Customer Value Delivery through Anything-As-A-Service (XaaS)

Over the past 15 years, as the internet connectivity – especially mobile – has become stronger and the phones and portable devices become slimmer and yet more powerful, we have witnessed an accelerated global move towards digital product offerings across all consumer and corporate market sectors.

The dual transformation of “digitization of products and services” and “digitalization of the business models”  accordingly, have introduced and expanded on the idea of “As-A-Service” as the most desirable type of Business-to-Consumer (B2C) and Business-to-Business (B2B) relationship.

By renting (or subscribing) to a service, instead of purchasing it upfront, users can start benefiting from them for a much lower cost for a flat recurring fee, and in some cases, they would only pay for what they used (Pay-As-You-Go models).

This welcomed evolution in customer value delivery, has lowered the barriers of entry for small business and start-ups and also has allowed the incumbents to switch their spending from CapEx (Capital Expenditure) to OpEx (Operations Expenditure). This way, instead of having to invest large amounts of cash upfront and spend years in amortizing them off their books, they can use a leasing model that would be classified as expense under their fiscal spending costs and deduct it from their taxable income.

The fortunate overlap between the expansion of Public Cloud service adoption and the Digital transformation movement amplified the “As-A-Service” progress by providing “Infrastructure-As-A-Service (IaaS)” and “Platform-As-A-Service (PaaS)” to these providers in a “Pay-As-You-Go” costing model, which also lowered the barrier of entry for the new market entrants that wanted to test their “As-A-Service” ideas in the market and would have a limited spending capacity for their exploratory plans.

The concept and delivery model of “Software-As-A-Service (SaaS)” already existed in the market, being served from data centers of enterprises and over the internet or private VPNs, but it received a new boost through adoption Public Cloud as its new hosting and servicing point.

Leveraging Public Cloud as the hosting and provisioning services behind the “As-A-Service” value delivery model comes with a number of extremely important benefits (some of which already inherent in the concept of “As-A-Service” through using the Public-Cloud service in the form of “Platform-As-A-Service (PaaS)” and “Infrastructure-As-A-Service (IaaS)”):

• Shifting the Costing Model from CapEx to OpEx(and can be removed as operational expenses from the corporate taxable income in the same fiscal year).
• Transference of the bulk of administrative, provisioning and maintenance work for the infrastructure of the “As-A-Service” providers to the Public Cloud service providers(and freeing up their IT teams to focus on more and better service delivery).
• Cost Effective High Availability and Service Capacity Elasticity(being up and running when it matters and having the ability to expand the capacity to meet with service demand spikes and later releasing unused resources when it drops, changes the game for all “As-A-Service” providers as it maximized the gain from what they spend while maintains the quality of the customer journey).
• Higher Business Agility and Stronger Continuous Exploration(due to freeing up the IT teams and being able to provide them with their sandboxes and development environments quickly and cheaper  whenever they need to do R&D or need to quickly respond to a change in the market or a request coming from customer feedbacks).
• Business Growth and Service Sustainment for Lower Costs (since there is virtually no limit to how many resources can be allocated to expanding business services in any market sector and in any part of the globe, there is a low barrier of entry for any new sector that the business wants to expand into).
• Easier Regulatory Compliance with National and International Regulations(since all major Public Cloud service providers have compliance ready resources that match all international and most local compliance requirements).

As it would be expected, Public Cloud enabled more “As-A-Service” value delivery covering every aspect of IT solution delivery, such as:

• Infrastructure-As-A-Service (IaaS)
• Platform-As-A-Service (PaaS)
• Software-As-A-Service (SaaS)
• Network-As-A-Service (NaaS)
• Data-As-A-Service (DaaS)
• Communications-As-A-Service (CaaS)
• AI-As-A-Service (AIaaS)
• Function-As-A-Service (FaaS)
• Backup-As-A-Service (BaaS)
• Disaster Recovery-As-A-Service (DRaaS)
• Identity-As-A-Service (IDaaS)
• Desktop-As-A-Service (DESaaS)
• Security-As-A-Service(SECaaS)
• Knowledge-As-A-Service (KaaS)
• Video-As-A-Service (VaaS)
• Monitoring-As-A-Service (MONaaS)
• Business Process Management-As-A-Service (BPMaaS)

The COVID-19 Pandemic led to a new and much higher demand for Public Cloud adoption across many sectors that prior to the pandemic, were either on the early stages of migration or had no plan for it yet. The close-downs and shut-downs of face-to-face interaction for several months after the onset of the situation, created an immediate need for enterprises to provide extra connectivity and processing capacity for their teams that now had to use internet to connect back to their workspaces in their offices.

