Summary: What Businesses Need to Know About ‘Anything-as-a-Service’ Models
Almost everything in the technology space, both for enterprise buyers and consumers, has or is migrating to as-a-service—at least as an option. Mike Kelleher, SVP at MarketBridge, joins Lee Kantor on High Velocity Radio to share how transitioning your go-to-market strategy will help you win in the XaaS (Anything-as-a-Service) economy.
Discussed in this episode:
- About MarketBridge
- The shift to subscription models disrupted the marketplace
- How transitioning to the ‘as-a-Service’ model changes go-to-market strategies
[00:02:20] You mentioned this ‘as-a-service model’ becoming more and more commonplace. How do you approach a business that maybe hadn’t thought of their business in that manner and help them move into that kind of solution?
Mike: In the tech space, there’s probably three types of organizations:
- Those who have led the path on moving to as-a-service. They saw the writing on the wall. It started with software, but it’s migrating now to hardware and frankly, in almost every area. And those folks are a little bit further out ahead and leading the charge on this trend.
- The second class is those who know that they need to make a transition. They’ve made the transition, but they’re still kind of struggling in two different business models. One is the before as-a-service model, which is classically referred to as “on-premise”, as well as trying to figure out what they need to do to succeed in this new as-a-service.
- The third group either aren’t making the transition, or they happen to have a unique business model where as-a-service may not be as pertinent to them.
But for the most part, data that we’ve collected and research that we’ve done has shown that increasingly there’s a greater and greater percentage every year of tech vendors who are saying “there’s big money. I want to go after it. I’ve got to figure out how to sell as-a-service because customers are really demanding this is how they want to buy technology, products, and services.”
[00:03:55] Now, do you believe that any service can be transformed into this as-a-service model, or is this only for certain things?
Well, it really depends on the customer. So the customers really drove this transition for a variety of reasons. One is it was a much more cost-effective approach to procuring technology.
In traditional ways of buying technology, every 3 to 5 years, there was a relatively large capital expenditure by an enterprise customer. That was a lot of money and a lot of effort put into buying technology. But customers were saying, I want a different model. I would rather spend some operating expense dollars, maybe on a monthly or a quarterly basis, not as much but more frequently, and have access to new technology and new software as it emerges and not be behind the curve. If I just bought something, I have to wait five years to get something new.
The as-a-service model really allows customers to get the best available technology at a flexible price. But that new model has kind of wreaked havoc on some vendors who need to make sure that they are changing their go-to-market accordingly to succeed in that new environment.
[00:05:18] What are some of the trade-offs when you make that transition into this as-a-Service model or subscription model?
For the vendors, those who sell the technology service, there’s just been a tremendous amount of complexity in the customer purchasing process, which is really forcing sales and marketing leaders to rethink their approach to how they sell and to whom.
And I’ll explain why:
- First of all, the buyers have changed. Traditionally, tech vendors sold to the CIO and their suite. Now, they’re selling to line of business owners…heads of Marketing, Sales, Supply Chain, Finance, and Human Resources. Those buyers have very different wants and needs than a CIO.
- Number two, there’s been changes in the purchasing process. As I mentioned, it’s migrated from once every 3 to 5 years to something where it’s a monthly purchase for software or hardware or infrastructure (like AWS). Even folks like HP sell print cartridges for their printer in an as-a-service model.
- The third area of change is because vendors are selling to new buyers now, there’s been a pretty big shift in the value propositions that are going to resonate with those buyers. With CIOs, for instance, there was a lot of focus on “speeds and feeds”, and security, and increasingly now mobility. But for Line of Business heads, it’s much more specific to how their teams are going to accomplish a very specific job. How do they handle invoicing, for instance, for Finance or inventory management for Supply Chain? Also, what’s changed for vendors is there’s been this incredible groundswell of new competitors that have entered into the market and who are trying to basically be born in this as-a-service environment. They don’t need a transition from some legacy approach. So, there’s been a whole lot of technology companies that have really started up trying to say, “I’m going to capture this as-a-service market share faster than some very large incumbent technology companies.” So that creates change.
A lot of challenges for our clients in large organizations, and also in the tech sector overall, as I’m sure you know, there’s a lot of change very quickly. There’s a lot of new products being released; a lot of new versions being released. You add all that stuff together that I just went over, and that’s really where the complexity comes from for Sales and Marketing execs to say, “What do I need to do differently to reach and engage and convert my customers in this new environment?”
[00:17:40] Is there any advice or something actionable our listeners who are about to go through this transformation, or thinking about it, should be or can do today or tomorrow, or this week?
Mike: I think depending on whether it’s a P&L person, a Marketing person, or a Sales person, there are kind of the four or five things I’m thinking about that might be good places to start. Number one, if you’re entering in a new market, be very prescriptive and very defined as to what’s the growth pathway from where you are today to capturing new revenue in a new market. There’s a very defined process to say, “we want to be in adjacent market. What’s the size of the market? What’s the whitespace? What is the best fit for our business based on our skill sets and our existing lines of business? What are the weak spots in the competitors; and what’s the prescribed path to be able to get to, let’s say, $100 million, the fastest path?”
For Sellers, it’s really thinking about does there need to be a refresh to the routes to market or the channels that are used to sell to those customers that you’re looking to expand your market share in?
And for Marketers, it’s really in my mind around understanding these new stakeholders, these new Lines of Business decision-makers, what is their buyer journey, and what messaging is going to resonate best with those stakeholders versus traditional IT stakeholders? So, I think those are three areas to start with.
[to recap] If you’re a P&L owner, “what’s your growth pathway and your fastest path to get the revenues.” If you are a Sales executive, “what’s the route to market and potential mix that needs to change to cover your customers that you’re trying to sell to?” And if you’re a Marketer, really understanding for these new stakeholders and decision-makers, “how do they consume information and evaluate competitors and make decisions, and what value props resonate best with them?”
[00:19:49] Do you think that this ‘anything-as-a-service’ (XaaS) or ‘everything-as-a-service,’ is this something that is a fad? Or you see this as like…where on its lifecycle do you see it?
Mike: Well, it’s not a fad. So, it started probably about 15 years ago with the software-as-a-service (SaaS) market. Salesforce.com really did a great job of expanding that market and they really proved the value to enterprise organizations (and companies like Salesforce) proved the value proposition of this as a more cost-effective way to purchase a superior product. And I’m not saying Salesforce is superior. I’m saying the fact that they can roll out versions and instances of the same software over time and the customer enjoys the benefit of that, that’s a better experience for the customer.
So that software experience then migrated into hardware-as-a-service. And really “big iron” infrastructure more than desktops. There are companies like HPE and AWS that do this very well where they’ll sell the infrastructure-as-a-service and whatever you need, an enterprise client can tap into it, use it like a utility, stop paying for it when they’re done with it. And then that started to migrate into really almost everything in the Tech space. I referenced earlier, even HP sells ink and toner as a service now. You don’t need to go into Staples or Office Depot to buy a cartridge if you don’t want to.
So really almost everything in the Tech space, both for enterprise buyers and consumers, has or is migrating to as-a-service, at least as an option. I’m not saying everything eventually is going to succeed, but I don’t think there’s any going backwards from a positive customer experience, a positive financial experience, and frankly, the availability of options because it’s such a competitive space, that’s great for the buyer.
A CMO’s Guide to Land and Expand Success in the Subscription Economy
Access our report for a deep dive on the marketing strategies fueling subscription revenue growth in the fastest-growing technology companies and industry leaders, along with benchmark insights on challenges CMOs are facing in this transition.