OEM Executive Buy-in Is Key to Keeping up With the Transforming Tech MarketThe demand for everything-as-a-service (XaaS) is rapidly outpacing the need for traditional products. While business transformation is inevitable, the drive for technology original equipment manufacturer (OEM) XaaS business model adoption creates a significant burden on budgets and resources. OEMs must maintain service level agreements and buyer relationships with existing customers while simultaneously ramping up an entirely new arm of their business that’s based on services delivery. Meanwhile, the transformation to XaaS introduces unfamiliar delivery methods and products that require an upskilled workforce and new ways of thinking and working.
Business transformation to XaaS is a substantial, yet necessary, undertaking that requires unwavering executive commitment. Without executive support, product and business development teams can suffer false starts and setbacks, blocking the road to progress. Support from the C-suite and executive leadership helps ensure adept management of stakeholder expectations, the optimal mix of capital and human resources and business continuity to keep both new and existing customers engaged.
Accelerated XaaS Adoption Leads to Greater Business Agility
A survey conducted by Technology Services Industry Association (TSIA) found that nearly 48 percent of the 50 largest technology providers have seen product revenues flatten or decline in recent years, while 66 percent of those same companies experienced growth in service revenues. The economic uncertainties caused by the global pandemic greatly accelerated the sense of urgency for business transformation across global technology markets. Due to rising customer demands for scalable, subscription-based delivery, OEMs are seeking the fastest, most effective ways to develop XaaS offerings. The sooner OEM executives steer their organization toward XaaS, the greater chance they have of claiming their share of that rapidly growing market.
However, the economic decline in traditional services predates the current market conditions. The global XaaS market is still on pace to reach $344.3 billion by 2024, as more organizations take the necessary next steps toward XaaS adoption. For established OEM executive leadership teams, XaaS transformation requires a balance of the risks and opportunities. Established OEM leaders see the value of as-a-service and software-defined delivery, but the challenge becomes the journey from established products and practices to XaaS. The advantage of current revenue streams and customers must be weighed against the stickiness that you get from a recurring services delivery model.
While the promise of new customers is inviting, the larger challenge of transformation goes far beyond internal team and product changes. OEMs that adopt XaaS delivery must also make sure existing customers and channel partners see the value in their new offerings. Only with strong executive leadership support can OEMs reestablish themselves in this transforming market and still hold onto existing market share. When acting as a unified entity, OEMs stand to capture new customers and penetrate new sales channels while also supporting — or even encouraging — the transformation initiatives of their loyal customer base.
The value of business transformation also transcends the need to hedge against declining demands for traditional product delivery. Such transformation accelerates business agility and provides the foundation needed to pivot quickly in the face of future disruption. By adopting emerging technologies that provide a data-driven approach to strategic development, such as artificial intelligence and big data analytics, and by moving toward automation and IoT integration, OEMs that transform to meet today’s needs also build the tools and processes they need to stay ahead of future trends.
The Top Four Business Challenges of XaaS DeliveryTraditional product lifecycles typically have definitive start and end points, and customer success is measured by how well the product functioned throughout that period. In sharp contrast, XaaS requires a steady stream of resources who engage through touch points that span the entirety of the customer relationship. CEOs moving to this model need to carefully prepare for this fundamental shift in delivery and consider the challenges to their investment model, business value, delivery and market penetration. Some of the biggest challenges OEMs face through transformation include:
Balancing capital investments
Shifting business models can place a strain on working capital that threatens delivery for both legacy products and new offerings. When moving to an XaaS model, OEM executive leadership must keep existing product delivery moving forward as scheduled while also transitioning to a new delivery model. During that time of transition, they must carefully balance legacy revenue streams with future investments, and existing customer commitments with new customer demands. Additionally, OEM leadership must invest in XaaS product development, marketing and sales while still honoring established customer expectations for product updates and maintenance.
Maintaining customer loyalty through transformation
Customer preferences and loyalty can quickly shift through transformation. By fostering excellent customer service throughout and beyond transformation, established customers are less likely to feel left behind. Maintaining customer loyalty through any transformation starts with strong executive support and a unified message. Keeping those customers engaged also requires significantly more touch points than the OEM team might expect. By enlisting an expert services partner, you can not only keep customers engaged, but also improve the quality of each communication between your organization and your existing customer base to keep them engaged, excited and loyal to your brand.
