Over 90% of Companies Generate Revenue from This Business Model, One Survey Says. Is It Time to Try It Out in Your Business? With the economic climate we have today, business leaders must embrace new and holistic growth strategies that align their business goals with that of their customers. There's one business model that will do just that — tying the ability to earn recurring revenues to customers' desired outcomes, maximizing value for the company, its customers and the macroeconomy.
By Al Subbloie Edited by Kara McIntyre
Opinions expressed by Entrepreneur contributors are their own.
Technology completely defines mainstream society today because it makes people's lives easier and expands the horizon of possibility. Apple's once novel catchphrase, "There's an app for that," has never rung truer. You can order groceries, visit the doctor or adjust the temperature in your home — all from the palm of your hand.
Technologies are also bringing ease and efficiency to businesses small and large. Global manufacturers have embraced Metaverse-like technologies to design, plan and test operations in their future factories before entering the costly construction phase. Even restaurant franchises are exploring new technological opportunities, with artificial intelligence drive-thrus garnering serious attention. Beyond maximizing operational efficiencies, digital technologies can boost the value a business is able to offer its customers — and this is increasingly happening through the Anything-as-a-Service (XaaS) business model.
Similar to the way smartphone apps make everyday tasks easier, the XaaS model makes achieving your and your customers' desired outcomes more practical and feasible. Under this model, a company owns, delivers and manages a suite of product offerings, including various hardware and software solutions. Enabled by the addition of digital technologies in particular, XaaS business models are generating more value for companies old and new.
In fact, according to a recent report from EY, over 90% of companies that responded to its survey are now generating at least some revenue from XaaS models. Driven by competitive pressures and market changes, the amount of businesses generating more than 80% of their revenues from XaaS is expected to surge from 3% in 2022 to 19% by 2026, showing great momentum for the XaaS model. From greater customer satisfaction to repeatable revenue streams, companies that reimagine how they deliver value through a XaaS lens can find sustainable success in today's rapidly evolving macro dynamics.
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Create a one-stop shop that maximizes customer satisfaction and creates repeatable revenue streams
Today's economic climate is leading many businesses to reconsider the way they purchase products and services. What once worked — like making one-time purchases from a number of vendors and paying upfront for each — is now inefficient and expensive.
This is especially true for small- to medium-sized businesses (SMBs), which are unable to exploit economies of scale, but make up nearly 90% of all businesses worldwide. In addition to being expensive, these siloed products are rarely capable of solving complex business problems, as they fail to account for the wider business perspective and future integration challenges.
For example, retail franchises that want to reduce operating costs by lowering their energy usage likely need more than just new light bulbs. They'd also want to invest in energy-efficient heating and cooling, smart thermostats and a way to automate and monitor their real-time energy consumption to ensure they're achieving their energy reduction goals. Approaching each solution as part of a whole — rather than an individual unit — allows XaaS models to minimize costs and complexity and accelerate project timelines to meet client objectives.
Companies that deliver their offerings via XaaS business models provide far more value, particularly SMBs. By directly tying the ability to earn recurring revenues to customers' desired outcomes, the XaaS model creates a one-stop shop for customer satisfaction and repeatable income streams while ensuring full transparency into investment outcomes. The ability to showcase ongoing value also enables XaaS providers to develop stronger and more resilient long-term client relationships.
Grow with your customers
The XaaS structure is designed to grow and scale as a customer's needs shift or expand. With it, service providers are incentivized to continuously optimize and enhance their offerings through critical learnings and insights gathered on the job. This flexible model is optimal for today's macro climate, which increasingly requires businesses to adapt to changing demands in the face of new market catalysts.
Small and large businesses, for example, are facing mounting pressure to become more energy-efficient and resource-conscious as climate change and other environmental challenges are growing more salient to the public eye. XaaS companies in the energy space, known as Energy-as-a-Service, use intelligent monitoring systems to learn and resolve where energy is being wasted to maximize energy savings and lower overall operating costs.
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A win-win-win for companies, customers and the macroeconomy
The comprehensive capabilities of XaaS and today's shifting macro dynamics make outcome-based services a more attractive way to meet customers' needs. A results-driven model, XaaS aligns the economic costs of a solution and its tangible and intangible benefits derived over time, allowing stakeholders to focus on generating long-term results as opposed to spending upfront capital. This runs contrary to one-time "upfront purchase models," which have the unfortunate consequence of interfering with optimizing value outcomes.
At its core, XaaS empowers businesses with the flexibility and sustainability to continuously innovate and scale, unconstrained by product boundaries to best meet customer demands. To find success in today's economic climate, business leaders must embrace new and holistic, growth strategies that align their business goals with that of their customers.
