The anything-as-a-service (XaaS) model is booming in the Channel, with the rise of cloud computing and a hunger for flexible, subscription-based offerings driven by the UK’s changing working patterns and economic challenges.
Under the XaaS umbrella, Channel companies are offering numerous services through the model, which includes software-as-a-service (SaaS), infrastructure-as-a-service (IaaS) and contact-centre-as-a-service (CCaaS) to name a few.
The ability to provide a variety of services through a cloud platform has become increasingly attractive to customers looking for efficient and adaptable solutions in the era of digital transformation, boosted by the pandemic and its resulting technology demands.
Indeed, research from Deloitte in 2021 found that for 81 per cent of XaaS adopters, the pandemic accelerated their organic shift to XaaS from traditional IT, and over half (55 per cent) said that the pandemic caused their organisation to invest more in XaaS than originally planned. 75 per cent of responders confirmed their organisation already runs more than half of its enterprise IT as-a-service.
Michael Frisby, senior VP cloud services at Infinigate, said that the pandemic has added “relevance and urgency” to the XaaS model. He commented, “Tighter budgets as a result of the economic recession are forcing decision makers to justify every penny in their expenditure.
“XaaS offers technology solutions and services ‘on tap’ that can be used efficiently, eliminating the need to hire costly in-house resources – both in terms of hardware and experts. Being able to offer companies ‘all-in-one’ packages that better meet consumption needs and resource gaps is a win-win for customers during times of economic turbulence.”
Key drivers
Besides the economic challenges presented by the pandemic, another notable driver of XaaS adoption is the IT skills shortage, Frisby believes. He said, “The increasing skills gap, coupled with the cost of hiring IT and cybersecurity specialists, has resulted in more organisations looking for IT solutions with built-in services.
“It is hard enough for the IT channel to hire the required individuals with the expertise and knowledge needed, and virtually impossible for SMB organisations, so XaaS will continue to play an important role in bridging this gap.”
Simon Fabb, director of Lease Group described how a lack of resources post-pandemic, and in the cost of living crisis, has led to a focus on streamlining processes and reducing operational costs.
“Innovations in fintech have made accessing funds easier and quicker than ever, enabling suppliers of all sizes to offer monthly subscription pricing to their customers on the latest equipment and technology,” Fabb said.
“The rise of white-labelled finance portal solutions means businesses can present financing solutions as part of their brand’s service, without needing to front the costs of the deal themselves.”
Fabb pointed out that the greater emphasis on flexible working arrangements, consumer “pay later” trends and the speed of technological evolution means more and more businesses are looking to suppliers to fully manage their tech-stack.
“Buying equipment and software upfront feels old-hat in 2023, not to mention it’s a burden on IT teams, cash-flow and accounting departments. As supplier-led equipment and technology financiers, we’ve seen a steady uplift from suppliers in more established sectors, such as AV, who have historically sold their solutions alongside a monthly maintenance agreement,” he told Comms Business.
“In 2023, all elements of the solution, including hardware, software and services are being presented on a simple monthly subscription model, to make the latest innovations more attainable to customers, and to shift any headaches relating to hardware maintenance, security and disposal onto those better-qualified in the field.”
One major trend driving XaaS is sustainability, pointed out Brendan Hourihane, senior director enterprise and real estate at connectivity infrastructure-as-a-service provider Freshwave. Customers are looking for energy savings for both environmental and cost reasons, he commented.
“In the mobile space currently, you usually need active radio equipment on each customer site. But in the next few years this will be centralised, saving energy, cost and time to deploy,” said Hourihane.
“Another driver is ensuring security. Heads of IT don’t want to spend their time constantly doing firmware updates to ensure everything is running smoothly and is as secure as it should be. The as-a-service partner can take care of all of this, allowing the in-house staff to concentrate on more value-added tasks for the business.”
Streamlining security
Steve Nurton, head of channel for the UK and Ireland, WithSecure, drew attention to the increasing popularity of cybersecurity-as-a-service, rather than just the sale of individual products and solutions.
