The XaaS Phenomenon in the Tech Marketplace

How the world went from time-sharing systems to the Anything-as-a-Service (XaaS) model

What started off as a niche Software-as-a-Service (SaaS) model for businesses has evolved over the years to become an all-encompassing industry where anything is available as-a-service, from platforms, storage, and infrastructure, to information technology (IT), and even disaster recovery.

Today, you can get Anything-as-a-Service (XaaS). XaaS refers to an emerging niche in the service economy where, instead of offering people-driven assistance, products and technologies are offered as a service instead.

Considering that the organizational fabric of businesses is getting more complex as they evolve and adapt to advancing technologies, outsourcing any tech requirements that are too costly to build in-house is usually a smart business decision.

Various as-a-service businesses are capitalizing on this by ‘servitizing’ products, such as customer relationship management (CRM )service provider Zendesk and Alibaba Cloud VMware Solution.

Though the idea for this model came about before computers were so ubiquitously accessible, the industry has now come full circle.

Everything has a price

The entire XaaS market itself is expected to see 4x growth in value, from $93.8 billion in 2018, to $344.3 billion in 2024.

The market is also interconnected. For instance, Japanese Platform-as-a-Service (PaaS) startup Anyflow allows businesses to connect and integrate different SaaS applications via its platform.

Of all the XaaS options, SaaS, Infrastructure-as-a-Service (IaaS) and (PaaS) are growing the most rapidly. Between 2013 and 2018, these three segments cumulatively grew at a compound annual growth rate of 24%.

Currently, one of the most successful companies in this arena is Slack, a business communications platform that allows workers to instant-message one another and work collaboratively on product development. The service is currently in high demand due to the surge in remote working.

On-demand cloud computing platforms have also emerged as one of the fastest growing IaaS segments, and the size of the cloud system infrastructure market is expected to double in size from $30.5 billion in 2018, to $61.9 billion in 2021.

Public cloud IaaS provider Amazon Web Services (AWS) has especially emerged as a leader in the marketplace for software, where businesses can build their own software on the AWS platform, or use software from independent vendors on the AWS platform.

Cloud computing raises serious cybersecurity concerns. As the technology advances, so do cybercrime methods. Larger companies can often take months to detect a breach. Even AWS, a mammoth system on its own which accounted for 67% of Amazon’s operating income in Q4 2019, was taken down for eight hours in a distributed denial of service (DDoS) attack late last year.

However, XaaS has a straightforward answer to this problem, and it’s called CSaaS- Cybersecurity-as-a-Service. In this business model, cybersecurity partners work with businesses to take care of all their security needs, such as risk assessment and management, data encryption, cloud security, and advisory requirements.

Another question that adopters of XaaS face pertains to their employees. Business tech solutions serve more functions and are more layered than consumer tech, presenting a relatively softer challenge in terms of training employees to adapt to the new form of workload distribution.

The dark side of this, however, is that people can potentially lose their jobs if the company is not interested in or equipped to upskill them. IT has seen some of the best benefits of cloud computing, due to its obvious benefits of cost reduction and increased efficiency. The more a company uses ITaaS, the more likely it is to achieve cost reductions. With increased adoption, some jobs risk becoming redundant.

The early bird

Companies were using the XaaS model as early as the 1960s through a ‘time-sharing system,’ when computers were prohibitively expensive and found in much fewer numbers.

To leverage computer technology cost-effectively, companies, especially small and medium enterprises (SMEs), relied on the time-sharing system, where multiple keyboard and monitor terminals were connected to a single powerful mainframe, allowing for shared access to computing resources.

By the 1990s, companies such as travel and expense management system Concur Technologies (which sold to SAP in 2014) and CRM service provider Salesforce emerged as pioneers of the pure SaaS business-to-business solutions model.

On the technical front, grid computing briefly occupied the limelight, until the popularity of cloud computing picked up in the mid-2000s. The upsurge of interest in cloud computing was a watershed moment in the SaaS industry, enabling much of what defines the entire ‘as-a-service’ segment today.

“Cloud computing refers to both applications delivered as services over the Internet and the hardware and systems software in the datacenter that provides those services,” wrote Dr Rao Nemani, a Director of Tax Data and Analytics at KPMG, in the International Journal of Computer Science Engineering and Technology.

Businesses started shifting to cloud infrastructure in waves, but did not (and still do not) necessarily have or want to expend resources on building that infrastructure in-house. This was XaaS’s moment to emerge as a global trend.

Key trends

The XaaS model turned out to be a welcome development for the business world, with the world’s appetite for subscription-based services taking off.

Going forward, the sector is only expected to expand, as Content-as-a-Service, Artificial Intelligence (AI)-as-a-Service, and Internet of Things (IoT)-as-a-Service are expected to gain traction. In fact, Hewlett Packard Enterprises has announced that it will offer its entire portfolio as a service by 2022.

Growth in this market is likely to be accelerated by the COVID-19 pandemic, with businesses clearly looking to cut costs while adopting survive-and-thrive strategies amid a grim economic atmosphere.

As the aphorism goes, ‘never waste a good crisis’. It looks like XaaS is not about to.

Header image by natanaelginting on Freepik

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