Sometimes it seems like there are too many business acronyms to remember. With rapidly changing technological advancements and the advent of cloud computing, new categories will continue to sprout up. XaaS is one such latest addition.
XaaS (Anything as a Service) covers it all: everything can now be a service.
It sounds like a lot to take in, but don’t worry—we’ll break it down for you. This post will cover what XaaS is, and review the different types of XaaS companies.
What Is XaaS?
XaaS stands for Anything as a Service.
The term XaaS came into use after certain technologies and innovations were connected over networks and converged to become productized.
XaaS leverages cloud computing instead of on-site local software to provide various services and reach customers. It gives you more flexibility in running your business on servers housed in a warehouse or even on-site.
The XaaS industry is evolving and should be a growing focus in future years to come. To say that it has been transformative to the way businesses operate would be an understatement.
More businesses are turning to XaaS to power and grow their enterprises. The global XaaS market is currently growing at a compound annual growth rate of around 26%, and experts predict this trend to continue until at least 2025.
But what exactly is the XaaS business model? How do XaaS companies operate? Is it a good model for business? Let’s take a look at it on a deeper level.
What Is the XaaS Model?
XaaS companies use cloud computing to deliver their services to millions of customers worldwide.
Their products are typically online platforms that are available at all times for users to log in. Users will encounter an easy-to-use workspace that’s often housed right in their browser.
After making changes or downloading data from this workspace, the browser will send the request to the platform. Typically, the platform runs on on-premise servers, a cloud provider, or a web-based network.
A XaaS platform eliminates the need to worry about building out extensive on-premise storage, web services, hardware, or custom software. It depends on what service the specific XaaS company is offering.
Instead of building everything in-house, companies can purchase a XaaS product license for an extended period and take advantage of its extensive infrastructure.
As long as the XaaS product is available, this can be lucrative.
“Anything” is a broad category, though, which can sometimes make the concept of XaaS companies hard to grasp.
To fully understand the different XaaS businesses currently on the market, let’s take a look at 10 of the most common types of XaaS companies now.
10 Types of XaaS Businesses
There are several types of XaaS businesses that millions of customers around the world use. Let’s take a closer look and some of the most popular ones.
1. SaaS (Software as a Service)
SaaS stands for “Software as a Service,” and it is the most common type of XaaS business.
Companies integrate SaaS products into their tech stack and use the software to streamline business operations without developing the software from scratch.
Ultimately, it saves a company both time and resources, enabling its members to concentrate on core business functions.
The average company uses 137 Saas apps, which is 30% higher than the prior year. It shows how popular integrated SaaS solutions are with nearly every type of company.
One notable SaaS company is HubSpot, an all-in-one marketing solution that functions as inbound marketing, sales, and service platform.
Hundreds of thousands of customers use this software to power their marketing efforts, including us at Kinsta. It relies on a subscription-based business model. Like most SaaS companies, HubSpot uses cloud computing to store and manage data.
2. PaaS (Platform as a Service)
PaaS stands for “Platform as a Service.” PaaS companies offer users a cloud-based solution that enables them to create apps, software, and other engineering projects on the platform instead of building their own.
PaaS companies can offer their customers everything ranging from servers to storage, database functionality, and more.
The platform is housed and entirely owned by the company. Users can build their products on this platform, cutting out the costly expenses of buying and storing hardware independently.
An example of a PaaS company is AWS Elastic Beanstalk.
AWS Elastic Beanstalk enables companies to “deploy and scale web applications and services on familiar servers.”
PaaS provides a foundation for entrepreneurs and business owners to create products on cloud-based infrastructure and sell them to the masses.
3. IaaS (Infrastructure as a Service)
IaaS stands for “Infrastructure as a Service.” IaaS companies provide infrastructure in the form of network-based solutions and storage. Generally, they offer computing power to develop, run, and scale products.
If a PaaS platform is what a company would use to build their app or software, an IaaS company is what they’d use to power and grow it.
IaaS companies typically offer a “pay-as-you-go” model, allowing customers to pay for however much they use over a set time.
One major drawback is that you become wholly reliant on the IaaS company since it essentially makes up your company’s infrastructure. Your success will be at the mercy of its reliability and uptime. If the infrastructure becomes unstable, so will your company.
An example of an IaaS company is Microsoft Azure.
Microsoft Azure provides companies with the “flexibility to build, manage, and deploy your applications anywhere.” It enables users to work with all computing languages and frameworks while scaling products and companies.
