The best webinar I have seen recently is George Humphrey, VP of the Managed Services Research at the Technology Services Industry Association (TSIA). George talks about emerging business models for tech companies, especially related to XaaS, and the vital role of Managed Services in achieving higher returns. As you may know, Managed Services is the most rapidly growing part of the services portfolio, and Managed Services for XaaS is leading the charge.
A big issue facing XaaS businesses is how to turn a profit. Born in the cloud companies, or XaaS divisions of established companies, are achieving remarkable growth, but, in many cases, operating income leaves a lot to be desired. The average operating profit of companies in TSIA’s Cloud 40 is 0.4%. Part of that is the land grab. Part, unfortunately, is simplistic offers and ineffective pricing. We observe companies treating the shift to XaaS as a simple change in the pricing mechanism rather than a change from a product-centric to a service-centric offering. Even in a land grab, businesses need dynamic pricing across the life-cycle to turn loss leaders into well-paying customers.
Our experience working with dozens of companies is that willingness to pay is much higher than managers believe. One key is offering designs, including products and services, that are customer and market oriented. Another is proof of value using customers’ data to tie offerings directly to desired outcomes. Value pricing is a win-win relationship with customers in which companies work together to create value and equitably share the proceeds of the effort.
I strongly encourage you to invest 45 minutes in this webinar. It will change the way you think of your XaaS offers.
Enjoy the video,