Future of Xaas

Future of XaaS
Signals of change
KPMG International
home.kpmg/futureofxaas
Signals of
change
Contents
Business
models
XaaS and the

connected
enterprise
Making
connectivity
happen
21 Business
models 38 Making
connectivity
happen
04 Signals of
change 32 XaaS and the
connected enterprise
© 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. Future of XaaS 2
Foreword
Over the last two decades, the as-a-Service model has COVID-19 has accelerated the movement to XaaS in leaps
Signals of
change
revolutionized how technology resources (software, platforms, and bounds.

infrastructure) are provisioned and consumed. From a consumption
perspective, there has been a rapid migration to on-demand The XaaS world has many business model variations. The more
environments that can be provisioned through self-service, with traditional perpetual and term licensing models are rapidly being
elasticity to allow rapid scaling and ubiquitous availability through replaced with models ranging from subscription, consumption to Business
multiple access channels and with billing flexibility. freemium and marketplace-based models. These variations flex models
on dimensions such as how they define ownership or right to use,
To cater to this rise in demand, we have seen many born-in-the-cloud payment mechanisms, payment timings, units of payment etc.
providers emerge as market leaders in their respective category
segments and continue to see a large number of providers move from We describe the different paths companies can chose to help enable
perpetual/term license models to subscription/as-a-Service models. The a XaaS first model, and the not insignificant challenges to overcome
success of this operating model in the technology world has also given to help ensure the right path for their company.
XaaS and the
rise to companies in a variety of other industries adopting this model. Providers that are transitioning from a traditional solution model to a connected
We call this trend Everything-as-a-Service (“XaaS”). Despite this rapid enterprise
XaaS mode should deal with several transformational challenges:
growth, XaaS companies are still highly challenged by three key issues:
1. They should have a nimble product strategy to continuously
1. Transforming their operating model(s) to realize a true “connected remain relevant and differentiated
enterprise” to help provide a seamless customer experience
2. They should maintain a laser focus on the experience customers
2. Maintaining margin while offering competitive pricing and product are having of the XaaS product. Making
agility to their customer base connectivity
This requires an agile engineering frame of mind, a culture that happen
3. Managing the cost of delivery to remain competitive in the market. delivers continuous innovation, and a front office that reaches
In this point of view, we explore the critical signals of change the addressable market through a variety of channels while being
currently influencing the XaaS industry and how XaaS companies supported by a middle and back office that is efficient and automated
might address the three challenges outlined above. Consumers of to meet the challenges of an on-demand model.
XaaS are becoming increasingly demanding about:
We hope this point of view provides leaders and stakeholders in the
1. The experience they want to receive sector with valuable insights to help them move into the future with
confidence. To discuss these themes in more detail, or to explore
2. The value they want XaaS providers to deliver how KPMG professionals can help your organization become a
3. Reliability of the product offering true connected enterprise, we encourage you to contact your local
KPMG firm or any of the authors listed at the back of this publication.
4. The cost structure they would want to commit to.
© 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. Future of XaaS 3
Signals of
change
Signals of
change
Business
models
XaaS and the

connected
enterprise
Making
connectivity
happen
© 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. Signals of change 4
Signals of change
The XaaS sector is in the perfect storm of change. A number of factors influence the
nature of how the XaaS sector designs product offerings, approaches its market, and Signals of
provides compelling value to its customer base. We will analyze the following signals of A number of factors change
change in greater detail: influence the nature of

how the XaaS sector
01 Customers demand
— new levels of value and service, while wanting XaaS providers to designs product
price for value offerings, approaches Business
— vendors aligned to broader values
— providers who measure what matters for customer experience
its market, and provides models
compelling value to its

02 Competitive environment drives customer base.
category saturation industry specialization
co-opetition vertical integration XaaS and the
connected
enterprise
03 Regulatory challenges include

XaaS — — cyber security, data privacy and data localization
— commercial regulations covering antitrust,
signals digital tax
of change — protection and ownership rights of intellectual
Making
connectivity
property happen
— operational regulations such as those for AI ethics
04 Technology signals cover

AI bias democratization of platforms DevSecOps
cost of outages self-service/self-healing
05 Economic factors
— create operational considerations including offering shaping, compensation
agreements and adopting XaaS metrics
— increase major shifts to asset light, subscription models
Signals of
change
In a recent global
Customer KPMG survey,
56 percent of XaaS Business
models
providers rate
their customers’
experience as
‘average’ at best.1 XaaS and the
connected
capabilities, simple renewals and flexible pricing. enterprise
Fast-maturing customers are increasingly
clear about the kinds of XaaS services they To effectively co-innovate, XaaS players should
understand what value really means to customers and
seek, including flexible pricing to meet varying
factor such feedback into new product development.
needs. They also want to work with vendors
who share — and demonstrate — similar This does require XaaS players to rethink their
customer segmentation — what worked in the past Making
environmental, social and governance connectivity
(ESG) values. is probably not the best, and should not be the only happen
lens to see the future through. Providers should strike
Customers are demanding new levels of the right balance between standardizing their offers
value and service and configuring what feels like a personalized quote,
to meet the more granular emerging segments.
As they strive to gain the agility to adapt to changing Connecting frontline feedback to the product roadmap
market conditions, customers expect their XaaS can help accelerate customer-backed-innovation,
providers to become more intimate business which should be prioritized based on value at stake,
partners. This means working closely together and in alignment with overall commercial strategy.
across the entire relationship lifecycle, in order to
help continually improve every interaction, balancing It is equally vital to remember that not all products are
frequency of releases, ease of upgrades, self-service created equal.
1
Source: A commissioned study conducted by Forrester Consulting on behalf of KPMG, April 2021. Base: 355 professionals
involved with customer strategy decisions at organizations providing cloud services.
Customers want XaaS providers to price resources to improve product quality. Given this demand, conversion rates and sales goals. Such an
for value complexity and a need to get the ‘value’ right, approach enables a win-win pricing model that is
there are a few important pricing-model related built on the idea of fair-exchange of value between
To satisfy diverse demands, XaaS providers considerations for the XaaS industry: customers and XaaS providers. Taking customer Signals of
are devising complex product offerings and segmentation further, to the point where clear use- change
pricing strategies. According to a 2021 KPMG- Dynamic pricing/price optimization: Offering cases can be identified for each segment, and then
commissioned study conducted by Forrester solutions at different prices depending on a range associated willingness-to-pay can be estimated, can
Consulting, seven out of 10 XaaS providers feel they of dynamic inputs, enabling XaaS vendors to then help maximize monetization anchored on the
can effectively articulate their product architecture, adjust products and services according to factors value delivered.
implement a dynamic pricing strategy, and optimize like perceived value, competitor pricing, supply,
Business
models
XaaS and the

connected
Strategic — Determine primary personas benefited by the product (software, hardware, enterprise
professional services, support, warranty, etc.)
— Differentiate personas between currently addressed and aspirational
User personas — Distinguish personas between buyer/influencer and user profiles
— Align personas based on increasing level of influence within the organization
Making
— Determine key areas of value creation that are addressed by the current offering connectivity
Value propositions and features on the product roadmap happen
— Aim to ensure value propositions are unique and mutually exclusive
— Determine use cases (by persona and value proposition)

— Consider cross-persona and cross-proposition use case applicability
Use cases — Aim to ensure use cases are directly addressed by existing product offerings
or those planned on near-term roadmap
Tactical
Bundle pricing: Customers are increasingly looking for solutions versus point tools. XaaS providers need to identify the building blocks for the solution packaging
options — spanning across hardware, software and services (e.g., customer security services and software, accidental damage protection, and other disaster recovery
services, etc.). Pricing bundles for value requires a clear understanding of perceived value and potential role of these building blocks in monetization. Some capabilities
will likely drive the incremental outcomes leading to increased willingness-to-pay, while others may be table stakes. These factors often drive the difference in what goes Signals of
change
into the good versus the better versus the best offers in the commonly used feature differentiated bundling designs.
Curate pricing strategy based Do not turn dynamic pricing

