable product, identify product market fit and access product market delight.


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