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Three Market Leaders on What It Takes to Become a Service-Based Business

It’s no secret why manufacturers and high-tech companies are driving business model innovation with service-based strategies, essentially selling outcomes, not products. The global everything-as-a-service (XaaS) market is projected to grow from US$545.35 billion in 2022 to $2,378 billion by 2029. In one study, IT companies said that XaaS helped them “create new business processes, products and services, and business models, and reimagine how they sell to their customers.”

During a panel discussion held at this year’s SAP Sapphire & ASUG Annual Conference Orlando, three industry leaders shared their XaaS experiences, including business drivers and results, lessons learned, and future strategies.

HPE: Broad Service-Based Mix Gives Customers Flexibility

Shifting customer expectations are behind the decision of most organizations to innovate with service-based offerings, and global infrastructure leader HPE is no exception. HPE provides customers with a range of software-as-a-service (SaaS) and infrastructure-as-a-service (IaaS) offerings.

“Our industry is going through an incredible amount of transformation in terms of how our customers, from large enterprises all the way down to individual developers, consume services and infrastructure,” said Dave Carlisle, chief technology officer of Global IT at HPE. “Having a broad mix of service-based options means that customers can choose what works best for their business. You need to balance flexible customer options with standardization guardrails to manage complexity.”

For a 75-year-old organization like HPE, moving to a subscription-based business model has involved every part of the organization.

“You have to be fully aligned, between developing new offers and capabilities to the customer experience and partner engagements,” said Carlisle. “Using SAP Billing and Revenue Innovation Management as the foundation for our service-based business, we’ve radically simplified our end-to-end move to a subscription-based model. What used to take days or weeks to quote is now minutes. Overall, it’s a tremendous opportunity for us to evolve and innovate our business models.”

Autodesk: XaaS Data Drives Business Growth

Sudhir Misal, senior director of Engineering at Autodesk, agreed that the XaaS business decision was primarily customer-driven.

Transforming to a service-based model has helped the global design and software company better meet the needs of its customers in the architecture, engineering, construction, product design and manufacturing, and media and entertainment industries.

“We have multiple subscription-based offerings that reflect how our customers want to buy,” said Misal. “It’s also a mindset shift for the whole company, as well as partners and customers. You have to make sure everyone comes along on this journey from planning to execution. SAP S/4HANA gives us a connected system of record to run the business, and SAP Billing and Revenue Innovation Management provides us with subscription-based order management capabilities.”

Besides boosting speed to market, XaaS is surfacing valuable data for business expansion and scale.

“This digital transformation informs our investments for future growth,” said Misal. “We have collected a lot of data over the years and can use that to reinvest for new market opportunities. With a strong foundation in place, we can roll out new business models quickly worldwide.”

SAP: Start Small for Big Impact from Subscription-Based Offerings

At SAP, transitioning to a cloud-based business model has made perfect sense for this market leader in enterprise application software across an unrivaled swath of industries.

“Just about every industry is extending the reach of their products to get closer to their customers with embedded software and services,” said Stefan Krauss, senior vice president and general manager for Discrete Industries and Energy & Natural Resources at SAP. “For us, this meant creating new software-as-a-service offerings like RISE with SAP and GROW with SAP, where we support companies of all sizes that are making the move to the cloud on their transformation journeys.”

Krauss explained how one SAP customer, a power tools manufacturer, embedded sensors in its products, allowing it to charge by actual usage, sell predictive maintenance as a service, and track items throughout the entire lifecycle, including design and recycling for a circular economy. He advised companies to carefully pinpoint where service-based offerings can generate the greatest results and involve the entire organization in the shift from selling products to services.

“One manufacturer in Germany had to reeducate salespeople to not sell products but sell solutions,” he said. “Most companies start somewhere small. Sometimes there’s a crisis that forces companies to rethink how they do business. For example, subscription-based offerings can help customers that may be struggling because of unexpected market disruptions.”

IDC researchers predict that digital products, services, and experiences will generate 40% of total revenue for G2000 organizations by 2026. Introducing XaaS is a strategic business decision that, when done right, is a win-win for companies and their partners.

Susan Galer is a communications director at SAP.

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