Build capability Build transparency in pricing
on type of customers into price discrimination
— Modifications to the billing — Customers should be — Always have a basic price — Profiteering from unforeseen
Business
system and process (e.g., aware of the factors option in place or unfortunate circumstances models
customer entitlement and influencing pricing not only can result in
capabilities to handle detailed — Customers who do not have negative perceptions from
breakdown of billing fees) — Clear information about large customizations and are customers but also may carry
price changes should be regular users require stable legal implications.
— Training of sales personnel given in advance to avoid plans
to sell based on appropriate customer complaints
pricing strategy for a XaaS and the
customer connected
enterprise
Value alignment: While pricing for value is key, it is also important to deliver on your margin goals. Doing so requires good visibility into underlying cost drivers — such
as cloud costs, understanding how these costs scale across different sizes and types of customer segments (e.g., for corporate headquarters with higher numbers
of intensive users versus remote/branch locations with a few sporadic users) and ultimately helping to ensure your costs are aligned with how you charge for value.
Choosing the right pricing bases is key to an effective price model, and the ideal choice should scale with customer growth and success. A good model should aim to Making
ensure that while the customer pays for the value they get, the bundles are ring-fenced so that the underlying costs remain aligned with the level of value delivered. connectivity
happen
An effective pricing meter enables you to: Key considerations:
— Extract value delivered — Which pricing basis/bases align best with your product’s value proposition goals?
— Differentiate between customer segments — Which ones scale with customer growth/success?
— Align revenue with cost and risk — Which ones would be attractive/acceptable to customers?
— Overcome customer buying constraints — How do you split the value between primary (monetization) and secondary (ring-fencing) bases?
— Bypass psychological thresholds — Examples of primary: Platform fee, usage-based (# of API calls, # of IP addresses under
— Differentiate from competitors management), seat/capacity (# of licenses)
— Examples of secondary: Limiting exposure to cost drivers (cloud costs), data/API limits
It is all about customer experience but measure what matters
In a recent global KPMG survey, 56 percent of XaaS providers rate their customers’ experience as ‘average’ at best. The Chief Customer Office and the Customer
Experience function should step up their focus on customer outcomes, looking at issues such as licensing models, routes to market (i.e., self-led, partner-led, Signals of
marketplace, self-service, direct to customer), bundling methods, and introducing industry specific features into products. change
The disconnect between self-reported capabilities and delivery on customer experience is consistent globally:
North America Europe Asia-Pacific
Business
84% Improve profitability 86% Improve profitability 81% Improve profitability models
Improve the quality of Improve the quality of the Improve the quality of the
81% 77% 72%
Top areas of the customer experience employee experience employee experience
execution Drive operational Explore new business Improve the quality of
[Good/excellent] 74% efficiencies
77% models/revenue streams
71% the customer experience
XaaS and the
Improve the quality of the Improve the quality of Modernize and future-proof
73% employee experience
73% the customer experience
68% IT infrastructure/operations
connected
enterprise
Exceeds expectations Exceeds expectations Exceeds expectations

45% occasionally/consistently 45% occasionally/consistently 42% occasionally/consistently
Delivery on
Experience meets Experience meets Experience meets
customer 48% expectations
33% expectations
45% expectations
Making
connectivity
experience happen
expectations Fails to meet expectations Fails to meet expectations Fails to meet expectations
8% 22% 13%
occasionally/consistently occasionally/consistently occasionally/consistently
Note: Some percentages to do not add up to 100 percent due to rounding

Base: 355 professionals involved with customer strategy decisions at organizations providing cloud services; 80 in North America, 145 in Europe, and 130 in ASPAC
Source: A commissioned study conducted by Forrester Consulting on behalf of KPMG, April 2021
XaaS providers have the unique advantage in terms of their ability to provision telemetry to measure various aspects of customer experience in real time. However,
while reviewing real-time telemetry requirements from products, more does not necessarily mean better. One needs to define the exact sets of information that
would drive the right product strategy. One should measure what matters. Customer success instrumentation should factor in customer segmentation, as one
would like to focus customer success representatives where there is the most-significant potential for expansion. It is harder to make small incremental changes
for tier two customers where the product footprint is small.
Customers seek vendors aligned to Recycling: Partnerships with local recycling
broader values organizations and offering optional recycling
resources as part of the service.
ESG has become a critical, board-level issue Signals of
as companies seek to combat climate change, Giving back (monetary and volunteerism): ESG has become a change
create resilient supply chains, encourage Some XaaS companies have launched funding
diversity, inclusion and equality, and support local initiatives and are donating a portion of their critical, board-level issue
communities. Investors expect organizations to earnings to causes relevant to their business. as companies seek to
report on their non-financial impacts and more
frequently base decisions on companies’ ESG
Employee health/wellbeing and board combat climate change,
governance: Developing software and bots
performance. Customers also prefer to do business
that check in on employees to boost morale and create resilient supply Business
with XaaS providers whose values match their own.
mental health. This software can allow anonymous chains, encourage models
According to KPMG’s 2021 CEO Outlook Pulse questions to senior executives, connect employees
Survey,2 49 percent of CEOs plan to put in place based on their interests, and let employees submit diversity, inclusion and
more stringent ESG practices, while 96 percent workplace feedback. equality, and support
are placing greater focus on the social component
of their ESG programs. The previous 2020 survey
Discounts or concessions during crisis: local communities.
Giving employees discounts for items or services
found that 65 percent of CEOs say managing XaaS and the
that may be of value to them during pressing times. connected
climate-rated risks will be a key factor in keeping
their jobs over the next five years. enterprise
Hybrid workforce: Reducing the need for
physical meeting places, enabling businesses to
Sustainability is no longer a ‘nice to have’ but a
reduce carbon emissions from infrastructure and
business imperative and a source of competitive
commuting, and giving employees the option to
advantage. We’re seeing more and more examples
work in an environment that suits them best.
of ESG initiatives from the XaaS sector, including:
Making
connectivity
happen
2
Source: https://home.kpmg/xx/en/home/insights/2021/03/ceo-outlook-pulse.html
Signals of
change
Competitive A recent survey found

