3 steps for tech vendors to boost revenue and margin through operational efficiency
Digital transformation has had a profound effect on every industry, but the changes are perhaps quite striking for enterprises like tech vendors. Customers are increasingly moving towards a subscription-based model since it allows them to be flexible with the purchase according to their changing business requirement – all of this at no CAPEX investment or OPEX commitment.
With Anything as a Service (XaaS) coming to the fore, tech vendors are offering high-margin solutions and services on top of their low-margin core hardware products. Additionally, the subscription model allows them to shorten their sales cycle as well as ensuring predictable annual recurring revenue (ARR). The bundling of software and services added on contribute to an increase in customer lifetime value (CLV) and higher retention rates. One study shows that post-sales services contribute to about 25% of all revenue and 40–50% of all profits for tech vendors.
XaaS also enables tech vendors to bundle different products and services to create unique and differentiated offerings tailored for respective segments, yielding a higher market share. For example, Hewlett Packard Enterprise’s (HPE) GreenLake solution, which is a XaaS bundle of computing and storage hardware with software and services, has added more than 1,000 customers with over $4B in total contract value within the first three years.
Tech vendors must become more agile to respond to any future disruption and compete with higher efficiency through a complete structural transformation using the following three-prong approach.
1. Unify backend processes for streamlined and efficient operations
While tech vendors have an established and efficient physical supply chain management set of processes and systems, that is only one part of the story. They now need to focus on transforming their digital supply chain.
Tech vendors should be able to integrate their existing legacy systems with any in-house or third-party systems and platforms. This should enable vendors to automate the entire process of ordering, provisioning, and fulfillment, which otherwise involves error-prone manual processes, preferably on a single platform. As a result, they can go to market faster with reduced errors and lower operational costs.
2. Create, manage, and deliver subscription based XaaS offerings
Since most tech vendors use legacy systems using manual workflows, they find it difficult to update product configurations, bundle, and deliver different types of products through any channel. To make matters more complicated, they need to handle many catalogs from several different IP owners.
Hence, to be able to offer different types of products such as hardware, cloud software, and services as a subscription, tech vendors need a platform to, manage and scale their own branded marketplace. Ideally, they use one single platform to automate product onboarding, bundling, pricing, publishing, and multi-tier deployment.
3. Build a marketplace to scale and expand
As tech vendors move towards XaaS models, they feel the need to drive product expansion, channel growth, and more rapid new product and offering introductions.
All of which can be accomplished, in part, with a marketplace solution that allows tech vendors to manage all their vendor contracts, channel partner connections, products, and listings in one place. This should enable tech vendors to create multiple marketplaces, which can be managed centrally. It might help even more if the platform already has an existing portfolio of vendors and products with the flexibility to create one’s own community on top of that.
The end goal that tech vendors should aim for is to offer XaaS solutions to even more customers in new verticals, segments, and countries harnessing the power of the network to grow exponentially beyond their own ecosystem.
Contact CloudBlue to learn how we have enabled tech vendors to leverage the as-a-service economy. Our platform has end-to-end capabilities of vendor and catalog management, billing and subscription management, and channel management. Together with 200+ pre-integrated flagship B2B vendors, CloudBlue helps to build and monetize XaaS bundles, standardize back-end processes, and significantly reduce time to market. The platform also provides white-labeled B2B marketplaces which can be branded by tech vendors to enhance the customer experience.