What is Anything as a Service (XaaS)?

Anything as a Service (XaaS) leverages cloud infrastructure, and it’s a booming market opportunity

XaaS, or Anything as a Service, refers to any products that are delivered to users as services using the cloud. Historically, IT departments had to purchase up-front or license the software and systems businesses needed to get things done. XaaS provides businesses with a more flexible consumption model because companies pay as they go, based on need and use. That’s typically through either a subscription model or as metered payment, based on actual use.

All XaaS solutions share one basic trait: They’re built on cloud computing infrastructure and concepts. XaaS encompasses a rapidly expanding galaxy of “as a Service” options. Gartner research says that end-user spending on public cloud services topped $332 billion in 2021. The report expected that trend to continue in 2022. Gartner projects spending of $397.5 billion — almost a 20% increase year over year. 

In the operator space, the XaaS model is Verizon’s inspiration for its Network as a Service (NaaS) offering. The service debuted with a custom solution for Walgreens and Duane Reade pharmacies in the United States. It was a result of the customer requesting help to deliver more automation and real-time experiences in the stores. The challenge was to do so without creating a network bottleneck. Also, without implementing technology and solutions that will become outdated and unusable. 

Verizon Business’ Group VP of Sales Massimo Peselli explained that Verizon’s NaaS concept is flexible and commercial.

“You pay a monthly fee depending on how many users you have, how much network you consume, the level of sophistication of the network and how many licenses you purchase. Then you can scale up or down depending on your need,” Peselli said.

Answering the need for digitalization

The pandemic accelerated an existing corporate trend away from on-premises data centers and into the cloud, according to Sid Nag, research vice president at Gartner.

“Even absent the pandemic, there would still be a loss of appetite for data centers, said Nag. “Emerging technologies such as containerization, virtualization and edge computing are becoming more mainstream and driving additional cloud spending. Simply put, the pandemic served as a multiplier for CIOs’ interest in the cloud.” 

Gartner predicts that the next phase of enterprise cloud adoption will see significant corporate investments in emerging adjacent areas. They pinpointed AI, Internet of Things (IoT) and 5G as examples.

“In other words, cloud will serve as the glue between many other technologies that CIOs want to use more of, allowing them to leapfrog into the next century as they address more complex and emerging use cases. It will be a disruptive market, to say the least,” said Nag.

That pull away from simply investing in cloud infrastructure and onto practical and, by necessity, more complex use cases creates the opportunity for anything as a service to emerge. 

The burgeoning market for Internet services

One benchmark to gauge the growth of the “Anything as a Service” market is Bessemer Venture Partners (BVP’s) Nasdaq Emerging Cloud Index, which tracks public cloud computing companies. That index’s total market cap reached $1.9 trillion in 2021 with an annual growth rate of 37.5%. 

The explosive growth of XaaS is fueled by what BVP calls “the unbundling of the office.” That trend started before 2020, but it picked up dramatic acceleration during the COVID-19 pandemic. Now many information workers expect to work from home environments.

The SaaS trend is continuing as more enterprises digitalize. Businesses are finding ways to move not only their data but also essential operational and business functions to the cloud. Enterprises are migrating to whichever makes the most sense for the business task. That can be the public cloud, private cloud, or hybrid, either on-premises or in remote data centers.

It isn’t just enterprises, either. BVP notes that small to medium-sized businesses (SMBs) are reaching for cloud software tools as well.

“Across every key functional area that an SMB needs to care about, including Sales & Marketing, IT, Customer Success, HR, etc., SMBs have recognized the importance of leveraging cloud software to create a better experience for their customers and more efficient operations,” said BVP.