that 86 percent of
environment organizations expect Business
models
nearly 80 percent of all
their apps to be SaaS
post-2022.3
XaaS and the
connected
enterprise
With certain mainstream segments becoming certain categories have been saturated with an
over-saturated, XaaS players should carve excess of products, such as customer relationship
management (CRM — used by 87 percent of
out distinctive niche products and industries,
businesses) and procurement apps.
forming partnerships with competitors to gain
Industry specialization
a stronger foothold and reputation. Less-crowded categories with growth potential
Making
include databases, artificial intelligence (AI) and Industry-specific ‘as a service’ applications offer an connectivity
Category saturation content management. Another differentiating tactic is alternative to broad applications for functions like happen
to adopt a micro-XaaS model, packaging core services sales, accounting, human resources (HR) and CRM.
After initial hesitation, customers have finally and fully as an application programming interface (API) and a Leading research agencies have also backed this trend,
embraced XaaS, recognizing its superior agility and suite of small tools. For example, an API that allows which has the capability to capture, store and analyze
cost-effectiveness compared to traditional on-premise customers to enrich users/contact data, rather than industry-specific data, providing better customer
software models. As evidence of this pronounced shift, using a traditional ‘contact enrichment tool’. This intelligence and more-customized reporting.
a recent survey found that 86 percent of organizations approach lets clients create a user experience tailored
expect nearly 80 percent of all their apps to be SaaS to their specific needs, although even here there is For example, machine learning (ML) and artificial
post-2022, and 61 percent cite ‘migrating workload to the potential for saturation. Micro-XaaS companies intelligence (AI) capabilities can be adapted to many
cloud’ as their top priority for 2021, with companies provide services that can overlay on existing saturated industries, such as built-in data privacy compliance
anticipating using an average of 16 SaaS apps every segments such as office productivity. options for the healthcare and financial services
day.3 However, in the rush to meet this rising demand,
3
Source: Ariella, Sky. ”30 SaaS Industry Statistics [2022]: Trends + Analysis.” Zippia, Inc., 5 January, 2022.
sectors, secure ID ‘passports’ for online education, redistributed, and combined with other open
and monitoring fish stocks in the ocean. With so data. This interoperability dramatically enhances
many variations of vertical XaaS products being the capability to combine different datasets and
created, this software has a huge worldwide develop more and better products and services. Signals of
potential. change
Vertical integration Many dominant
Co-opetition
Many dominant technology companies are technology companies
A growing number of competitors are collaborating vertically integrating into software, hardware, are vertically
to deliver hybrid, as-a-service models and share risk. content and services to help improve efficiency
and reduce costs. Meanwhile, some are planning integrating into
Such alliances highlight the rise of co-opetition,
creating ‘open data’ ecosystems where ‘common’
to invest in transoceanic cables to offer domestic software, hardware, Business
models
middle fiber capacity.
data or code can be freely used, re-used, content and services
to help improve
efficiency and reduce
costs.
XaaS and the
connected
enterprise
Making
connectivity
happen
Signals of
change
Most social media

Regulatory platforms are granted
‘intermediary’ status,
challenges legally protecting Business
models
them against content
published on their
channels — but this
situation may XaaS and the
connected
The increasing incidence and severity of Cyber security, data privacy and data not last. enterprise
cyber-attacks, along with concerns over data localization
sovereignty, have led to evolving regional and
Publisher or platform?
national regulations and compliance standards
covering storage and use of data. Emerging Most social media platforms are granted ‘intermediary’
technologies like AI have accelerated this status, legally protecting them against content
published on their channels — but this situation may Making
trend, and ‘as a service’ providers should connectivity
not last. Yet, that hasn’t shielded companies from
respond by adopting ‘security, ethics and lawsuits for failing to comply with new and changing
happen
compliance by design’ for products. government regulations.
Regulations fit into three broad categories: In future, it seems likely that XaaS companies who
generate or facilitate content will have to identify as
either publishers or platforms, which carries huge
Cyber security, data privacy and data localization legal implications. While tech companies still have a
responsibility of care and duty to remove any content
that violates federal criminal laws, however, they
Commercial regulations
currently can’t be held responsible for users spreading
misinformation through the platform. However, with
a growing requirement for regionalized compliance
Operational regulations/ethics
officers, there will likely be increasing expectations of
compliance and regulatory oversight.
Regulations based on data privacy Data breach regulations shaping the
industry
There are many national privacy laws limiting the
disclosure of personal information to third parties. Cyber-attacks and data breaches are influencing Signals of
Companies doing business in certain countries may the way XaaS companies operate, forcing them to change
be prohibited from transferring data to a third-party focus on cyber security. After a leading tech giant Abu Dhabi Global Market
cloud provider for processing or storage outside
that country. The alternative may be to provide
compromised the personal data of 530 million (ADGM) introduced Data
users, it was subjected to class-action lawsuits
customers with local storage at additional cost. in Europe and the US — specifically California. Protection Regulations
Examples of data protection laws include:
A federal judge approved a settlement for the 2021, aimed at increasing
company to submit to independent audits of its
1. Abu Dhabi Global Market (ADGM) introduced data security measures for the next five years. the protection of personal Business
models
Data Protection Regulations 2021, aimed at
Commercial regulations
data processed in the
increasing the protection of personal data
processed in the Emirate. Emirate.
Antitrust laws
2. China’s Cybersecurity law (article 37) requires
IT infrastructure operators to store all personal The US government has the power and the
information collected from users (sales, responsibility to prevent corporations from XaaS and the
marketing, accounting, etc.) within the country’s becoming monopolies, with antitrust laws in place connected
to promote free and open markets, keeping a check enterprise
mainland territory.
on market allocation, bid rigging, price fixing and
3. Europe’s Digital Services Act aims to create mergers and acquisitions.
a common set of rules on intermediaries’
obligations and accountability across the single The Sherman Act prohibits agreements among
market. This should open new opportunities companies not to compete, for instance by
to provide cross-border digital services, while colluding to fix prices. The Clayton Act was Making
ensuring a high level of protection to all users, designed to prevent mergers and acquisitions connectivity
that consolidate excessive market power in one happen
no matter where in the EU they are based.
company.
4. Data privacy laws in the US are gaining ground
with the CCPA (California Consumer Protection In recent investigations, the US federal government
Act) and similar bills in Virginia and Florida. has repeatedly charged technology companies for
violating antitrust guidelines. These regulations
5. India’s Personal Data Protection Bill (PDPB)
and lawsuits have forced companies to rethink
the expected benefits of organic versus inorganic
growth, given the increased scrutiny over
acquisitions.
Regional and industry-specific regulations minimum, common global regulations with additional, In the ASEAN region, Singapore, Indonesia and
location-specific compliance add-ons. Malaysia charge a digital service tax, while Thailand
The swift adoption of cloud computing has put data has announced forthcoming plans to tax foreign digital
sovereignty under the spotlight, with countries passing Common policy compliance-as-a-code can help build service providers. Signals of
laws to regulate and control data storage and transfer, compliance capabilities, with a regulatory database change
making data subject to laws and governance in the tracking global and regional policies such as GDPR, Over the last five years, India has been aggressively
territory where it was collected. CCPA (California Consumer Privacy Act), HIPAA (US pushing for increased tax on digital transactions,
Health Insurance Portability and Accountability Act) specifically targeting foreign companies with no
These laws now reach beyond sectors and carry steep and PCI DSS (Payment Card Industry Data Security permanent establishment in India who, up to now,
penalties — for example organizations can be fined Standards) — which are all regulations established have not had to pay local income tax. India is not alone
up to 20 million euros (EUR) for failure to comply with by government authorities or industry groups. in imposing tax on digital sellers.
GDPR. Data localization refers to the requirement to Business
keep certain types of data within the country of origin. Compliance-as-a-code is a useful strategy for Meanwhile, negotiations involving 140 countries models
Additionally, some nations place significant limitations enforcing both regulatory and internal compliance are underway at the Organization for Economic
on data transmission, either outside the country of rules, to assist with ensuring privacy by design. Cooperation and Development (OECD), to overhaul
origin or cross-border. Such regulations are forcing international tax rules to adapt to the fast growth of
XaaS companies to rethink where they store data and Digital services tax internet economies. The OECD’s decision on cross-
move away from global data hubs. border tax rules will provide clarity on the tax liability
Rapid and extensive digital transformation has
of companies providing digital services or selling XaaS and the
sparked discussions in many legal and regulatory
Industry specific regulations online. The plan for effective implementation of the connected
realms including international tax, with a wide-ranging enterprise
decision is slated for 2023.
Sectors such as healthcare, government agencies impact upon direct and indirect taxation, broader tax
and finance require stringent data protection systems policy issues and tax administration. The countries that currently impose the digital tax point
and are governed by strict data regulation laws such to how internet giants or large e-commerce platforms
At the center of the debate is the question of whether
as GDPR in the EU and the US’s Criminal justice are able to ‘book profits in low-tax countries’ regardless
international income-tax rules, developed more than
Information Services. of where their customers are located — which
a century ago, remain fit for purpose in the digital
necessitated changes in the existing framework of Making
The Intermediary Guidelines and Digital Media Ethics global economy. The fundamental elements of global connectivity
international taxation.
code in India has established regulations on health- tax which determine where taxes should be paid, happen
related data, geo-location information and the ‘right to be and what portion of profits should be taxed, have Operational regulations/ethics
forgotten’ (individuals wanting to remove their personal enshrined tax certainty, and helped to eliminate
data off the internet). It also includes as-a-Service double taxation, thus stimulating global trade. Regulations on AI — AI ethics
components, making it even harder to comply with digital
France imposes a 3 percent digital services tax In April 2021, the EU proposed new regulations
taxation for ‘straight-through’ process transactions.
on revenues generated in the country by digital governing the use of AI. Despite having left the EU, the
Adopting ‘compliance-as-a-code’ to tackle companies, regardless of where they are established, UK lending market is intrinsically linked to the European
if their annual supply of taxable services exceeds banking sector, and larger trading blocs tend to dictate
regulatory and internal compliance
EUR25 million (US$30 million) in France and the likely direction of travel for smaller markets such
Compliance-as-a-code can help companies cater EUR750 million (US$900 million) worldwide.4 as the UK. Therefore, it is reasonable to expect UK
to regional regulations, combining the flexibility of legislation to continue to closely mirror that of the EU.
4
Source: Schulze, Elizabeth. ”France targets Google, Amazon and Facebook with 3% digital tax.” CNBC, 6 March, 2019.
Companies are required to adopt design procedures
and practices such as:
— Providers of AI systems must establish Signals of

