For a few years already, several ‘aaS’ concepts have been part of the IT strategy of organizations. The principle is simple: don’t buy a product, but rent it as a service at a fixed cost and defined in time. In other words: rather than an investment to be amortized, it concerns a rent, meaning you turn Capex (capital expense) into Opex (operating expense). Nowadays, financial managers are more and more sensitive to this argument since the crisis (and not only the one related to Covid-19) has a hard and sustainable impact on businesses.
Several versions of ‘aaS’ are already widespread within organizations. Indeed, SaaS or Software as a Service allows an organization to no longer buy software, but to use it on the Internet. Microsoft 365 is the perfect illustration of it, but other software programs are also partially or entirely commercialized as a service (especially in the fields of office automation, ERP, human resources and finance).
Similarly, Infrastructure as a Service (IaaS) prevents an organization from buying hardware to be deployed internally, since this hardware (CPU, RAM, disk storage, networking) can be installed at a host and can be remotely accessible. Platform as a Service (PaaS) aims to provide a complete application platform allowing the customers to develop, host and run their own applications. Probably, the best-known PaaS is Engine, a Google tool allowing users to develop applications in Python, Java, PHP or Go.
However, there are also other versions of ‘aaS’, such as DRaaS (Disaster Recovery as a Service), which allows to recover not only an infrastructure, but also applications in case of a disaster, DaaS (Desktop as a Service), according to which the provider offers a virtual desk in the cloud, by taking care not only of the hardware and the applications, but also of security, storage and backups, for instance. There is even an acronym covering two realities, namely SaaS, in which S not only means Software but also Storage, since an organization can rent external storage capacity.
We can imagine that in the future, a company will no longer buy a product, but that it will rent it according to a service model accessible on the Internet. This can be compared somehow to the emergence of the sharing economy among individuals, according to which a product (such as a bike or a car) is being rented when its user needs it.
Such an approach implies many benefits. In the first place, there is the financial aspect, of course, since you no longer need to invest in purchases made by means of your own funds. All you do is pay a monthly rent (operating expenses). Moreover, this rental system allows you to dispose at all times of the latest version of software, applications, hardware or processes without having to reinvest each time and without having to perform your own upgrades. Security can also be improved since the service provider will be responsible for securing the service he offers.
Flexibility is another argument raised by the promoters of XaaS since the service can be extended or reduced according to the evolution of the activity or of the strategy of the client. Moreover, by outsourcing this service, the client will be able to focus on his core business, to allocate his internal resources to operations offering added value to the company and to stand closer to the business. To put it briefly: these are the benefits traditionally associated with outsourcing. The fast and easy implementation as well as the mastering of the obsolescence of the infrastructure and of the applications are also part of the arguments raised.
However, XaaS should not be considered as a magic solution. Indeed, rental isn’t interesting in all cases, nor for all organizations; sometimes, it can be smarter to invest in your own equipment. It can, for instance, concern a strategic service according to which purchasing would make you less dependent on an external provider. You should also consider the sustainability and responsiveness of the provider, especially if the service will change regularly. Likewise, if the service is complex and closely related to specific needs, rental can be problematic, while the integration of different XaaS providers can quickly cause difficulties. Security and compliance are other aspects you must consider when negotiating an XaaS contract.
As for the financial aspect, it isn’t only limited to the Capex vs Opex debate, but it must take into account the needs in the medium and longer term. Moreover, the availability of the service must be analyzed since XaaS forces you to rely on an external partner. Security (whether it concerns securing data or the infrastructure, or even confidentiality and traceability) is an essential item, of course, even if a specialized provider can sometimes offer better guarantees for an internal IT service.
Dependence = trust
Obviously, XaaS makes the organization dependent on an external provider. This is why a relationship of trust with this provider is very important. Aprico Consultants is a leading consulting company guiding the strategy and transformation of your organization in order to stimulate its performance, productivity and competitiveness. We combine specialized expertise with a perfect understanding of your context and customer experience as well as an end-to-end approach in all sectors; from consultancy to solution deployment.