“Thanks to this, the standard Security Operation Centre has rapidly improved and expanded into a full service model, rather than just an alerting service,” he said.
“Take managed detection and response and vulnerability management as two prime examples of this. Not only are threats and vulnerabilities being identified using a continuous scanning approach, they are then automatically remediated. With this level of service and remediation, such as automated patching agreements, the threat level and landscape is minimised and clients are less susceptible to attacks.”
He added that the way organisations of all sizes see the value in managed services is also continuing to evolve, and this, again, comes back to the skills gap.
“Vulnerability management, for example, has traditionally been very resource heavy in terms of man power when it comes to reviewing reports and identifying what needs to be de-risked first from a severity point of view,” said Nurton.
“Rather than being pigeonholed as a one stop shop, the XaaS evolution offers exponential growth and expansion opportunities for partners, providing access to new industry verticals and emerging technologies that might not have previously been possible.”
Infinigate’s Michael Frisby said that XaaS adoption is seeing particular growth in the SMB market due to the more complex technologies and business threats that SMBs must navigate.
“The increasing sophistication of cyber criminals, for example, means SMBs will be looking for XaaS and Managed Services that can protect them,” Frisby said. “The XaaS model has a levelling effect, enabling smaller players to benefit for the same technology tools as larger organisations. Channel partners can play a really important role in supporting SMBs in ways that they could not before.”
Preparing for the switch-off
Andrew Dickinson, managing director of Jola, pointed to the imminent PSTN switch-off as another key trend driving the as-a-service model. He said, “There are millions of single-call PSTN lines in the UK that are soon to be end-of-life. Upgrading to broadband is expensive and capital costs of converters and 4G routers soon mount up.”
He explained that customers can pay for a new solution through an affordable monthly rental, rather than needing to pay upfront.
With 2025 fast approaching, the Channel is unsurprisingly seeing a huge shift toward IP telephony.
Collaboration technologies are also booming in popularity since the pandemic, and with an initial high outlay, AV-as-a-service has become a way for businesses to outsource AV deployment, management and upkeep whilst reaping the technology’s benefits, said Lease Group’s Simon Fabb.
“IoT solutions have also followed suit, with inventory tracking, fleet management and hardware designed to collect company-critical data being bundled into monthly data-SIM propositions which simplify billing and aid cash-flow,” Fabb commented.
“In each one of these cases, as-a-service makes the adoption of the latest communication technologies far less restricted by budget. This means decision-makers can focus their discussion on which technologies and endpoints are best suited for their business, and how sustainably users can be added and removed from the environment.
“The ability for more businesses to get their hands on the best equipment is driving competition and encouraging faster innovation in the market.”
Doing things differently
Research from Gartner shows that SaaS spend is continuing to grow by 15 per cent to 20 per cent annually as organisations maintain an average of over 125 different SaaS applications totalling $1040 per employee. However, as many as 25 to 50 per cent of provisioned licences are not regularly used by employees, said Stefan Voss, VP product management at N-able.
“In other instances, some MSPs have not yet adopted SaaS across the board. One example is data protection, where these MSPs often rely on on-premises or hybrid solutions building on legacy architectures,” Voss said.
“New software technologies are being explored where it makes little sense to deploy an on-premises or hybrid infrastructure. An example would be analytics and decision support using AI, where it’s easier to scale and crowd source using a SaaS platform. Given many licenses are not even being used by employees, exploring new SaaS technologies will also focus on better visibility and utilisation of SaaS contracts.”
He predicts that the shift from on-premises legacy infrastructure to cloud and SaaS could accelerate in the coming years, as companies struggle to justify investment in legacy architectures to accomplish a successful outcome.
Elsewhere, in the mobile connectivity space, Freshwave’s Brendan Hourihane said that innovation is going to be driven largely by sustainability efforts and cost over the next few years.
“Having delivered multi-operator small cell in-building connectivity for over five years, we’re seeing innovation in being able to deliver all four mobile network operators with just 1-2 boxes needed on the ceiling, rather than one for each operator. This not only reduces costs but makes it more environmentally friendly as it reduces the amount of equipment and cabling needed,” he said.
