Talk to any high-tech industry leader who’s launched an as-a-service offering, and they’ll tell you that everything as a service (XaaS) is unlike any other business model transformation. Instead of a one-and-done sales transaction, customers are signing up for a long-term relationship that bundles services with the company’s hardware or software products. XaaS often broadens the collaborative bonds with partners that are involved in service delivery as well. At the outset, companies need to think big but start small.
“Moving to an as-a-service model dramatically changes how an organization does business and keeps customers satisfied, starting with product design and pricing through synchronized order fulfillment, revenue recognition and sharing, invoicing, and contract management,” said Mirjam Wittmann, director of Product Marketing, High Technology at SAP. “We’re seeing our customers begin with a targeted pilot in one line of business, followed by refinements and expansion to monetize XaaS packages for greatest competitive advantage.”
XaaS-Driven Growth at Lenovo: Go Bigger Than Back Office
Everything-as-a-service business models are essential to Lenovo’s growth plans. Long recognized for laptops, phones, tablets, data center servers, and business solutions, the company’s service-led transformation has been a catalyst for significant expansion in its non-PC business, accounting for over 42% of the company’s revenue.
“We’re in a phase of rapid acceleration, focusing our efforts on the expansion and refinement of our XaaS capabilities and business infrastructure,” said Arthur Hu, senior vice president and chief information officer at Lenovo and chief technology and delivery officer at Lenovo’s Solutions and Services Group. “This journey involves a multifaceted approach, combining agile development, strategic partnerships, and continuous optimization to ensure that our XaaS offerings meet the evolving needs of our clients.”
Hu said that SAP Billing and Revenue Innovation Management provides Lenovo with the flexibility to monetize services through pay-as-you-go, subscription, consumption-based, outcome-based, and other models. For example, the company can structure pay-as-you-go packages priced by the customer’s power consumption, storage of gigabytes, utilization, and number of nodes in an installation.
“Redefine your product hierarchies to fit the as-a-service world. Update financial accounting for managed services, such as revenue recognition and costing. Provide the sales team with a clear understanding of the offerings so they can articulate the value to customers,” Hu said. “Make sure that every impacted system has the integrated data for accurate and timely fulfillment and entitlement that delivers the optimal customer experience and desired outcomes.”
Personalized XaaS Offerings Generate Revenue at Autodesk
Autodesk offers customers both subscription- and usage-based models for nearly all products across 50 countries. As a global leader in the design and software industry for media, construction, and engineering, Autodesk is using XaaS to future-proof the company.
“As-a-service provides us with a scalable, nimble foundation that drives better outcomes for customers and generates a steady stream of revenue for the company. We can quickly offer customers personalized products and pricing combinations for faster go-to-market,” said Sudhir Misal, senior director of Engineering at Autodesk. “SAP solutions are the backbone of our as-a-service business model, helping us cost-efficiently manage orders, converged invoicing, contract accounting, and the financial supply chain. For example, we’ve reduced quarterly financial closing times by over 80%.”
Misal agreed that a successful XaaS strategy requires a mindset shift.
“You need to partner closely with your system provider, in our case it was SAP, to understand the business context behind the offering. We focused on standardizing as much as possible,” Misal said. “Change management was a priority as we went through this journey that included all stakeholders. By talking with peer companies to hear their learnings, we avoided repeating mistakes that others have made.”
Generative AI Promises Dynamic Innovation
No discussion of high-tech innovation would be complete without addressing the significance of generative AI. Misal said that Autodesk was exploring how AI can help companies quickly test and adopt value-added XaaS offerings.
“Generative AI can analyze data to help organizations see how customers are behaving depending on the services they’re using,” said Wittmann. “Data from generative AI can help companies cross sell and upsell personalized services that meet individual customer preferences, increasing customer loyalty. With faster market demand insights, companies can dynamically adjust XaaS bundles and iterate fresh ideas to take advantage of emerging opportunities before the competition.”