09.27-09.28 XaaS Business Models

• What is the As-a-service business model?

• It is an emerging business structure from the traditional model of product ownership to a more fluid customer-merchant relationship. Where the consumer merely ‘rents’ or obtains ‘temporary ownership’ of the product/infrastructure. It is a shift from a ‘goods-centered’ way of thinking to ‘service-centered’ & ‘customer-centric’.
• This sort of business is Anything-as-a-Service (XaaS), examples include: Software as a Service=Saas, Communication as a Service=CaaS, Network as a Service=Naas, Platform as a Service=PaaS, Database as a Service=DBaaS, Infrastructure as a Service=IaaS, Storage as a Service=Staas, Disaster Recovery as a Service=DRaaS
• Why aaS becoming popular? [Increased convenience of a pay-as-you-go model] [it ‘recurring service’ is more resistant to economic downturns] [increased scalability] [reduced consumer liability in terms of infrastructure purchase, maintenance, and improvement] [better suited for remote workforce] [cost-effective for business to optimize and sell TCO=Lower Total Cost of Ownership]

Types of As-A-Service Business Models

1. Software-as-a-Service SaaS: it is built around the concept of providing software resources and services through a Subscription-Based Model. The resources & infrastructures are centrally hosted, it is also referred to as on-demand software, web-based, or web-hosted software. SaaS is commonly seen in services such as Messaging/Payroll/Booking/Office/HR software, etc. The main advantages are Increased Flexibility/Reduced Cost/Frequent Upgrades.
2. Data-as-a-Service DaaS: it refers to a cloud-based data management software such as data storage and analysis, the services are provided on an on-demand basis and the infrastructure is not owned by the user. The customization of DaaS is through the use of API=Application Programming Interfaces and SOA=Service-Oriented Architecture allows for more services. The benefits include Cost-Effectiveness/Increased Flexibility/Greater Data Handling Services/Greater Expertise.
3. Infrastructure-as-a-Service IaaS: it offers cloud computing services, such as data partitioning, data storage, computing, networking, and servers. It operates through API to handle the basic aspects of data computing/utilizing pay-as-you-go cloud services. Some IaaS examples: are Microsoft Azure, Rackspace, Digital Ocean, and Google Compute Engine. In SaaS, all the key components of cloud computing are handled by a 3rd party, while the OS/Apps/Data processing/Middleware are handled by the users.
4. Platform-as-a-Service PaaS: it is an intermediate between IaaS & SaaS, and offers a large degree of on-demand computing services. Some key functions such as application & data analysis are still within the control of the user. The main function is to help users accelerate the creation & deployment of software apps at a reduced cost, less complexity, enhanced scalability, reduction of coding, and increased exchange of knowledge.
5. Mobility-as-a-Service MaaS: it is a revolutionary innovation to the traditional models of mass transit. It involves the use of ‘smart’ and IoT tech to operate vehicles that can be temporarily leased on a pay-as-you-go model or monthly subscription. It offers various market opportunities, such as its impact on suppliers and consumers. Advantages include environmental advantages, public convenience, and cost.
6. Blockchain-as-a-Service BaaS: it is a cloud computing service that offers various blockchain-related solutions through various 3rd party service providers (Azure/AWS/IBM/Oracle, etc.).
7. Iot-as-a-Service IoTaaS: it requires significant restructuring of the way the system currently operates. The shift from a one-time transactional model to a long-term commitment is a challenge. The lack of widespread interoperability amongst different brands may pose a big challenge as well.

Critical Factors for Servitization Success

1. Business Strategy: it is a bedrock upon which the success of the project lies. A good strategy to succeed requires strong leadership, a dedicated workforce, set targets, as well as innovation. Three types of innovation during servitization: Incremental/Niche/Disruptive innovation.
2. Customer Journey Engineering: it focuses on more than just the Look and Feel of the product, but also How It Works. This can only be done by building a customer-centric structure and using various service-design techniques to deliver a powerful end-to-end experience.
3. Enterprise IT Renovation: Innovation is the lifeline of any company. Any company that fails to innovate will always stand the chance of being pushed out of the market.
4. Talent and Mindset: it is important that the company understands that its image is built upon the customer opinion, built upon their interaction with the service. A talented team is critical to creating top-notch products, it entails transformation through training in tech/problem-solving, soft skills, and full support from an organizational standpoint.

How to develop an AAS Business Model?