4. AaaS (Analytics as a Service)
AaaS stands for “Analytics as a Service.” Companies are turning data into insights and using those insights to drive business decisions. With a shift toward digital solutions, companies are using AaaS products to track their key business metrics.
The AaaS industry was worth nearly $5 billion in 2019. Experts anticipate that it will have a compound rate of growth of over 25% through 2027.
Businesses with a firm grasp of analytics will better position themselves for whatever obstacles they may face.
An example of an AaaS company is Outlier.
Outlier’s software can ingest data from your company and extract insights using proprietary technology. Data is only valuable if it is actionable, and this software is helpful to companies that don’t know how to find insights within large datasets.
5. DaaS (Desktop as a Service)
DaaS stands for “Desktop as a Service.” DaaS companies enable users to manage their entire workforce through a secure web browser. Employees would individually log into that browser when reporting for work.
This secure service makes it easy for employees to access necessary files, programs, and software—even while they’re out of the office.
DaaS products’ flexibility and reliability are replacing the need for businesses to build custom, localized desktops.
An example of a DaaS company is Citrix.
Citrix offers a range of products that can help you and your employees work from anywhere. Their Citrix Workspace is designed to bring together all your apps and software into one secure desktop, enabling your team to work more efficiently across a variety of different devices and platforms.
6. FaaS (Functions as a Service)
FaaS stands for “Functions as a Service.” What if you wanted to run an app or service function without building the entire thing yourself? That’s where a FaaS company can help.
FaaS companies enable businesses to leverage specific functions or outcomes without forcing them to develop or run the application.
The FaaS industry is snowballing and is estimated to be worth about $7.7 billion.
An example of a FaaS company is Google Cloud Functions.
Cloud Functions is Google Cloud’s scalable product that lets you pay as you go. It offers customers the ability to “run their code with zero server management.”
Besides, it has built-in security functions, hybrid and multi-cloud options, and debugging capabilities.
7. STaaS (Storage as a Service)
STaaS stands for “Storage as a Service.” It can be costly and cumbersome to house all of your data internally. That’s why companies are turning to STaaS providers for their storage solutions.
Offloading some data to a reliable STaaS partner can free up internal resources and reduce costs.
Of all the XaaS categories, the STaaS industry is the most impressive in sheer volume. It’s estimated that the entire STaaS industry will be worth over $100 billion by 2027. With more companies using cloud-based STaaS solutions to scale their operations, that number is expected to grow exponentially in the years to come.
An example of a STaaS company is HPE Greenlake.
HPE Greenlake is a product under the Hewlett Packard Enterprise parent company. The product offers “cloud services for storage optimized for all your workloads.”
The data platform functions entirely as a service to you, making it the perfect solution to scale up and down as needed.
8. CaaS (Containers as a Service)
CaaS stands for “Containers as a Service.” All software codes are packaged together in “containers” to be read and run anywhere. The code, library, and dependencies are all packed together in a container to be read and executed when needed.
Similar to other XaaS companies, if a customer didn’t want to build a container to store a code library, they could purchase it from a CaaS company to solve this issue. The CaaS industry is expected to grow to $4.1 billion by next year.
An example of a CaaS company is Portainer.
Portainer is a container management tool that “allows anyone to deploy and manage containers without the need to write code.” It can be a powerful time and money saver for numerous companies looking to outsource their container development to a reliable partner.
9. DBaaS (Database as a Service)
DBaaS stands for “Database as a Service.” DBaaS solutions enable businesses to organize, filter, and store customer data in software easily accessed and retrieved by the right employee.
Companies using DBaaS software won’t have to build their database from scratch. Instead, they can customize and create a personalized database in the cloud using a trusted DBaaS solution.
An example of a DBaaS product is Oracle Database.
Oracle Database is “the world’s leading converged multi-model database management system.” It unifies in-memory, NoSQL, and MySQL databases.
The product enables users to build databases that connect business units and cut back on each employee’s lift and time to devote to their database operations.
10. AaaS (Authentication as a Service)
In this instance, AaaS stands for “Authentication as a Service” (as you can see, some of these acronyms can have more than one meaning.) It can sometimes be appropriate to specify which business model you’re referring to if duplicative industries exist (i.e. Analytics as a Service).
AaaS businesses provide users with the ability to implement access control solutions in their platform. It gives them the flexibility to control who can use the product across devices and networks.
The AaaS industry is expected to grow to $2.4 billion by 2026.
An example of an AaaS business is Duo Security.