appropriate data governance and management change
practices and use datasets that are relevant,
representative, free of biases and complete.5
— Consequence scanning should be adopted
to incorporate ethical AI design into product
development.
— High-risk AI systems should be designed to allow Business
users to oversee them in order to prevent or models
minimize potential risks. Design features must
enable human users to avoid over-reliance on system
outputs (automation bias) and allow a designated
human overseer to override system outputs.6
— A system’s technical documentation should XaaS and the
contain metrics used to measure potentially connected
discriminatory impacts and information about the enterprise
foreseeable unintended outcomes and sources
of risks to biases and discrimination (intended or
unintended).7
— Companies should prohibit AI systems from
providing social scoring for general purposes by Making
public authorities. The regulations also preclude the connectivity
use of “real-time” remote biometric identification happen
systems, such as facial recognition, in publicly
accessible spaces for law enforcement purposes.8
These changes are expected to make it harder to
develop AI based applications and have far-reaching
implications on as-a-Service providers — especially
those based in the US. They would also impede the
use of data analytics in as-a-Service applications.
Source: MacCarthy, Mark and Propp, Kenneth. ”Machines learn that Brussels writes the rules: The EU’s new AI regulation.” The Brookings Institution, 4 May, 2021.
5,6,7
8
Source: ”Proposal for a Regulation of The European Parliament and of The Council: Laying Down Harmonised Rules on Artificial Intelligence (Artificial Intelligence Act) and Amending
Certain Union Legislative Acts.” European Commission, 21 April, 2021.
Signals of
change
XaaS companies
Technology should consider
issues such as cyber
Business
security and code models
barriers, to enable
customers to
design their own
interfaces. XaaS and the
connected
Emerging technologies like IoT (Internet of Consequence scanning enterprise
Things), AI and edge computing are expected

Given that AI solutions are self-governed, it’s vital
to have an impact on the design and marketing to understand the consequences of any decisions,
of products. XaaS companies should consider some of which can be negative and life touching. In
issues such as cyber security and code an extreme case, facial recognition AI could identify
barriers, to enable customers to design their the wrong person as the perpetrator of a crime. When Making
designing AI features and products, XaaS companies connectivity
own interfaces. happen
should attempt to minimize any bias by considering
AI bias intended and unintended consequences, focusing
on specific positive consequences, and identifying
Bias can be due to a range of factors, namely poor specific consequences they want to mitigate.
algorithm design, bias in sample selection and design
(for example, excluding significant data sets), and data Training developers on ethical principles
that conforms too closely to broad stereotypes and and bias
fails to take account of an organization’s or individual’s
unique profile. AI bias can be caused by human prejudice during
algorithm development and training. A 2019 US study
There are two main methodologies available to help found that an algorithm was less likely to refer black
reduce bias: people than white people to programs for improving
care. Developers should be trained to recognize their easy access to information, questions, tutorial videos adopting a DevOps model, where development and
own and others’ biases when building algorithms. and live chat/bots. Organizations are turning to more operations merge into a single team, with engineers
‘natural’ engagement methods such as voice and working together across the entire application
Data security, technology and other AI-powered technologies, which can achieve lifecycle. Such an approach, known as DevSecOps,
Signals of
organizational hurdles higher operational efficiency and improved customer places a greater emphasis on security at all stages change
satisfaction. of development, which can help to avoid potentially
Cyber security is a huge concern with organizations devastating incidents.
at risk 24/7. When using XaaS tools, it’s essential to AI enabled self-healing platforms are one of the
have an integrated platform that can swiftly identify latest innovations in artificial intelligence, with the DevOps can also be enhanced by AI-driven
security incidents and provide detailed analysis to potential to fix issues quickly and efficiently across applications and ML, helping to determine where
mitigate the root cause. XaaS customers are faced systems without any human help, avoiding the need to focus on vulnerability management. Automation
with further challenges like regulatory and security to escalate. They can identify and prioritize factors that can be used for a range of activities, from building Business
compliance, disparate legacy systems, technological may impact network performance; make accurate infrastructure for the XaaS platform to auditing models
disruption and a lack of alignment between people and timely predictions about outcomes to allow swift security functions. As cloud usage goes mainstream,
and processes. remedies; and give deeper insights and drive better automation will likely increase and DevSecOps
decisions by correctly differentiating between casual will likely merge with DevOps, ultimately evolving
To address regulatory and security compliance, and correlative factors. into NoOps, when no human intervention at all is
XaaS providers should focus on helping to improve required for operations. In this model, lines between
operational efficiency and creating customer-centric, The cost of outages development and operations teams become blurred
service-oriented strategies. XaaS and the
with members of each group assuming each other’s connected
Outages are an inevitable fact of life in the technology
responsibilities. enterprise
Democratization of platforms age. Outages of even a minute can cost companies an
equivalent amount of lost sales. Being able to reliably
Data democratization means making digital calculate the true cost of an outage helps companies
information easily accessible to all users, expanding put together a more complete business case for
the value of XaaS services to a larger audience. This investing in cloud based XaaS services.
can be achieved through microservice architecture,
which positions applications as a collection of Making
Adopting DevSecOps to create an connectivity
services that are highly maintained and tested, integration and delivery pipeline happen
loosely coupled, independently deployable,
organized around business capabilities, and owned Continuous integration (CI) and continuous delivery
by a small team. (CD) enable application development teams to
deliver code changes more frequently and reliably.
Low code/no code platforms can accelerate digital And because these methodologies are agile and
transformation, enabling citizen developers to create, automated, developers are freed up to focus on
test and deploy new applications more easily. business requirements, code quality and security.
Self-service/self-heal environments In a trusted CI/CD pipeline every open-source project
or module is known and tested for compatibility
Self-service is becoming the norm as customers
before being released. More and more companies are
increasingly expect a fast, simple experience, with
Signals of
change
Products should
Economic deliver long-term
value, with rewards
Business
and incentives aligned models
with performance
metrics.
XaaS and the

