BBVA API Market
XaaS represents a new paradigm which does not intend to replace the current models of Software as a Service (SaaS), Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), among others; instead, it is intended to partially or fully integrate them into a single cloud-based model. However, even though not all cloud-based solutions are offered as XaaS, most XaaS solutions do use the cloud to offer its product or service to the clients.
These trends are quickly changing the nature of business offerings. “Billing a share rather than a single project means that the client needs to be guaranteed return on the solution,” says Xavier Gutiérrez, from the Lean Agile Center of Excellence at Interbank. “This became evident to Rolls Royce’s aircraft engine division 53 years ago,” he explains, “when they launched the initiative Power-by-the-hour; their engine servicing was charged depending on the number of flight hours, i.e. the longer the engine worked and the higher the return for the aircraft’s owners, the higher Rolls Royce’s servicing bill. In other words, they were able to align the objectives of both the client and the supplier.”
“In the past, companies needed to assume a series of commitments which restricted them to a specific business model and organizational structure: staffing commitments, real estate commitments for the work space, technological commitments for servers and hardware…,” mentions Sam Morris, head of marketing at Unnax. “For businesses, XaaS goes beyond this model and moves to pay-per-use. Freelance and project-based staff replace long-term employees, flexible work spaces such as coworking replace the corporate office, and cloud, subscription-based services replace server farms and individual software licenses.”
The success stories of leading businesses such as Netflix as its all-in-cloud strategies model have encouraged other companies to move in that direction. This increasingly wider-ranging flexible consumption formula is based on a pay-per-use model which has placed practically all kinds of services at the disposal of practically everyone. Without having to rely on too much technical knowledge and with only a low number of resources, many companies are using XaaS to achieve their digital transformation in an agile manner, or to become more agile. With this model, businesses avoid the risk involved in purchasing complex technology since they can now lease it from the best companies.
The UK’s Redwood Bank is a prime example of how XaaS increases efficiency and operational agility. The bank used Microsoft Azure to become a new commercial banking model. This transition had to be made against a hyper-regulated environment, and XaaS made is possible to use sophisticated technological tools without having to rely on a large in-house team.
Lower costs and operational efficiency are two of the main reasons for adopting the model, but let’s not forget innovation. With flexible consumption, businesses do not need to go through long procedures and installations to test the latest technologies. Additionally, the model increases the business possibilities. Small- and medium-sized enterprises as well as startups can now access tools from Google or Amazon to roll out their own business.
As such, XaaS has become a dominant model for technology firms. This perspective is shared by 71% of the companies which responded to Deloitte’s survey for its report Accelerating agility with XaaS. And seven out of 10 hazard that XaaS will lead to new business models.
According to Sam Morris (Unnax), this means a major change to the traditional concept of organizations, “which stop producing things to start managing the relationships between stakeholders.” This leads to a change in priorities: “The user experience becomes much more important since this is the only channel for the business to transmit its values and identity to its clients.” He cites Glovo as the clearest example. Founded in Barcelona, this company is already operating in dozens of countries across the world and has packaged logistics and messaging services to offer them via an app.
From the foundation of an innovative idea, startups can use XaaS to test their ideas almost immediately, without the initial capital needed for this step. Gamefly saw an opportunity in offering a gaming streaming service. The company used IBM Cloud to scale and serve the games. Shortly after, Electronic Arts bought Gamefly and ended up releasing its own gaming streaming technology based on the startup’s initial technology (see Deloitte’s report).
XaaS is so in line with the needs of organizations that it reduces stress, especially when costs go down as employees start mastering the new services, as explained by Deloitte in Accelerating agility with XaaS.
The Broad Institute uses Google Cloud Platform for its research into genome and, according to Deloitte’s report, this has accelerated its advances and results. Formula One Group is another example. The company has reached new capabilities in machine learning and data analysis by subcontracting Amazon Web Services. With this technology, the company gathers and analyzes real-time information about the performance of each of its cars. The result is an improved experience for more than 500 million Formula 1 fans around the world.
XaaS involves a revolution in corporate culture. “XaaS requires a complete change in philosophy and not just in platforms,” says Javier Galindo from the U.S. distributor Westcon. “And all departments must be involved since this is an end-to-end change in philosophy: from processes to people to tools.”
From the point of view of the team, it means a much more gradual investment than with traditional models. “Profiles are recruited when required by demand. In organizational terms, in most cases the wanted profiles refer to higher-level positions since you not only need to contract XaaS services but also to control the service levels, run sufficient audits to ensure that the best suppliers for each XaaS are selected, etc.,” adds Sam Morris (Unnax).
But there are more advantages to XaaS: in addition to reducing the stress levels in organizations because it facilitates and reduces the costs of their digital transition, it has given a new role to IT departments. According to Deloitte’s report, after the emergence of this new model, IT departments have gone from gatekeepers to orchestra conductors in the process of constant digital transformation.
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