Reducing supply chain complexity to keep up with accelerated delivery
Balancing the priorities, strategies and investments of XaaS with the needs of customers who rely on legacy systems and traditional supply chains takes a certain level of finesse. With the right executive support, OEMs can drive successful efforts to automate the supply chain and develop key partnerships. These strategies reduce overall delivery costs, provide flexible budget structures, expand reach to new customers and maintain the customer experience for both legacy and new business — all while accelerating the supply chain from end to end.
Managing resistance to change
Embracing the unknown is routinely met with resistance, both from customers as well as OEM employees and partners. Established customers rely on OEM legacy solutions for their success and may be reluctant to switch. Meanwhile, your engineers, management teams, business teams and even sales channel partners have established practices around your legacy solutions. And in many respects, the idea of automation instills fear in workforces who are concerned that their contributions will become obsolete. Business transformation requires an engaged and energizing executive team that gets people excited about transformation and helps everyone clearly see the benefits. Through thoughtful analysis, planning and buy-in on the part of the CEO and executive committee, along with a considerable amount of communication to level-set expectations and allay fears, your entire organization and your customers can more easily embrace your move to XaaS.
Best Practices for a Successful Business TransformationWhile there are many challenges on the road to business transformation, success starts with prioritization — and that starts at the top. The C-suite and heads of finance, legal and human resources all must work together to map out an XaaS transition strategy, establish key business stakeholders and clearly communicate the plan to make the transformation a success.
With a best-practices approach, established OEMs can accelerate transformation to overcome challenges, break through barriers and accelerate XaaS implementation. A successful XaaS transformation requires you to:
Communicate a unified vision
Once you have the backing of your board for investments and a well-defined, clear vision for the future, it’s up to the C-suite to openly and effectively evangelize the shift in business models. Through a unified message, you can generate enthusiasm and encourage business stakeholders, employees and partners to adopt the strategy and move forward with the necessary changes.
Bring together the right mix of resources
Each line of business has different priorities that need to be addressed and incorporated within the overall XaaS strategy. Your teams cannot operate in silos and achieve any amount of meaningful, widespread transformation. Bringing together cross-functional teams that are built around core strengths can help you develop an overarching XaaS strategy that clearly defines each team’s core roles and responsibilities while still meeting the needs of the different lines of business.
Become data-driven for continual improvement
Undergoing a successful business transition is difficult without data analysis. Keep track of your key performance indicators and use trends to establish your roadmap, make incremental changes in strategy and implementation and evangelize team successes to build upon the momentum you establish.
Effective Business Partnerships are a Game Changer for TransformationThe effort required for business transformation can place a significant strain on your teams, especially if they must split their time between strategic modernization efforts and keeping paying customers happy. By partnering with a service provider, you can focus your workforce on your transformation efforts without leaving customers behind. Your partner can maintain — and even grow — customer relationships by providing product lifecycle support throughout and beyond digital transformation. This frees up your in-house subject matter experts to move the company forward while trusting that your existing customer accounts are managed effectively. The result is accelerated transformation that moves you through and beyond the challenges and barriers with fewer distractions.
Meet Tech Data Global Lifecycle ManagementThe game has changed. OEMs need a new category of technology partner — beyond product distribution — to handle the product and customer lifecycle needs that meet rapidly shifting customer demands. Partnering with Tech Data Global Lifecycle Management (GLM) enables you to leverage our industry experts and develop a strategy that will evolve your business model to maximize revenue and customer satisfaction — no matter what comes next.
With GLM as your strategic partner, you can focus on the road ahead by transferring existing operational burdens to our experts. We can support a broad set of needs that create, optimize and recapture value for you, your partners and your customers in alignment with your customer experience goals so your company can move faster to your future state business model.
Download “A Roadmap for Technology OEMs” whitepaper to learn more about the XaaS transformation journey and how a strategic, global partnership can help get you there.