connected
Whether a business is ‘born in the cloud’ or Operational considerations of migrating enterprise
migrating from traditional one-off licensing to cloud

to an as-a-Service model, it should adapt to
Although advancements in cloud technologies
the economic uncertainties and operating have reduced implementation costs and technical
model challenges of XaaS. Products should barriers related to transitioning to XaaS, there remain
deliver long-term value, with rewards and significant challenges in adapting performance and Making
operating metrics. connectivity
incentives aligned with performance metrics. happen
Organizations adopting subscription-based
Changes or enhancements to product
business models should also consider
offerings
accounting and financial considerations,
making appropriate changes to the balance Companies offering a combination of software,
sheet and income statement. All of which hardware platforms, technology services and
professional services should maintain profitability in
calls for a rethink of internal capabilities and
the face of a range of vastly different cost structures.
management strategies to help ensure a To do so, they need a product hierarchy and bundling
smooth transition. process that simplifies revenue and margin estimates.
Additionally, for both pure-play XaaS companies and
those that sell hybrid products (combining on-premise
and/or on-device software and XaaS elements),
adding new features and functionality can typically relevant. The subscription based XaaS model elevates
require a rethink over profitability. It’s essential to the importance of evaluating customer experience,
clearly define a product offering as either pure cloud as customers' decisions to renew or cancel their
or hybrid, to understand the revenue recognition and services have a lasting impact on revenues. Signals of
cost accounting implications. change
Transitional growing pains are likely, as companies XaaS providers should
Changes to service and product offerings (e.g., combine on-premise licensing with subscription-
moving from a license to as-a-service) can create new based SaaS products. During this changeover period, also understand related
performance obligations — or change existing ones, they should keep investors accurately informed about services, such as post-
which calls for processes and controls to identify the balance between these two revenue sources, and
and evaluate such shifts. XaaS providers should also how that impacts performance metrics. contract customer
understand related services, such as post-contract
At the same time, metrics (for sales team members
support for on-premise Business
models
customer support for on-premise or on-device
software offered within a hybrid model. and partners) and their compensation structure should or on-device software
focus on retention and expansion of customers.
offered within a hybrid
Compensation agreements
Major shift to asset-light, subscription- model.
Compensation arrangements, including commission, based models
bonus and shares, may have been designed around XaaS and the
the company’s licensing model. Operating as a XaaS The recent pandemic has prompted companies connected
provider may also change the evaluation of supply in all sectors to consider asset-light strategies to enterprise
chain performance and channel partner rewards, with fuel growth and strengthen financial performance,
a shift towards nurturing long-term customer delight leading to improved shareholder returns and higher
and relationships and away from short-term sales. Any valuations.
changes to compensation should be made early in
An asset-light model involves transferring capabilities,
the transition process to avoid accounting issues and
such as people, process and technology, to third-party Making
employee and channel partner dissatisfaction.
owners in order to transition from fixed to variable connectivity
In a hybrid cloud model, there are separate software cost structures, enhance agility and shift resources to happen
license elements where revenue is generally focus on core capabilities.
recognized at point-of-sale rather than over the
A subscription-based model, with lower set-up and
subscription period. Even in pure cloud offerings,
implementation costs, is an attractive operational
companies should consider the appropriate revenue
and investment option for organizations considering
recognition for implementation services and any
shifting to remote or hybrid workforces. Today’s
variable, usage-based fees.
customer needs are volatile and influenced heavily
Adopting new metrics for the XaaS model by convenience, requiring companies to constantly
upgrade and refine products and services. XaaS offers
Transitioning to a SaaS business model will likely the speed and flexibility to adapt to fast-changing
frequently require companies to re-evaluate their markets, as value is not tied to physical asset
operating and performance metrics, with traditional, ownership.
licensing-based measurements becoming less
Signals of
change
Business
models
Business
models
XaaS and the

connected
enterprise
Making
connectivity
happen
© 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. Business models 21
Signals of
change
Everything-as-a-
Proliferation of Service (XaaS) is
the XaaS model evolving at pace,
Business
as customers look to models
adopt cloud enabled

technologies across
a wide range
of services. XaaS and the
connected
enterprise
‘Everything-as-a-Service‘ (XaaS) is evolving at pace, as customers look to adopt cloud-enabled technologies
across a wide range of services. Our research shows that customers are eager for models that support the
following goals:
Organization-wide cost reduction

Making
Transitioning on-premise software and hardware from significant capital expenditure to operating expense connectivity
happen
Business agility, ease and scalability
Version-less, many-to-many collaboration
More innovation, with advanced development tools and add-on marketplaces
Focus on outcomes and outcome-based pricing
Initial core XaaS offerings included software (SaaS), platform (PaaS) and infrastructure (IaaS). However, the growing commoditization
of business services, supported by technological advances, has accelerated the development of XaaS, leading to new ‘as-a-service’
models, as shown in the chart below highlights:
Signals of
change
XaaS Offering Description
Software-as-a-Service — Users can access software and licensing online via subscription
(SaaS) — Companies don’t have to develop software from scratch
Business
models
— Provider hosts cloud computing platform accessed online, enabling users to develop, utilize and
Platform-as-a-Service maintain applications, software, and other engineering projects
(PaaS)
— Users can build products on the cloud-hosted platform, rather than buying/storing hardware
XaaS and the
connected
enterprise
— Provider hosts IT infrastructure such as storage, server and networking resources, delivered to
Infrastructure-as-a- users on-demand via virtual machines accessed online
Service (IaaS) — Enables users to scale IT resources up and down in line with demand, and limits need for on-
premise hardware
Making
connectivity
happen
— Provider provisions analytics software and operations to users through cloud-delivered
Analytics-as-a-Service technologies
(AaaS)
— Enables users to track key business metrics and gain on-demand insights
— Provider hosts virtual desktop infrastructure, allowing users to log into their company’s virtual
Desktop-as-a-Service desktop
(DaaS)
— Lets employees access servers, files and software from anywhere
Signals of
— Provider hosts cloud platform in which users can develop, use and maintain application functionalities change
Functions-as-a- online, and leverage specific functions or outcomes without having to develop/run on-premise
Service (FaaS)
— Allows users to build apps and code with action sequences in response to events
— Provider hosts digital storage space where users can offload data onto a third-party, cloud-hosted Business
Storage-as-a- infrastructure models
Service (STaaS)
— Enables data transfers and frees up additional on-premise storage space
Containers-as-a- — Provider offers ‘containers’ to store and package software code

Service CaaS) — Users can store code libraries without having to build a container XaaS and the
connected
enterprise
Database-as-a- — Users can create a personalized database in the cloud, to organize, filter and store customer data
Service (DBaaS) — Users no longer need to develop their own databases
Making
Authentication-as- — Users gain control over access to information across devices and networks, gaining greater connectivity
a-Service (AUaaS) governance happen
— Users can build, use and maintain their own blockchain apps, contracts and functions on the blockchain
Blockchain-as-a- infrastructure developed by the provider
Service (BaaS) — Frees up resources that would otherwise be developing
in-house blockchain
Signals of
Device-as-a-Service change
— Users access mobile computing devices (laptops, desktops, smartphones) through subscription-based service
(DVaaS)
— Users able to outsource device management and more easily upgrade to new technologies
— Providers deliver networking infrastructure and connectivity to users through the cloud Business
Network-as-a- models
Service (NaaS) — Companies can develop and use their networks without physical hardware onsite, as well as tailor networks to
meet their own security needs
Automation-as-a- — Users access cloud-based RPA services to fulfill automation solutions

