I've written a lot over the last couple of years about the trend to Everything-as-a-Service, or XaaS — pronounced 'x-ass'. A connected business model that started out with Software-as-a-Service (SaaS) is now spreading to encompass every form of product and service. We call this The XaaS Effect. But how does this translate into the real world of day-to-day business?
Yesterday I had a chance to explore that question in a podcast discussion with Tod Neilsen, CEO of FinancialForce, whose customers are negotiating the practical implications of this trend. Think of this podcast as a high-level primer on what XaaS means for both product and services companies.
If you want to dig deeper into FinancialForce's specific proposition, check out my earlier two-part interview with Neilsen on its PSA product offering and its progress with midmarket financials. Or if you prefer audio, listen to Jon Reed's podcast commentary with Brian Sommer from the vendor's annual conference last year.
Servitization meets productization
FinancialForce is one of just a few companies that sits at the nexus of two converging trends, which gives it something of a unique perspective on XaaS.
On the one hand, there's the move towards connected products and delivering them as-a-service in a continuous subscription relationship, rather than as a one-off sale. Call this the servitization of product.
On the other hand, there's the productization of services, also packaged as a continuous subscription relationship, rather than the more traditional 'waterfall' project delivery model.
This convergence means that services and products are increasingly being bundled into a single subscription offering. But at diginomica, we don't see this as just a different way of bundling the same old products and services. Instead, we see it as part of a fundamental rebundling of the enterprise, enabled by connected digital technology.
Here's a quick overview of the key points covered in my discussion with Nielsen.
1. It's about outcomes
We've left behind the old days of simply throwing a product over the wall — or even a service contract. Today customers expect vendors to remain continuously involved in helping them achieve better outcomes. As Nielsen puts it:
You want to make sure that you're receiving the value in a way that's appropriate for you. It may not be through the traditional packaged product offering.
2. Focus on customer results
That continuous connection sets up a crucial feedback loop. Paying attention to outcomes means that vendors have an incentive to invest in customer success — and if they don't, customers will walk. Nielsen sums up:
In the new services economy, customer retention is critical.
3. Deliver products as a service
Adding a connection to all kinds of products makes it possible to deliver new value. We discuss the example of Quench, a FinancialForce customer that provides office water coolers. By delivering this as a connected product, the vendor can provide a better service more efficiently, explains Nielsen.
4. Package services more like products
On the services side, there's a move away from time-and-materials to more of a results-oriented model. Nielsen cites the example of Sirius Computer, a value-added computer reseller that is experimenting with preconfigured service bundles and other new offerings alongside its traditional product offerings.
5. Change your mindset
Flexibility is key to this new world. That means changing more than the underlying technology — businesses need to be ready to experiment and embrace change. Nielsen concludes:
It's not only the flexibility of the systems, but in many ways, it's also the courage to try something. The Internet is all about, let's try, and then fail fast — if it's not successful, don't do anything more — if it is successful, then do more of it.
There's a lot to unravel here, and we barely scratched the surface. Yes, FinancialForce delivers its software as a service, as many technology vendors do today. The interesting twist is that it also enables its customers to deliver their own products — and services — as-a-service. In doing so, it's taking them into new and unfamiliar territory, where everyone is learning as they go. But every business, sooner or later, will have to make the same journey, and can learn from the experiences of these early adventurers.
PS: Sign up for The XaaS Effect d·book and receive our newly launched, bi-weekly XaaS Update email newsletter.