XaaS Delivers The Last Mile Of Digital Transformation

By Matt Kimball, Patrick Moorhead - November 13, 2023

Digital transformation is a phrase that many in the tech industry are tired of hearing. The term has been used for several years by IT solutions providers looking to demonstrate the value that their offerings deliver to the market. But just because we in the tech world are tired of this term doesn’t mean it has lost its importance or relevance. Digital transformation is an evolution with which many organizations are still grappling. I use the term “grappling” intentionally because many IT and business executives struggle to realize the full potential of their digital transformation projects.

After years spent focusing on internal transformation projects, I see many organizations shifting their attention to outcome-oriented strategies. In this approach, the customer experience drives how data and technology are managed across the enterprise, from the datacenter to the edge to the cloud. (You can read my recent research that digs deeper on this topic.) We could think of this as the last mile of digital transformation—where organizations shift from projects spurred by a generic desire to improve efficiency or rationalize their tech stacks to projects that get right to the heart of customer needs. This is what I call digital reinvention.

I’ll cover some of these findings in the following sections and dig a little deeper into one key enabler of digital reinvention efforts—everything-as-a-service, or XaaS.

Digital transformation has been an evolution

While digital transformation has been a popular term for the last several years, it’s existed for decades, arguably starting with the rise of the World Wide Web and the digitization of goods and services in the 1990s. As an IT executive and consultant in the early 2000s, I implemented digital transformation projects for state government entities using business process automation (BPA). From renewing licenses to connecting data across agencies for real-time collaboration, the possibilities of digital government seemed limitless at the time.

An excellent example was the 2004 hurricane season in Florida, when four hurricanes hit the state in one month. Putting technology to work, the MyFlorida.com team was able to connect agencies with other agencies—and with the people living in the path of these hurricanes, along with their friends and relatives elsewhere looking for real-time updates. For me, that month of havoc demonstrated the upper bounds of how technology can drive better outcomes in the real world. I look back on it as an example of the first wave of digital transformation.

The second wave, which I call the cloud rush, came in the mid-to-late 2000s as organizations began to realize the value of the cloud for many costly functions previously handled on-premises. Do any of my fellow IT pros remember the budget allocated in the mid-2000s for business continuity contracts with companies like Sungard? I do. The cloud allowed IT organizations to deliver some of this functionality at a fraction of the cost and complexity.

The cloud hype cycle was ignited as organizations found success with these mission-critical functions. Organizations looking to replicate the success of deploying those functions to the cloud increased their cloud consumption by deploying more and more of their business data and applications there.

As organizations began to realize the cost (and complexity) of being (near) wholly dependent on the cloud, we experienced the third wave of transformation—what I call the cloud repatriation. In this wave, companies tried to find the balance between on-prem and off-prem for applications and data to achieve the best performance at the best price. This is when the concept of hybrid cloud (and eventually hybrid multi-cloud) took root.

The fourth wave of digital transformation built on those roots by refining the hybrid multi-cloud environment. This meant prioritizing further connectivity and automation across the digital landscape, including traditional infrastructure, private and public clouds, the edge and the apps and data that move from one property to another. This fourth wave was really about driving end-to-end business transformation.

Digital reinvention: the fifth wave

While digital transformation has been evolutionary, IT and business leaders often feel great urgency to drive better outcomes from the vast amounts of data and intelligence generated by digital technologies. Some of this urgency comes because they are being held to account for the investments made in technology-driven projects. And some of it is felt as digital upstarts “born in the cloud” populate more of the competitive landscape.

This fifth wave of transformation is perhaps the most critical for businesses and possibly the most disruptive to enterprise IT organizations. While earlier waves were purely technology-focused, this fifth wave is about tying technology to customers. The goal is to achieve this with a balanced approach that achieves the cost and simplicity of the cloud along with the performance and security requirements of on-premises deployments—a consumption-based, hybrid approach to business outcomes.

From my research, I have found four common traits in the reinvented business:

  1. The reinvented business is data-driven and highly predictive.
  2. Intelligent automation drives business and IT.
  3. Zero-trust security is a design concept that leads to a risk-aware environment.
  4. In an ever-changing world, the reinvented business is resilient.

Another common thread among those who view their reinvention efforts as successful is the utilization of consumption-based models. Everything-as-a-service (XaaS) underpins the agility, security, simplicity and economics that drive the digitally reinvented company.

XaaS: the key enabler of digital reinvention

Tension exists between the business leader who wants to drive better customer outcomes and the IT leader delivering the enabling technology. This was true 20 years ago when I was an IT executive, and it’s true today.

Further, cloud technology has conditioned the business to expect services and functions to be available for consumption at any time, from anywhere, with a consistency that spans the customer experience. This is the driver for XaaS.

Digital services platforms deliver XaaS
Moor Insights & Strategy

XaaS is not simply consumption-based computing that delivers a cloud-billing model for the use of infrastructure. It is a digital services platform that delivers a unified cloud operating model to the business and IT. It’s hardware, software and services tailored for each customer. And this can only be delivered effectively by a solutions provider with real breadth and depth of experience serving the market.

One company that could shift the XaaS landscape

MI&S believes that the ideal XaaS solution and provider combines hardware, software, cloud enablement and ecosystem partnerships with extensive experience in serving enterprise customers. While many innovative companies deliver solutions in the market today, MI&S sees one company in particular that could significantly impact the XaaS space—IBM.

In addition to the company’s infrastructure portfolio, IBM is the only IT solutions provider that can also claim a position as a top cloud services provider to help drive hybrid operations and on-premises offerings. Further, its work in developing technology and industry partnerships puts the company in a leadership position for hybrid multi-cloud.

Let’s not overlook what IBM has established on the software and AI fronts. The company has smartly leveraged its stake in Red Hat to deliver on the cloud and applications side as well. And its recent launch of watsonx enables organizations to seamlessly deploy AI-driven applications at scale across the entire digital estate.

I think an IBM entry into the XaaS market would quickly change the game. First and foremost, I believe such a solution would find a quick following in IT, not just with existing IBM customers but also with non-IBM IT organizations looking to find an easy and scalable integration of IT services, AI and hybrid multi-cloud capabilities.

I also think an IBM entry into XaaS would drive further innovation among existing players. To be clear, there’s been a lot of innovation to date. And there are some very competitive solutions in the market. But as one would expect, IBM and its portfolio of technology and solutions will bring out the best in every player. And that is good for the market as a whole.

Final thoughts

Digital reinvention is the last mile in the digital transformation journey. As with most projects, this last mile may be the hardest to traverse as it aligns complex technology investments with a customer-centric, outcome-driven end state.

Digital reinvention is equal parts operations and technology. More importantly, it’s about the business leveraging technology in real time to meet the market’s needs. This includes technology that IT may not be able to deploy and support through traditional ways. That’s why XaaS is a critical part of digital reinvention.

It’s important that organizations approach digital reinvention intelligently. In my research, I provide a digital reinvention checklist to help organizations successfully assess, plan and execute digital reinvention projects. This includes making the best choices for XaaS platforms. It’s worth a read.

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Matt Kimball is a Moor Insights & Strategy senior datacenter analyst covering servers and storage. Matt’s 25 plus years of real-world experience in high tech spans from hardware to software as a product manager, product marketer, engineer and enterprise IT practitioner.  This experience has led to a firm conviction that the success of an offering lies, of course, in a profitable, unique and targeted offering, but most importantly in the ability to position and communicate it effectively to the target audience.

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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.