Service (AMaaS) — Helps organizations implement scalable automation projects and test use cases for automation opportunities XaaS and the
connected
enterprise
Data Integration-as- — Provider delivers connectivity to systems, files and apps through an integration solution hosted over the cloud
a-Service (DIaaS) — Avoids need to manage and upgrade integration hardware on-premises
Making
connectivity
happen
How the business model is evolving
Today’s XaaS customers want greater choice over what they buy, how they pay, When considering the appropriate operating model and pricing strategy to deliver
and when and where they use products and services. Above all they seek flexibility XaaS, providers should understand evolving consumer demands and market Signals of
to change their purchases and scale up and down, at short notice, to suit their conditions in order to enhance revenue. This means determining products and change
business ambitions. Consequently, traditional models of SaaS, IaaS and PaaS are bundles, customer segments and specific needs, channels to market (including
evolving and expanding, driven by new technology platforms. partners and incentives), and multiple subscription and consumption-based
revenue models.
Traditional business models

Business
models
Revenue
model Perpetual Term Subscription Consumption Outcome/ Professional Freemium Ecosystem Marketplaces
licensing licensing value-based services
Key
dimensions
XaaS and the

connected
Perpetual Limited time Limited time Limited time Limited time Limited time Limited time Limited time Time and
Ownership/ and usage and service and service membership
enterprise
right to use limited
Up-front Up-front or Ratable/hybrid Variable Variable (value Variable (time 0 upfront/ Ratable Upfront or
ratable (usage)/tiered delivered) and materials) variable ratable
Payment pricing (usage) Making
connectivity
happen
Up-front or Periodic Periodic Periodic by Periodic by On delivery None up front Upfront and Upfront and
custom consumption value/royalty periodic periodic
Payment timing
Per license or Per license or Per subscriber Per usage Per business Per project Per license or Per license or Per download
Unit per seat per seat metric on time and seat or subscription
materials subscriber
Traditional revenue models Evolving revenue models Signals of
change
Subscription — Functions-as-a-Service
— Blockchains-as-a-Service
Perpetual
— Device-as-a-Service
licensing
Consumption — Platform-as-a-Service Business
— Authentication-as-a-Service models
Outcome/value — Analytics-as-a-Service
— Network-as-a-Service
based
XaaS and the

— Desktop-as-a-Service Professional connected
— Automation-as-a-Service
services — Data integration-as-a-Service enterprise
— Storage-as-a-Service
— Containers-as-a-Service
Term licensing Freemium — Desktop-as-a-Service
— Database-as-a-Service — Database-as-a-Service
— Device-as-a-Service Making
Marketplace — Software-as-a-Service
connectivity
— Automation-as-a-Service happen
— Infrastructure-as-a-Service
— Data Integration-as-a-Service
Ecosystem — Storage-as-a-Service
— Container-as-a-Service
The above tables are illustrative examples of companies that leverage the various revenue models
Offering a variety of software,
Signals of
communications tools and applications on change
an as-a-Service, subscription basis, calls
for a highly customer-centric organization,
with every part of the business aligned
XaaS transition around the customer experience. Hurdles
challenges to overcome include outmoded, manual
data entry and analysis, legacy, unintegrated Business
models
technology, poor governance and controls,
and a highly decentralized structure with a
lack of shared services.
XaaS and the

connected
Functional process enterprise
Manual data entry, and ad-hoc processes designed to fit a legacy on-premise strategy
Enabling technology
Target Operating Model Layers
Legacy technologies and environments are not well integrated and have multiple process paths
Making
connectivity
Performance insights and data happen
Master data management issues including SKU breakout/explosion, pricing and a single view of
the customer
High degree of Misalignment
variability in between the
pricing, go-to- Governance/controls reporting
market, and Controls that are reactive to risk and an over-reliance on manual detective controls strategies and
customer existing
experience technology stack,
People and organization
strategies Lack of communication from the top-down strategy and organizational buy-in to an overarching inhibiting
change management strategy meaningful
business
intelligence
Service delivery model
Decentralized and autonomous business functional groups with a lack of shared services
Signals of
change
We observe three broad approaches in the

transformation to XaaS, depending upon the
Building a XaaS- organization’s unique cultural, technological
and structural status and maturity: evolution/
first business adaptation, revolution/disruption and Business
composable/modular. models
XaaS and the

connected
enterprise
Evolution/adaptation Revolution/disruption Composable/modular
The organization adapts its operating model Developing a completely new operating Deconstructing the operating model into
and capabilities to shift from legacy products model and capabilities. modular building blocks. Making
and services. connectivity
This requires additional investment but provides Rearchitecting the business into pieces that can happen
This approach builds upon existing processes, a clean slate to build an agile, XaaS-first be assembled and connected with flexibility and
technology and people but can be held back by organization. agility.
complexity, resistance to change and reduced agility.
SaaS
Legacy SaaS Legacy SaaS
Back offi
ce
Legacy
Back office Back office
Signals of
change
Evolution/adaptation Revolution/disruption Composable/modular

Business
models
Expected benefits: Can Expected benefits: Opportunity Expected benefits: Increased
leverage existing technology to reinvent a new, flexibility to adapt to changing
investments customer-centric model; market needs
Increased agility unencumbered
Challenges: Thinking can be by legacy technology; Enables a Challenges: Some capabilities
grounded in old ways; range of strategies and may be dormant at times;
Resistance to change; investments on ‘old’ and ‘new’ Requires strong collaboration, XaaS and the
Complexity and compromise organization knowledge sharing and change connected
from combining legacy and management; Calls for enterprise
XaaS solutions; Competitors Challenges: Needs significant significant investment in
without legacy technology investment; Danger of a modular capabilities; Needs
may be more agile ‘them-and-us’ culture between modern integration and
old and new organization; Risk event-driven architecture to
of abandoning successful, connect the modules
revenue-generating products Making
and services connectivity
happen
Reimagining the operating model: The XaaS ‘iceberg’
As companies with traditional business models rapidly launch cloud-based products and XaaS offerings, they should rethink strategy, culture, engineering, customer
experience, go-to-market and operations. Such a transformation is immensely complex, depicted by the following ‘iceberg’ diagram, showing how many of the Signals of
challenges are not immediately visible to leadership. change
The XaaS transformation iceberg
Business
models
Strategy Culture Engineering

Culture Maintaining continuous Rallying around a Balance throughput,
competitive differentia- culture of continuous quality, stability and
Only a small number of
tion vis-à-vis born SaaS innovation, rapid customer satisfaction
Go-to-market issues are visible nimble and newer collaboration, and to build cross-product XaaS and the
competitors individual and group synergies in a software connected
purpose. platform enterprise
Many more factors
are relevant to XaaS
Operations transformation
Customer experience
Making
connectivity
happen
Engineering Customer Go-to-market Operations
experience Capitalizing on a Data-driven, cost-
Relentless focus on partner-driven sales efficient business,
Strategy compelling experiences model with compelling automated KPIs and
and self-service across product offerings priced intelligent telemetry
the broad acquire-to- to capture the across products and
renewal lifecycle complete addressable solutions
market
Signals of
XaaS and the

change
connected Business
models
enterprise XaaS and the

connected
enterprise
Making
connectivity
happen
© 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. XaaS and the Connected Enterprise 32
Signals of
XaaS is all about giving customers flexibility,
change
so they can adapt to fast-changing demands
What does a unencumbered by long-term, fixed-price
contracts, or software and hardware
flexible, robust that can quickly become obsolescent. A
connected enterprise gives XaaS providers
XaaS platform the power to create such customer-centricity, Business
look like? focusing every critical process, function

and relationship of a business on meeting
models
customer expectations.
XaaS and the

connected
enterprise
Being connected helps companies embrace new business/revenue models and routes to market, scale up (or down) rapidly, and via a modular operating model with a
configurable architecture.
Agility to embrace new business models Rapid scalability Scale client service and support
Making
— Enable continuous monetization — Scale from small trials to complex — Master agreement support for connectivity
Platform companies enterprise billing happen
continue to rapidly — Network effect customer and data centric — Support transactional level traceability
— Self-service with single view
evolve and disrupt of contracts, entitlements and
existing revenue allowances
models as they seek Adapt to embrace new revenue models 360° management of recurring/usage-based
to gain customers revenue streams
and increase market — Prepaid and postpaid business models
— Automated multi-channel payment
share — Multi-sided business model integration
— Personalized support for invoice inquiries
— Simple, flexible pricing and bundling design
— Partner revenue sharing
In this chapter, we will explore how a KPMG Connected Enterprise model can help XaaS organizations build a scalable environment.
Signals of
change
Insight-driven Innovative Experience-

