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What is XaaS? A way to inject agility into your digital business

Everything as a service (XaaS) is emerging as a go-to operating model for delivering IT services. By Clint Boulton.

What is XaaS?

Cloud computing has gone mainstream, with most enterprises adopting infrastructure as a service (IaaS), software as a service (SaaS) or platform as a service (PaaS) as part of their IT portfolios. But cloud services have also broadened to include offerings such as desktop as a service (DaaS), storage as a service (STaaS), containers as a service (CaaS) and more. Enter the everything as a service (XaaS) era, in which any IT function can be transformed into a service for enterprise consumption.

Strictly speaking, XaaS encompasses any computing service that is delivered via the internet and paid for in a flexible consumption model rather than as an upfront purchase or license. But in the rush to conjure new digital services for their business stakeholders, CIOs are increasingly co-opting the XaaS formula for internal operations.

For many CIOs, XaaS isn’t just a way to modernize IT by adopting Salesforce.com for CRM, ServiceNow for IT help desk support or Amazon Web Services for computing infrastructure. It’s become an IT operating model to drive digital business, freeing CIOs from the IT-as-cost-center stigma, Jeff Loucks, executive director of Deloitte’s center for technology, media and telecommunications, tells CIO.com.

XaaS, which some refer to as IT-as-a-service (ITaaS) and associate with the concept of “managing IT as a product,” can potentially form the foundation for new revenue streams, Loucks says.

XaaS emerges as new IT operating model

XaaS evolved from the cloud services model, Loucks says. Seeking cheaper, more efficient ways to run IT, CIOs began adopting cloud for anything from email to CRM, to ITSM and business intelligence visualization, to compute, storage and even networking, via software-defined networks, says Loucks. XaaS describes on-demand services that achieve scale horizontally across the business. Seventy-one percent of 1,170 IT and line-of-business professionals Deloitte surveyed from large U.S. companies said that XaaS makes up more than half of their enterprise IT.

Learning from their vendor partners along the way, savvy CIOs began co-opting XaaS best practices as their own blueprint for building and delivering new IT services to their business peers. “Rather than simply using flexible consumption models to cut costs and increase workforce efficiency, many organizations are adopting XaaS to transform digitally and become more agile,” Loucks says in a new Deloitte report, “Accelerating agility with XaaS.”

The XaaS operating model looks different for every company. But it typically involves leveraging agile and/or DevOps principles to deliver technology services more rapidly. This includes a speedy update cycle comprising minimally viable products, automation properties and design thinking. In XaaS, CIOs may serve act as “cloud brokers,” partnering with the business to find the right SaaS or IaaS solution, or cribbing notes from the playbooks of their cloud vendor peers to build something from scratch. Sometimes, XaaS requires an organizational restructuring along service lines.

The means may be different, but the desired ends are the same: Speed and agility. Seventy-six percent of Deloitte survey respondents said XaaS helps them rapidly design and deploy new services.

What XaaS looks like in the enterprise

Kronos CIO John McGregor faced a challenge a few years ago. To accommodate a strategic shift to delivering its workforce management software in a SaaS model, McGregor spread his 240 IT staff into 6 service classes, totaling 45 services.

McGregor began phasing out a project-based delivery model in favor of a product-based model characterized by monthly software updates. McGregor says that adopting more SaaS, such as Salesforce.com and ServiceNow, in recent years has helped him get more in tune with how to deploy software across Kronos’ business.

“The hard part is defining what services are and lining them up with the talent,” McGregor says. He adds that he has hired more business analysts than software developers in recent years, reflecting the importance of Kronos’ IT becoming more acquainted with business operations, such as finance.

XaaS has a different look at General Motors, where the company has built a data-as-a-service platform on top of its private cloud. The solution, called Maxis, helps GM support strategies such as pricing, marketing, sales forecasting and sales leads, as well as safety and contact center text analytics.

And at Cushman & Wakefield, XaaS takes the form of proof-of-concept-as-service (POCaaS), in which IT partners with the business. The initiative matches the commercial real estate firm’s intellectual property and staff with startups, universities, startup accelerators and early-stage vendors, ideally to foster innovation.

For more on how enterprises are making the shift to XaaS and IT as a product, see “XaaS success: Proving the value of ‘everything as a service’” and “IT as a product: Rethinking IT service delivery.”

The revenue potential of XaaS

Creating an XaaS platform or solution internally can pay dividends for the CIO willing to commercialize it, Loucks says. There’s likely little to stop GM CIO Randall Mott, for example, from extending Maxis to rivals. And there’s no reason why Cushman & Wakefield CIO Adam Stanley can’t flip the company’s PoCaaS for use across multiple industries. The trick is working with multiple business stakeholders to orchestrate commercial delivery.

In effect, such enterprises could compete with AWS, Microsoft and the very vendors whose XaaS models they are co-opting. Whether it’s wise to mix it up with the 800-pound market gorillas is another question, though the resulting competition could generate a healthier market. “It’s about coming up with new business models that are digitally focused,” Loucks says.

Indeed, Deloitte noted in its 2018 Global CIO survey that CIOs are driving digital to “streamline business processes, engage employees and customers, and drive new value-generating business models.”

Tips: Getting started with XaaS

There is no playbook for XaaS, as every business ostensibly differs. However, Loucks offers some advice:

Pick the right strategic partners to ensure success. Few CIOs have the IT talent to build a self-service analytics platform that can scale to thousands of employees, let alone the number of data scientists to help glean insights from complex data sets. That means CIOs may have to appeal to cloud vendors for the requisite scalability, reliability and security. To build something like GM’s Maxis, enterprises “need serious computing power … and the talent to wrangle it, find insight and tune the algorithms,” Loucks says. “Cloud operators have infrastructure and the talent they need to tap into.”

Watch your spending. The cloud isn’t always cheaper, as 45 percent of those Loucks surveyed for his XaaS study said that XaaS costs are difficult to predict and budget. And 42 percent said costs were greater than anticipated.

Consider what data you’re willing to put in a cloud. Some CIOs are bound to be squeamish when it comes to sharing certain data, such as financial or customer information, with a cloud service.

Beware of regulatory issues. CIOs mulling delivering an offering built for internal users to customers should not forget regulatory issues. You may be on the hook for regulatory standards, including GDPR and other data privacy standards.

Tips: Getting started with XaaSPick the right strategic partners to ensure success.Watch your spending.Consider what data you’re willing to put in a cloud.Beware of regulatory issues.