Duo Security provides “modern access security that is designed to safeguard all users, devices, and applications.” Businesses using Duo Security’s product can require employees to have two-factor or multi-factor authentication enabled.
It compels employees to verify their login attempts through various measures to ensure that no unauthorized users get into their accounts.
Now that you know the different types of XaaS businesses, let’s look at why so many are using this model as a foundation.
What Are the Pros of the XaaS Model?
There are numerous pros of the XaaS model, including flexible customer plans, lean operations, enhanced technical support, and scalability.
Customers Can Pay on a Subscription Basis
XaaS companies are more cost-efficient for the end consumer. Many operate using a subscription model, which ultimately provides more flexibility for the customer.
If a customer needs to cancel or adjust service, they can grow or shrink with the XaaS company. It can enable companies to scale at a faster rate.
Companies don’t need to build out their back office with servers or go through costly recruiting initiatives for employees responsible for the scaling effort. Instead, they can rely on the XaaS company to play a critical role in infrastructure and overall success.
Companies Can Become Leaner
Startups and mature companies will no longer have to invest in bulky, costly hardware and infrastructure needs or hire an extensive amount of full-time employees to build and develop products.
Instead, businesses can enlist XaaS companies’ help to use these services and integrate them into a business. It makes it far easier for the company to pivot if needed, especially if they’re bootstrapped.
Businesses won’t have to focus on building data warehouses, acquiring servers, or even having an expansive IT department. They can retain critical staff and leverage the XaaS company as a true partner.
Businesses Receive More Technical Support
Have you ever had a problem with a server or an error in a dataset that your team couldn’t solve?
XaaS companies often offer technical support for some problems that businesses would have had to handle independently otherwise. It’s a huge benefit because the XaaS company is acting as an extension of your team.
Businesses can turn to the support team at the XaaS company to help troubleshoot the software or overall business functions. A team can leverage the XaaS company’s expertise and use it as an asset to nudge the business forward.
Scalability is Easier with XaaS Products
Businesses can quickly scale their operations up or down by simply switching their chosen plan by coordinating with their XaaS partner.
Previously, it would’ve taken roadmaps and months of planning to scale. Now, it takes mere minutes through a XaaS company.
However, despite all the benefits, there are still a handful of negatives that accompany XaaS businesses.
What Are the Cons of the XaaS Model?
There are numerous cons of the XaaS model, including security issues, performance outages, and hidden fees passed onto the customer.
Security Issues Can Arise
XaaS companies can make your business more vulnerable. You are entrusting this business with your reputation and sensitive data.
Depending on their infrastructure, security concerns may arise, and hacks may occur. To temper your total reliance on the company, you need to make sure that you do proper research when selecting a XaaS company.
When evaluating XaaS partners, please pay close attention to their security verifications and badges. Look to see if they have suffered from data breaches in the past or have had other concerning reports in the news. It can be a small but critical step to ensure that you are making the right choice.
Performance Issues and Outages May Happen
Since you’re using these companies to perform specific functions for your business, you ultimately rely on them to work to deliver to customers. If the XaaS provider has an outage, you are at the mercy of their team to fix it.
These outages can disrupt your business functions and grind operations to a halt. It is critical to evaluate each XaaS platform’s average uptime and note when routine maintenance commonly occurs.
While outages will inevitably happen at some point, you should understand your vulnerability points and how you might prepare your business for them. If an outage does occur, you can enact your emergency mitigation efforts and customer communication plan to absorb the impact.
Hidden Fees and Licenses Can Add Up
Examine all parts of the contract before signing up, so you know what you are paying for in your agreement.
While using a XaaS company will likely cost less than owning your servers or housing your data, you still might find yourself paying hidden fees and buying expensive seat licenses.
It’s easy to rack up numerous fees and additional seats for your employees when trying to scale. Evaluate each subscription based on what you need now and what you may need in the future. It could be costly to switch down the road, so you want to be sure that you’re selecting the perfect XaaS service to scale with you.
Migrating services at a critical point in your business may disrupt your growth. Keeping the future in mind when evaluating XaaS options is vital for the growth trajectory of your company.
XaaS companies are becoming more popular and used by thousands of companies all over the world. The Anything as a Service industry is not slowing down anytime soon.
The XaaS model provides consumers with greater price flexibility, leaner structures, and relevant support. However, it can also be vulnerable to hacks, outages, and hidden costs.
By understanding how XaaS companies operate, you’ll be able to decide if using a XaaS company is the right move for your business.
Which is your favorite XaaS company, and why? Please share your opinion with our readers in the comments.
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