what is xaas model

What the XaaS Business Model Can Teach Us About Productization

Productization involves taking a skill or service and packaging it as a product to make it easy for any consumer to buy “off the shelf” online. One form of productization is software-as-a-service or SaaS, which has grown and evolved into anything-as-a-service (XaaS).

While XaaS and productization share many similarities, they aren’t necessarily the same thing. In fact, businesses that choose to productize their services can borrow from the XaaS business model.

Let’s take a look at XaaS and what productized service businesses can learn from the XaaS business model. 

What is the XaaS business model? 

The XaaS business model simply refers to delivering anything as a service. The term is often used to distinguish delivering as a service those offerings that were previously available only with a large capital outlay. Delivery typically occurs on a subscription basis, letting users “rent” a service for a small monthly amount rather than spending a large sum to “buy” the product upfront. 

Everything-as-a-service got its start with cloud computing, when tech companies started offering things like software-as-a-service, infrastructure-as-a-service, and even data and security as a service. Previously, these offerings were only available locally or on-site with a large initial outlay of capital.

From there, online businesses learned you don’t have to sell IT or even digital services to use the XaaS business model. With the right tools, you can leverage technology to sell just about any service over the internet. 

For example, take telehealth. The XaaS business model has revolutionized the experience of healthcare through telemedicine, which makes it possible for people to have a virtual doctor’s visit online.  

Telemedicine is just one example of XaaS. Technology makes it possible to transform just about any industry or business into the XaaS business model. Other industries using the XaaS business model include:

  • Carsharing – Using apps, you can rent a car from an individual vehicle owner when you need it, paying by the mile rather than using a taxi or renting a car over several days or weeks. The RV industry is also hopping on this trend, creating a business model similar to AirBnB.
  • Human Resources and Staffing – “Humans as a service” may sound futuristic, but a growing number of companies are turning to productization for their human resources and staffing needs. Rather than shelling out money to cover the cost of recruiting, interviewing, and onboarding, they can use third party staffing and HR services, paying only when their staffing needs expand — and not paying when their needs contract.         
  • Storage – Most businesses have shifted away from paper and filing cabinets toward digital storage. But maintaining servers in-house can create security problems and other issues. Cloud-based storage providers can deliver both space and security at enterprise levels, easing the burden on small- and medium-sized businesses.  

These are just a handful of examples of the XaaS business model. Now, let’s take a look at how this business model can offer valuable insights to businesses that productize services. 

5 takeaways from the XaaS business model for businesses with productized services

The XaaS business model highlights several benefits that businesses with productized services can use to their advantage.

1. Focus on the Customer Experience 

Many XaaS businesses focus on cultivating a unique customer experience while still being able to scale. A good example of this is the Dollar Shave Club, which sells razors on a subscription based sales model. However, the company doesn’t just sell razors. In fact, its commitment to creating a unique experience is right in its tagline: “Get a personalized, top-shelf grooming routine as unique as you are.” 

Using technology and a clever questionnaire system, Dollar Shave Club personalizes every box of razors. Rather than just putting up a storefront with all its products, it makes the purchasing process unique to the individual. This is XaaS that scales and still feels unique for every visitor to the site.

2. Innovate 

If you have a productized service business, there might be a dozen other companies that sell the same services. That’s okay. You don’t have to reinvent the wheel to have a successful business. 

However, you do have to make your business stand out. This is where the XaaS business model excels. The best XaaS companies innovate by using technology to present their service or product in a unique way.

3. Adapt to customer expectations 

A true XaaS business must emphasize the service part of its offerings — not necessarily the product. This doesn’t mean the product isn’t important. Rather, the XaaS business model is built around having enough flexibility to pivot when customers’ needs change. 

This goes against what most business schools teach about scalability. To get big, the theory goes, your business needs to mass produce a product and mass market it to as many potential customers as possible. 

However, the XaaS business model is mostly focused on delivering a service. To do this well, the service needs to accommodate the individual user. XaaS companies thrive when they offer services that can adjust and change with customer needs.

4. Cultivate loyalty 

Churn is a reality for many XaaS businesses, particularly those built primarily around a subscription model. The best XaaS businesses make their customers’ success a priority. As a business owner, this means shifting your mindset from “how can I succeed?” to “how can I make sure my customers succeed?” 

From a tech standpoint, this means putting systems and applications in place that deliver an experience customers can’t get anywhere else. 

There are numerous XaaS businesses that have created a loyal customer base by continuously refining the user experience. For example, restaurant delivery services like Grubhub offer customer perks that let users save on meals for using the app. 

5. Bundled products with managed services

Another thing the XaaS business model does well is offer a product or service bundled with a managed service. In this context, a managed service is a more one-on-one or individualized approach that serves as a complement to the main product or productized service. 

For example, in the IT security space, a XaaS company might sell a cloud-based security package while also offering training or help desk support from a tech expert who is available by phone or through email.  

Learn more about productized services

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