In Everything-as-a-Service (XaaS) business models, the provider summarises various services and products in the form of a value proposition as a service. This is provided to the customer on a recurring basis and billed (based on the actual added value for the customer) [1], [2], [3], [4]. Examples of XaaS models are Software-as-a-Service, Equipment-as-a-Service, Process-as-a-Service or Production-as-a-Service. Responsibility for the physical products, including regular maintenance and servicing, remains with the provider, while the user receives a right of use through booking and payment (subscription). XaaS business models can therefore be understood as subscription models in which the customer only pays for the actual use generated at the end of a billing period [5]. Monetisation is usually based on time or technical availability (e.g. pay-per-readiness), actual use (e.g. pay-per-use), performance or the generated output (e.g. pay-per-output) or the generated success or economic value (e.g. pay-per-outcome)[6], [2]. Combinations of the individual billing models are also possible.
As with supplier leasing, the supplier thereby taps into new sales potential and also increases customer loyalty[1], [5]. Customers, on the other hand, benefit from increased flexibility, as they can subscribe to and use the services as required, the assumption of risks, particularly operational risks, by the provider and access to the latest technologies and systems, as the investments (CAPEX) required for utilisation are not required[7], [8], [1], [9]. This lowers the barriers to entry, especially for smaller companies, and promotes innovation, as resources and knowledge can be shared and made available more quickly.
XaaS business models differ from traditional operator models in particular in that the use of I4.0 technologies enables networking between customers and providers. As a result, XaaS business models promote the networking and automation of processes and make these business models fundamentally interesting as a strategic tool for industry. XaaS therefore plays a central role in the digitalisation and automation of production processes. By using IoT (Internet of Things), cloud computing and big data, industrial processes can be monitored, analysed in detail and optimised almost in real time[1], [10], which benefits both parties[1], [8], [10]. End-to-end digitalisation and automation of production processes can optimise the entire value chain.
In addition to the benefits, XaaS models also harbour a number of challenges for the provider. As the cash flows in XaaS business models are delayed and, depending on the billing model, subject to a certain degree of variability, the provider takes on the financing function. This can become a financial challenge, particularly for XaaS business models with capital-intensive service components (high initial investment costs for the provider)[11], [5]. In this case, the provider could outsource the financing to banks or private investors. In addition, the introduction of XaaS business models is likely to result in initial revenue losses if the customer has to be convinced of the data transfer and billing models[11], [5]. Furthermore, the technical, procedural and organisational implementation of XaaS models can become a challenge for the provider in order to enable secure, reliable and robust billing of the service provided and to use the data to optimise the service offering[4], [5]. This requires expertise, particularly in the areas of cyber security, IT architecture and data science [5].
Comparability with analogue phenomena
Everything-as-a-Service (XaaS) business models offer companies the opportunity to utilise various services and products as flexible, subscription-based services. A comparable analogue phenomenon is the leasing of equipment and machinery. With leasing, companies rent equipment or machines for a certain period of time instead of buying them outright. In this way, they can use the equipment without having to make a high initial investment.
Compared to leasing, however, XaaS business models offer two key advantages. Firstly, the digital component makes XaaS business models much easier and more flexible (increased changeability) to scale than traditional leasing contracts for purely physical products. Secondly, the digitalised and networked systems (networking and data integration) allow real-time monitoring and optimisation of production processes (automation) by collecting, analysing and using data for optimisation models (generation and processing of large amounts of data)[13]. This data collection and analysis sometimes takes place across companies so that all users can benefit from process optimisations. XaaS business models therefore have a high degree of digital specificity.
Another comparable phenomenon is service contracts, for example for regular maintenance and repairs. Ongoing, recurring payments are also frequently agreed for these contracts and ensure continuous support and assistance from the provider. In contrast, service contracts only have limited scalability and are not aimed at continuously and automatically optimising the range of services.
Social relevance
Everything-as-a-Service (XaaS) business models are highly relevant to society. This results from the ability of XaaS business models to tackle technological, economic and social challenges and bring about positive change in various areas. For example, XaaS models promote access to the latest technologies and services, as high initial investments are not required. This promotes innovation and accelerates the digitalisation of companies. XaaS models also contribute to resource efficiency and sustainability, as processes can be optimised and unused machinery and equipment can be returned to the manufacturer. In addition, XaaS models enable an increase in productivity through automated and optimised processes and consequently reduce the need for labour, especially if production can be expanded from single-shift production to virtually unmanned three-shift production. XaaS models therefore also increase competitiveness and thus the attractiveness of Germany as a business location.
Sources
- Classen, M. et al. (2019). „Everything as a service? Introducing the St.Gallen IGaaS Management Model. In: Proceedings of the 2nd Smart Services Summit, Thun, Swiss Alliance for Data-Intensive Services, 61–65.
- Hypko, P./Tilebein, M./Gleich, R. (2010). Benefits and uncertainties of performance-based contracting in manufacturing industries: An agency theory perspective. In: International Journal of service industry management, 460–489.
- Kölsch, P./ J. C. Aurich, J. C./ und C. F. Herder,C. F. (2019). Grundlagen zu Produkt-Service Systemen. In: Entwicklung datenbasierter Produkt-Service-Systeme. Berli/Heidelberg, 5–15.
- Leiting, T. et al. (2021). Pricing For Smart-Product-Service-Systems In Subscription Business Models For Production Industries. Proceedings of the Conference on Production Systems and Logistics, 719–729.
- Schöllhammer, O. et al. (2023). Everything-as-a-Service Geschäftsmodelle für die Industrie: Kundenzentrierung durch nutzenorientierte Erlösmodelle und digitale Vernetzung. In: Handbuch Industrie 4.0. Berlin/Heidelberg, 277–293.
- G. Schuh, G. et al. (2020). Subskriptionsmodelle im Maschinen- und Anlagenbau.Internet of Production – Turning Data into Value, 282–301.
- Stjkovski, I./Achleitner, A. K. (2021). Equipment as a Service: The Transition Towards Usage-Based Business Models. In: SSRN Electronic Journal.
- Toffel, M. W. (2008) „Contracting for Servicizing,“ SSRN Electronic Journal, 2008.
- West, S. et al. (2018). Value-Scope-Price: Design and Pricing of Advanced Service Offerings Based on Customer Value. In: Practices and Tools for Servitization. Cham, 141–167.
- Doebler,T./Bending, O./Janik, J. (2020). Der zweite Frühling für den Maschinenbau: Servicedigitalisierung als Wachstumstreiber [online]. https://www2.deloitte.com/content/dam/Deloitte/ch/Documents/energy-resources/deloitte-ch-digitale-services-maschinenbau-DE_KS8.pdf.
- Spring, M./Araujo, L. (2013). Beyond the service factory: Service innovation in manufacturing supply networks.In: Industrial Marketing Management 1, 59–70.
- Acatech (2012). Cyber-Physical Systems: Innovationsmotoren fur Mobilitat, Gesundheit, Energie und Produktion. Berlin/Heidelberg.
- Bauernhansl, T. et al. (2015). Geschäftsmodell-Innovation durch Industrie 4.0: Chancen und Risiken für den Maschinen- und Anlagenbau. München.