Everything of a Service’s XaaS has evolved by leaps and bounds over the last decade, with high-speed internet connections becoming more accessible to the general public. The business model says that any IT product, whether it’s software, a game, databases, AI, storage, computer processing, hardware, infrastructure, media content, etc., can be offered as an online service for regular payments (subscriptions), or usage-based charges, rather than a one-time purchase package.
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And according to a report by the consulting firm Revenera, the trend is that more and more companies adopt the continuous revenue model through the use of their products and software, instead of relying on individual sales .
More and more IT companies, in various sectors, are adopting of the XaaS model (Credit: Negative Space/Pexels)
Market research conducted by Reverera It focuses primarily on software companies, but it provides interesting information about the big picture in IT, in several branches. According to the data collected, the dominant monetization format in the sector today is that of subscriptions, with 36% of the total, followed by the concession of perpetual licenses (single sales), with 24%.
However, 53% of the companies interviewed say they will migrate to the continued monetization model, which includes subscriptions, which will now account for 53% of the total, and usage-based billing, which jumps to 37%. The main reason for this change in approach, according to the report, is the desire to implement recurring revenue models, defended by 62% of the companies interviewed.
It is not necessary to go far to understand why this happens: Microsoft, which during the management of the CEO Satya Nadella became a fundamentally a service provider company, arrived in the past encourage users to use Microsoft 365, the cloud-enabled office suite offered as a service, rather than legacy Office 365, which operates on the traditional single-license model. The excuse used, the former is more constantly updated and works better online.
Actually, it’s more convenient for Microsoft to have more users who pay monthly, or annually, to continue using the Office suite, than selling a closed software package only once, even though it is quite expensive and does not contemplate future versions.
This is also true for corporate services and its Xbox platform, which launch of the Game Pass for Sony and Nintendo consoles was even considered; today, the company advocates inserting access to its exclusive streaming games on TVs, dongles and set-top boxes, for those who can’t afford an Xbox Series X|S or a high-end PC, but want to play anyway. In addition to your consoles, Xbox cloud games will be available on PCs and mobile devices.
Microsoft positions Xbox platform as a Service, using Game Pass (Credit: Disclosure/Microsoft)
Be it Microsoft 365, Azure, Xbox or even Windows, which although it is still sold as a single license per version, is also treated by the Redmond giant as a service, this change in philosophy has allowed Microsoft to significantly increase its market value since 2014, and today it is one of the few companies to surpass the US$1 trillion mark, second only to Apple, which has already surpassed the US$2 trillion mark. .
Interestingly, even with the apple being the most valuable company in the world today, it invests less in the XaaS format than its competitors, even because it is a seller of products that benefits more of the Walled Garden concept. On the other hand, some of its services, such as iCloud and Apple TV+, are accessible to anyone who does not have an iPhone, iPad, Mac or other iGadget.
There are also GaaS models ( Games as a Service), in which the game itself is a permanent service. It usually offers a free backbone and assorted internal monetization models, such as selling items and loot boxes and even DLCs, to a greater or lesser degree.
As recent examples of GaaS models successful, we can mention Fortnite, PUBG: Battlegrounds, Free Fire, Fall Guys: Ultimate Knockout and other Battle Royales, all gacha games, as
Genshin Impact, FPS as the series
enters the Battle Royale genre) and Overwatch, and even sports titles, such as The Ultimate Team Mode of the series FIFA.
Returning to the report by Revenera, companies that adopt the continuous monetization model, whether with subscriptions or charges based on the use of their services, need to consider both the format of your products and the impact the migration will have on your customers. For this, it is necessary to establish a balance between the price charged and the value perceived by users, which is essential to ensure adherence.
The transition from the traditional to the XaaS model must be accompanied by studies and research from interest with users to determine what it considers valid in a subscription or on-demand service, and what best fits the perpetual lease of use, which can be understood as the main reason why Microsoft has never ended Office traditional. Instead he will receive a new version
, which will be released along with Windows 11.
Of course from the point of view of any company, where the main objective is profit, the XaaS model is very attractive, but needs to be implemented in the right way. According to Revenera, only 30% of the companies evaluated claim to have fully aligned the relationship between price and perceived value of their software.
It may be that in the near future, most or all of IT products, whether hardware, software or consumer, will be offered to end and business customers under the XaaS regime, but the biggest challenge will be to convince the customer that he is getting a good deal, giving up a permanent product.
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