A successful operating strategies and products and centricity
actions services by design
model is built upon eight Business
models
connected capabilities
Seamless
interactions
and commerce
14x Impact
Responsive
operations
and supply
chain
XaaS and the
connected
enterprise
In a recent survey, conducted by Forrester

Consulting on behalf of KPMG, two-thirds Integrated
Aligned and Digitally-enabled
(67 percent) of XaaS organizations say they’re partner and
empowered technology Making
investing in at least six customer-centric alliance connectivity
workforce architecture
capabilities.* The study found that high-maturity ecosystem happen
XaaS providers demonstrate better execution of

a holistic customer-centric enterprise strategy —
one that spans multiple capabilities — than low- * Base: 355 professionals involved with customer-centric strategy decisions at organizations providing
cloud services
maturity organizations.**
** Base: 173 professionals involved with customer-centric strategy decisions at high-maturity and
low-maturity organizations providing cloud services
The eight capabilities of KPMG Connected Enterprise:
Harness data, advanced analytics and actionable insights with a

Insight-driven strategies and actions 01 real-time understanding of the customer and the business to Signals of
change
shape integrated business decisions.
Develop compelling customer value propositions on price,

Innovative products and services 02 products and services to engage the most attractive customers
and drive profitable growth.
Design seamless, intentional experiences for customers,

Experience centricity by design 03 employees and partners, supporting the customer value
Business
propositions and delivering business objectives.
models
Seamless interactions and commerce 04 Interact and transact with customers and prospects across
marketing, sales and service and achieve measurable results.
Responsive operations and supply Operate the business with efficiency and agility to fulfill the
chain 05 customer promise in a consistent and profitable way.
XaaS and the
Build a customer-centric organization and culture that inspires connected
Aligned and empowered workforce 06 people to deliver on the customer promise and drive up business
performance.
enterprise
Create intelligent and agile services, technologies and platforms,

Digitally enabled technology
architecture
07 enabling the customer agenda with solutions that are secure,
scalable and cost-effective.
Making
Engage, integrate and manage third-parties to increase
Integrated partner and alliance
ecosystem 08 speed-to-market, reduce costs, mitigate risk and close capability
connectivity
happen
gaps to deliver the customer promise.
In building an effective XaaS business, based around customer experience, providers may be held back by poor
product or business processes, which can slow down delivery of services and push up costs, failing to fulfil customer
expectations. The composable model uses the connected enterprise framework to deliver a robust, configurable
XaaS operating model.
Investment in key digital
capabilities helps drive better
Signals of
performance change
Compared with their less-mature peers, high-maturity XaaS providers are more likely to successfully:
Business
2.8x Harness
Compared with their data,peers,
less-mature advanced analyticsXaas
high-maturity
integrated business decisions.
andproviders
actionable
areinsights with
more likely toasuccessfully:
real-time understanding of the customer and the business to shape models
2.7x Interact and transact with customers and prospects across marketing, sales and service, and achieve measurable results.
XaaS and the
2.6x Engage, integrate and manage third-parties to increase speed-to- market, reduce costs, mitigate risk and close capability gaps to deliver
the customer promise.
connected
enterprise
2.3x Create intelligent and agile services, technologies and platforms, enabling the customer agenda with solutions that are secure, scalable and
cost-effective.
Develop compelling customer value propositions on price, products and services to engage the most attractive customers and drive Making
2.2x profitable growth. connectivity
happen
2x Build a customer-centric organization and culture that inspires people to deliver on the business performance.
Design seamless, intentional experiences for customers, employees and partners, supporting the customer value propositions and
1.7x delivering business objectives.
1.5X Operate the business with efficiency and agility to fulfill the customer promise in a consistent and profitable way.
Base: 173 professionals involved with customer-centric strategy decisions at high-maturity and low-maturity organizations providing cloud services
Signals of
change
Case studies
Business
models
1 2 3
XaaS and the
Helping partners transition to subscription Making life easier for customers and Driving cloud metrics reporting at a connected
payments partners networking company enterprise
A global enterprise software company was A cyber security company has grown quickly A major multinational networking company,
transforming to a subscription-based model over the recent years through acquisition. whose revenue came primarily from
and needed help to review its partners, who Although revenue has risen, leadership hardware, was transforming into an
were responsible for 80 percent of revenues. found that internal processes and systems integrated solution, SaaS, cloud, subscription-
were holding back the ability to make fast based provider. Making
KPMG in the US helped to assess baseline and insightful decisions and help reduce connectivity
performance and capabilities of existing fixed costs. KPMG in the US has been helping the client happen
partners, refine the partner program, metrics, to achieve its ambition, by defining strategic
and incentives, and accelerate subscription KPMG in the US performed a rapid finance opportunities and developing its
revenue growth of priority partners. assessment of the operating model and business intelligence capability. They also
helped implement a number of quote-to-cash worked with the company to help improve
This enabled the client to hit sales targets, (quoting, contracting and ordering) solutions financial reporting metrics, tools, dashboards
improve partners’ quality of service to to streamline the front, middle and back and forecasting, which is enabling the new
end customers, and ensure consistent office. Customers and partners now find business model and bringing greater revenue
and appropriately incentivized partner it easier and swifter to do business, which and cost transparency.
management. enhances the overall experience.
Making Signals of
change
connectivity Business
models
happen XaaS and the

connected
enterprise
Making
connectivity
happen
© 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. Making connectivity happen 38
Signals of
change
Business
models
KPMG Connected Enterprise for XaaS is an insight-led, customer centric approach to digital transformation.
XaaS and the
connected
In KPMG professionals’ experience, there are a number of key considerations that can help XaaS companies make faster progress on the connected journey: enterprise
1. Keep close to what your 2. Do things in an agile way. 3. Build in resilience. Take 4. Keep it human. While 5. Make use of new
customers want. The Break changes down into on today’s challenges embedding new technologies. Continually
ability to think, outside in, is specific steps, sequence with resilience and technologies such as AI look at what new
key in building a customer- them and implement. Keep determination, and be and automation are likely technologies are becoming Making
centric business. Strive to standing back to assess prepared to expect the to be critical in developing available that could help connectivity
ensure you know and act whether the change has unexpected, fail fast and more seamless interactions you serve customers happen
on what your customers been successful in a ‘test learn along the way. By for customers, remember better or connect your
want, need and value; keep and learn’ approach. It’s developing a connected that you also need to keep business. Experiment with
continually looking up and about a series of small enterprise architecture, the experience ‘real.’ the opportunities enabled/
outside of the organization changes that together you can find your ability to Great organizations remain available through cloud,
and industry to help ensure add up to a significant and change course at speed is defined by the quality and machine learning and
alignment with the best impactful transformation. significantly enhanced. passion of its people and its advances in data science.
customer experiences in sense of purpose.
day-to-day life.
KPMG firms help XaaS providers to evaluate and
improve all eight connected capabilities across the
enterprise. These capabilities align with the operating
model and allow companies to prioritize, shape and Signals of
execute their digital transformation. change
KPMG professionals’ experience of working in digital

