– XaaS is democratizing access to new technologies by making them more affordable and easily available
– Companies are 2.6 times more likely to prefer acquiring advanced innovation capabilities as a service versus via traditional IT
– Seventy-one percent of organizations using XaaS report that it makes up more than half of their enterprise IT
– Data security/privacy is the #1 concern for XaaS
Companies under pressure to move faster due to competitive shifts fueled by technology-driven business models are turning to Anything-as-a-Service (XaaS) to tap into advanced technologies quickly. While improving operational efficiency and reducing costs remain important goals for XaaS adoption, business agility – the ability to pivot quickly as new opportunities and threats emerge – is rivaling these traditional uses of XaaS, according to Deloitte’s Flexible Consumption Models study released today. By accelerating and democratizing access to advanced technologies such as artificial intelligence (AI), mobile, analytics and IoT, XaaS is helping bigger companies innovate faster, while giving smaller companies the scale and capabilities they need to compete.
The study revealed that XaaS has become essential for keeping up with competitors, with 28 percent of companies reporting that they are able to use XaaS to create a sizable lead. Thirty-nine percent of companies report that XaaS adoption helps them catch up to or keep pace with their competitors, and another 32 percent believe it will help them edge slightly ahead. In fact, adopting XaaS is no longer just a part of the information technology (IT) playbook, with seven in 10 companies reporting it is “very” or “critically” important to their business success. Furthermore, the study found in the next one to two years, the number of companies that consume over three-quarters of IT as a service will increase by 50 percent.
Democratizing advanced technologies levels the playing field
Innovation acceleration with XaaS is emerging as an essential part of companies’ strategic playbooks, particularly for the C-suite, the study notes. Making new technologies accessible to companies of all sizes, and to business units within companies, is driving experimentation and agility.
Seventy percent of companies said flexible consumption allows them to access a product or solution that otherwise would be too expensive.
Seventy-five percent of respondents said that XaaS makes it easier and faster to prototype new solutions.
Eight in 10 companies reported that XaaS gives them quicker access to the latest technologies and innovative capabilities.
“Companies want to access advanced technologies like artificial intelligence, data analytics, and IoT as a service because it’s faster and cheaper than building their own capabilities. That’s especially true for small companies that lack the IT budgets and tech talent of market leaders,” said Paul Sallomi, vice chairman, Deloitte LLP, global TMT industry leader and U.S. technology sector leader. “In this sense, XaaS is democratizing technology and promoting competition.”
XaaS security: Trust grows with experience
While XaaS’ popularity is soaring, challenges remain, the study found. Topping the list are data security and privacy concerns (43 percent). Only one-third of companies keep sensitive data such as customer details, financials and intellectual property “mostly” or “fully” in the cloud. Compared with those who have used XaaS for less time, companies with three or more years of XaaS experience are 60 percent more likely to keep their customers’ proprietary data mostly/fully in the cloud, and 37 percent more likely to do the same with their financial data.
More than 70 percent of respondents noted new privacy regulations are causing them to re-examine how they handle data through XaaS solutions.
Yet, the comfort level for XaaS security is improving, with 69 percent of respondents noting they now have adequate processes and policies in place.
“Companies are adopting XaaS to use AI and data analytics. To get the best insights, they’ll have to put sensitive data about their customers, financials and operations in the cloud. We’ve found that the more experience they have with XaaS, the more comfortable they are with this,” said Dr. Jeff Loucks, executive director, Deloitte Center for Technology, Media and Telecommunications, Deloitte LLP. “Strong data and privacy governance should be a top priority for companies looking to use XaaS to build agility.”
The cost conundrum
Organizations are generally satisfied with their ROI from XaaS, with 69 percent of respondents saying it has resulted in better ROI and a lower total cost of ownership than traditional IT. Using XaaS to reduce costs isn’t straightforward, however:
More than one-third of companies rated cost concerns as a top-three challenge of XaaS.
Among these respondents, 45 percent reported that XaaS costs are difficult to predict and budget, 42 percent said costs were greater than anticipated.
One reason for higher costs is duplication: continuing to pay for traditional IT (such as existing infrastructure) while moving to XaaS. Forty-four percent who cited cost as a top-three challenge are concerned with duplicative costs.
To learn more about how companies are adopting and benefiting from XaaS solutions, Deloitte surveyed 1,170 IT and line-of-business professionals across 12 industries from large US companies that consume at least 15 percent or more of their enterprise IT as a service.
Connect with us on Twitter: @DeloitteTMT, @Jeff_Loucks.
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