It is made of 4 categories & 9 core building blocks

1. Client-based Areas: Customer Segments, Customer Relationships, Distribution Channels
2. Offer-based Areas: Value Propositions
3. Resource-based Areas: Key Resources, Key Partners, Key Activities
4. Finance-based Areas: Revenue Streams, Cost Structure

Deconstruct your aaS Business Model

1. Value Proposition: key advantages offered by most aaS platforms include Reduced Costs/Greater Expertise/Increased Scalability/Greater Mobility.
2. Customer Segments: lower-income/higher-income households, families/singles, etc.
3. Distribution Channels: email/text messages/website/SNS/Ads, etc.
4. Customer Relationships: how a business and its client interact within products/service delivery. It may be through personal assistance/self-service/communities, etc. It also includes how businesses acquire new clients, retain old clients, encourage clients to expand their services, etc.
5. Revenue Streams: these refer to how a business generates income from products/services, aaS models work using either a subscription-based model/pay-per-use model/freemium model/per-user model, or function as a pay-as-you-go service.
6. Key Activities: the activities to ensure the business functions properly, which may include R&D/Production/Service Delivery/Marketing/Customer Service, etc.
7. Key Resources: inputs required for a business model to work. It involves things like material resources/technological inputs/human resources/intellectual property/financial resources, etc.
8. Key Partners: other businesses/entities which are essential to the functioning of your business. They may offer key services/maximize profits through economies of scale/reduce risk, help in resource acquisition, and provide other key services.
9. Cost Structure: it involves all costs linked to the operation of the business and delivery of the services. It may include salaries/maintenance/acquisition/software development, etc. The cost structure is generally divided into fixed costs/ongoing costs/one-off costs.

Procedure to Start your aaS business

1. Find a niche: after creating your biz model above, you will be in a strong position to highlight the strengths & weaknesses of your business. Maximizing your strengths is the KEY to success. It involves finding a niche within the market where consumers have not been fully addressed or where you can provide better services.
2. Define positioning/market/competitors: after the niche, you need to build your Brand Image around it. Positioning refers to consumer perception of your brand and how it relates to competitors. It requires a complete understanding of your customer’s needs, your company’s capabilities, and what your competitors offer as well.
3. Identify tech stack: it involves identifying the necessary resources/tech/tools required to make your business plan a success. It includes physical infrastructures like servers/computers/offices, non-physical resources like software/apps, etc.
4. Pricing Strategy: you need to have an understanding of consumer behavior & preferences/your position in the market, the strategy your competitors are using, etc.
5. Assemble a development team: make sure your team with relevant experience, skills, tools, and motivation necessary to convert your vision into reality.
6. Release a product: solid release strategy built around ads/publicity/customer communication channels/reliable schedule, etc.

Advantages of aaS Business Model

1. Recurring Revenue Stream: stable, reliable revenue stream
2. Dedicated & Engaged Customer Base: they encourage longtime service use and promote customer loyalty.
3. Predictive instead of Reactive System: drive innovation and preempt consumer needs.
4. In-depth Customer Data Analytics: due to the long-term relationship between consumers & aaS providers, there is a lot of data to draw from, leading to deeper customer insights and services.
5. Lower Costs: the users do not have to bear purchasing/upgrades/maintaining infrastructure. So premium services can be made accessible to a wider customer base due to economy of scale.
6. Flexibility & Scalability: no need to purchase or update existing infrastructure when upgrading their services. Simply upgrading their subscription and accessing new features from service providers.
7. Free Upgrades: the service providers are constantly working at the backend of their services to increase both efficiency and customer satisfaction.
8. Mobility: most aaS services allow remote work from virtually any internet-capable terminal.
9. Installation Speed: accessing the service is quicker since the user does not have to purchase software or hardware. They have access to a wide range of features through simple subscriptions.

Advantages of aaS Business Model

1. Difficulty in making the shift to aaS: it requires a large amount of expertise/leadership/dedication, and financial commitment. A well-built business plan and roadmap are required.
2. Requires more user engagement: shifting to aaS model requires a significant overhaul of existing products and services. It is more than just selling a product, but also maintaining relationships over a period of time. It requires constant engagement with users and a high level of commitment.
3. Security Requirements: important that aaS ensures users top-notch data security and complies with all regulations involving data handling.
4. Higher Operational Costs: a significant amount of upfront investment and high operational costs.