“Shareable digital infrastructure reduces the equipment needed and reducing energy usage by even a small number of watts makes a difference over the year. It’s also now possible to deliver multiple technologies over the same infrastructure, for example you can do public and private 4G and 5G mobile networks on the same infrastructure. So once the infrastructure is installed, newer technologies can be added and updated faster and more easily.”
Hourihane added that the range of services available under the as-a-service model has developed a lot over the past decade.
“In mobile in particular it’s moved from someone selling the digital infrastructure to a customer and then trying to get the mobile operators to join the network, to connectivity infrastructure-as-a-service providers like us who do all the design and deployment and don’t start charging customers until the mobile network operators are live on their network.”
Andy Rawll, senior product manager at 8x8 said that a key focus area is the support of more third party environments – because “no solution is an island”, he emphasised.
“Customers need sharper hooks into the applications and business processes that are driving their customer engagement workflows, in particular deeper integration with Microsoft Dynamics 365 and Salesforce. The agility and extensibility of cloud based, and service-oriented solutions put companies in the best possible position to achieve that.”
Specific user roles’ needs are being explored more too, he explained, resulting in an increased momentum around the evolution of ‘composed experiences’ – whereby a standard interface is then tailored to the specific needs of each member of a team.
“The adoption of intelligent process automation, enabled via machine-based learning, is continuing to gather pace too. The integration of more sophisticated algorithms for call routing, chat interaction and voice transcription are elevating the level of communications performance and quality of customer engagement that organisations can now expect from the latest generation cloud-based platforms,” he told Comms Business.
The XaaS opportunity
Jon Selway, VP global channels at Aryaka, said that while some larger, more experienced enterprises are technically able to go direct to a vendor for their solutions, smaller enterprises and international operations may still need a helping hand to navigate operational, logistical and technological complexities.
“This is a key factor for resellers looking to work with more prominent clients – become a trusted source of sound advice and problem-solving for clients, and they’ll never let go,” he said.
“Customers would get the same product going direct, but most would rather pay a little more, get the right solution first-time, and minimise the impact on resources required to make it happen. Concurrently, as-a-service solutions also provide end-customers with the ability to dip their toes into an MSP’s services, enabling them to verify the provider’s knowledge and ability without the massive risk attached to traditional long-term agreements.”
When guided by the proper underlying infrastructure and support, partners can considerably accelerate the onboarding time for new as-a-service customers, Selway explained, enhancing customer satisfaction and reducing time to revenue.
Jola’s managing director Andrew Dickinson highlighted that for Jola partners, the DaaS OpEx model has many benefits over CapEx purchase. He said, “From the end users’ point of view they usually have lower set-up costs and they pay over a period of time without having to sign a third-party lease.
“The monthly rental usually comes with a service guarantee, support and future proofing, as there is the ability to upgrade within the term. Suppliers who offer XaaS products to resellers remove the need for them to invest CapEx in stock.”
Dickinson also emphasised the cost-savings that can be made on both sides due to many service-based offerings requiring fewer manual interventions. He said, “Xaas products are in-the-cloud and with little equipment actually on the end users’ premises there is less to go wrong - and by removing the need for engineers to physically attend site, service overheads are lower.”
Overall, one of the biggest opportunities for channel partners within XaaS is tied to the service part of the term, Infinigate’s Michael Frisby concluded. He said, “Cybersecurity offerings are much more powerful and effective as a managed service than as a standalone product. Channel partners, supported by distributors can deliver services including configuration, monitoring and management to complete an ‘XaaS’ offering.
“Channel partners stand to benefit through the additional revenue source provided by the service offering as well as the longer-term, stronger customer relationship intrinsic within this model. The channel is moving from transactional selling to a model built of longevity. This also creates more opportunities to engage with customers in the long-term, discovering and catering to their evolving needs and requirements.”
This market report appeared in our February 2023 print issue. You can read the magazine in full here.