transformation has informed a set of transformation
accelerators, including a range of configurable SaaS
solutions from leading technology providers.
Five key questions for XaaS providers:
Business
models
Are you connecting customers
1 with compelling value propositions,

opportunities and interactions?
Are you connecting and empowering XaaS and the
2 your employees to deliver on the

customer promise?
connected
enterprise
Are you connecting your front,
3 middle and back offices to execute

the customer growth agenda?
Making
connectivity
happen
Are you connecting your ecosystem
4 of business partners to jointly deliver

on commitments to customers?
Are you connecting to market

5 dynamics and digital signals?
Contributors
The following team was instrumental in the development of this point of view:
Signals of
change
Project Sponsorship Global TMT Board Contributors James Murphy Philip Wong
Principal, Advisory, KPMG in the US Principal, Advisory, KPMG in the US
Alex Holt Members Achinta Khairom
Jessica Odermatt Prashant Talwar
Global Head of Technology, Audit — Jana Barsten, Partner, Principal, Advisory, KPMG in the US
Senior Associate, Advisory Director, Advisory, KPMG in the US
Media & Telecoms, Audit, KPMG in the US Aditya Rath KPMG in the US
KPMG International Raman Gilotra
Australia — Levi Watters, Partner, Partner, KPMG in India
K G Purushothaman Director, Advisory, KPMG in the US
KPMG in Australia Amardeep Chohan Partner, KPMG in India
Connected Enterprise Richard Hanley Business
Canada — Anuj Madan, Partner, Director, Advisory, KPMG in the US models
Global TMT Lead Konrads Klints Principal, Advisory, KPMG in the US
KPMG in Canada Amitabh Chhibber Director, KPMG in Singapore Sabrina Zhu
Peter Mercieca China — Daniel Chan, Partner, Director, Advisory, KPMG in the US
Kunal Chande Senior Associate, Advisory,
Consulting Industry Leader,
KPMG in China Amy Carpenter Director, Advisory, KPMG in the US KPMG in the US
Technology,
EMA COE — Mritunjay Kapur, Associate Director, KPMG in the US
KPMG in the US Malika Adam Saloni Singhal
Executive Director, Head of Anand Sekhar Manager, KPMG US Foundation, Associate Director, KPMG in India
Advisory, KPMG in South Africa Managing Director, Advisory, XaaS and the
XaaS Global Business KPMG in the US Shahnawaz Alware
KPMG in the US connected
France — Jacques Pierre, Partner, Mansi Joshi Director, Advisory, KPMG in the US
Architect enterprise
Audit, KPMG in France Anish Mitra Sector Executive, Asia Pacific Sony Anthony
Vijay Subramanyam Germany — Markus Kreher, Associate Director, KPMG in India KPMG in Australia Partner, KPMG in India
Principal, Transformation Delivery, Partner, Audit — Finance & Anuranga Dehideniya Marina Odai Sunil Seth
KPMG in the US Governance Advisory, Manager, KPMG in Singapore Manager, KPMG in the UK Director, KPMG in India
KPMG in Germany Bekki Leu Mark Levy Suraj Shridhar
Ireland — Anna Scally, Partner, Director, Advisory, KPMG in the US Managing Director, Advisory Making
Consultant, KPMG in India connectivity
KPMG in Ireland Devika Deshpande KPMG in the US
Urvashi Roe happen
Japan — Keita Yamane, Partner, Associate Director, KPMG in India Matt Loong Global Director, Sales Enablement,
KPMG in Japan Gary Plotkin Associate Director, Connected Enterprise,
Singapore — Darren Yong, Principal, Advisory, KPMG in the US KPMG in Singapore KPMG International
Executive Director, Gavin Bartlett Matthew Antosy Vivek Sudhakar
KPMG in Asia Pacific Director, Consulting, KPMG in the US Director, Advisory, KPMG in the US Managing Director, Advisory,
Tax — Komal Dhall, Principal, Tax, Harman Guron Namrata Mehta KPMG in the US
KPMG in the US Manager, Advisory, KPMG in the US Director, KPMG in India Whitney Keller
UK — Ian West, Partner, Harry DeRecat Nikkhil Gill Director, Advisory, KPMG in the US
KPMG in the UK Associate, Advisory, KPMG in the US Managing Director, Advisory,
US — Mark Gibson, Partner, Himanshu Mishra KPMG in the US
Growth & Strategy, Managing Director, Advisory, Pär Edin, Principal
KPMG in the US KPMG in the US Advisory, KPMG in the US
© 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 41
Contacts
Alex Holt Peter Mercieca Vijay Subramanyam
Global Head of Technology, Consulting Industry Leader, Principal,
Media & Telecom, Technology, Transformation Delivery,
KPMG International KPMG in the US KPMG in the US
E: alexanderholt@kpmg.com E: pmercieca1@kpmg.com E: vijaysubramanyam@kpmg.com
Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities.
home.kpmg/socialmedia
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate
and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on
such information without appropriate professional advice after a thorough examination of the particular situation.
© 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved.
KPMG refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a separate legal entity.
KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. For more detail about our structure please visit
home.kpmg/governance.
Throughout this document, “we”, “KPMG”, “us” and “our” refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG
International”), each of which is a separate legal entity.
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization.
Designed by Evalueserve.
Publication name: Future of XaaS
Publication number: 137908-G
Publication date: April 2022

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Future of Xaas

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Future of XaaS

XaaS and the

revolutionized how technology resources (software, platforms, and bounds.

XaaS and the

change in greater detail: influence the nature of

compelling value to its

03 Regulatory challenges include

04 Technology signals cover

XaaS and the

— Determine use cases (by persona and value proposition)

Curate pricing strategy based Do not turn dynamic pricing

An effective pricing meter enables you to: Key considerations:

North America Europe Asia-Pacific

Exceeds expectations Exceeds expectations Exceeds expectations

Note: Some percentages to do not add up to 100 percent due to rounding

Competitive A recent survey found

Most social media

compliance by design’ for products. government regulations.

— Providers of AI systems must establish Signals of

Things), AI and edge computing are expected

XaaS and the

migrating from traditional one-off licensing to cloud

XaaS and the

adopt cloud enabled

Organization-wide cost reduction

Business agility, ease and scalability

Version-less, many-to-many collaboration

More innovation, with advanced development tools and add-on marketplaces

Focus on outcomes and outcome-based pricing

Containers-as-a- — Provider offers ‘containers’ to store and package software code

Automation-as-a- — Users access cloud-based RPA services to fulfill automation solutions

Traditional business models

XaaS and the

XaaS and the

XaaS and the

We observe three broad approaches in the

XaaS and the

Evolution/adaptation Revolution/disruption Composable/modular

Back office Back office

Evolution/adaptation Revolution/disruption Composable/modular

The XaaS transformation iceberg

Strategy Culture Engineering

XaaS and the

enterprise XaaS and the

look like? focusing every critical process, function

XaaS and the

Insight-driven Innovative Experience-

In a recent survey, conducted by Forrester

XaaS providers demonstrate better execution of

Harness data, advanced analytics and actionable insights with a

Develop compelling customer value propositions on price,

Design seamless, intentional experiences for customers,

Create intelligent and agile services, technologies and platforms,

XaaS and the

happen XaaS and the

KPMG professionals’ experience of working in digital

1 with compelling value propositions,

Are you connecting and empowering XaaS and the

2 your employees to deliver on the

Are you connecting your front,

3 middle and back offices to execute

4 of business partners to jointly deliver

Are you connecting to market