This push also created a rising appetite for “As-A-Service” value delivery models as the on-premises solution would find it difficult to scale up and meet the sudden amplified demand from the staff (former “internal” users)  that were no longer on the internal network of their own organizations.

The growing demand for more processing power, storage, and connectivity from emerging technology solutions such as containerization, virtualization and edge computing also raised the appetite for expanding into the elastic and cost efficient service provided in the Public Cloud.

The term “Anything-As-A-Service (XaaS)” refers to expansion of this value delivery thought process and implementation that is now covering almost anything that can be delivered to consumers (at personal or and/or business level) through digital channels.

This hyper-accelerated growth is intertwined with the combined power of Public Cloud adoption (as a great enabler for Digital Transformation of organizations) and the expanding concept of “Remote Work” that is creating more demand for the “As-A-Service” value delivery model.

Gartner research shows that end-user spending on Public Cloud services exceeded $332 billion in 2021 with no sign of slowing down through the 2022, predicting an spending of $397.5 billion — almost a 20% increase year over year. “Anything-As-A-Service (XaaS)” market reached a current total market cap of $1.9 trillion in 2021, following an annual growth rate of 37.5% which is expected to grow through this decade.

Caveats

As is the case with every evolution in our technology and business paradigms, there comes a list of concerns and risks that we would find in the bundle. XaaS on Cloud would also have its share of caveats from being on the Public Cloud:

• Sitting on someone else’s infrastructure, and being available based on their SLAs: Even though Public Cloud hyperscalers (fancy name for service providers), have shown a good track record over the past 10 years, we have seen quite a few times where they had one entire region and sometime multiple regions going to black-out for several hours at one time. While this is still a much better record compared to most globally distributed enterprise data centers (on-premises), we need to make sure that our solution architecture design allows for seamless and transparent failover and recovery with minimal loss of data or downtime. If we are paranoid enough, we may even want to go multi-cloud to leverage our services coming from more than one Public Cloud hyperscaler.
• Having to worry about the geographical location of the data: Not only we would want to make sure our data – especially the privacy-sensitive information from the customer – are positioned and replicated in specific geographical locations where our corporate, national and international compliance requirements would allow, but also their security and control measures structured in a manner that only authorized personnel from specific geographic locations can access them and only within their functional  domain.
• Integration challenges between on-premises and on-cloud solutions: establishing a bidirectional, secure, and fast data connection between the owned data centers and the resources allocated on the Public Cloud always comes with its challenges and headaches. The data format, conversion requirement and recency of the changes can become a growing pain as the two sides of the solution architecture are functioning in different domain with different latencies.
• Cybersecurity complexity growing with the architecture: whether the XaaS solutions are Cloud-Native or a mix of on-premises and on-cloud (Hyper-Cloud), there will be several points of vulnerability that need to be hardened and their security should be properly orchestrated and covered to protect the data and the functionality of the XaaS solutions that are presented to consumers.

Conclusion

The natural compatibility between the “As-A-Service” value delivery movement and the context of Public Cloud service provisioning have intertwined their power in changing and lowering the cost for their consumers and led to higher business agility and market responsiveness for these organizations.

The global reach, low latency, high availability, capacity elasticity and ease and low cost of exploratory work have made Public Cloud the de facto hosting and provisioning base for the “As-A-Service” model. All the predictions point out that their combined power will grow fast and strong for the foreseeable future.

As the major Public Cloud service providers are enhancing their processing and networking capacity towards more virtual and augmented services over the next 3 to 5 years, we can expect to see the “As-A-Service” paradigm to also expand into that area.