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Why servitization and -as a service business is booming

Across all markets, servitization and -as a service businesses like SaaS are on the rise. That's because they do what other companies can't for customers.
Niclas Lilja
By Niclas Lilja on March 25, 2020

It's hard to go online or engage with any business these days without coming across some form of the terms "servitization" or "-as a service" - and with good reason. These business models are everywhere, and they are fundamentally changing how we do business. But what is driving the change, and how is it that companies can come out on top when there is increasing competition? It comes down to consumer trends and customer demands.

They put customer needs at the forefront

In the simple economic concept of supply and demand, those in the position of power can dictate their terms. When demand is up and businesses have the power (such as when there is lack of competition in the marketplace), consumers are beholden to those businesses, who can drive prices up or reduce quality of service without many repercussions.

But when supply outstrips demand and consumers have the power, companies must work a lot harder to win customer attention - and their money.

The reason SaaS and servitization have become hugely popular - not just from a development and business standpoint, but from a consumer standpoint - is due in part to the fact that they center around putting customer wants and needs first. Competition is increasing across all industries, meaning businesses now, more than ever, have to actually woo customers. SaaS and companies leveraging servitization have this idea built into their DNA. From the beginning, especially in B2B sectors, -as a service companies strive to provide solutions to real problems and improve the lives of their users.

This means more businesses are actually listening and responding to what their existing customers and prospects really want and need. And with SaaS especially, putting customer wants and needs at the forefront of the business model is easier.

Providing quality experiences and solutions is one of the only ways to stay on top in competitive markets when consumers have the purchasing power, and many companies are realizing this.

Delivery of service is instant and ongoing

We live in an age of instant gratification, and this applies to just about every aspect of work and home activities. Digital delivery of servitization and -as a service means that we have what we need exactly when we need it, and service is continuous and ongoing.

With subscription models, consumers and businesses no longer need to worry about making repeat purchases or there being an interruption in delivery. It means there is less time worrying about and managing administrative tasks, and more time doing the things that directly impact business (or entertainment, or everyday activities, etc.).

Especially in the business sectors, productivity is the name of the game. This means solutions that can benefit a company's bottom line and are known to be consistent and reliable become indispensable tools. This is a major reason subscriptions are so appealing.

They anticipate needs rather than relying on reaction

With old forms of software and before servitization, companies often developed products and solutions in response to what people want and need. With cloud applications, development roadmaps and feature rollout can happen much more quickly, and adaptation to current trends in business and technology is much more feasible.

But SaaS companies in particular also have opportunities to anticipate needs of users thanks to the plethora of data that is available. With subscription metrics about usage, customer lifecycle information, and financial reports, SaaS companies can get a much clearer picture of how their apps are actually being used, and they can use that information to dictate new ideas.

The caveat is that SaaS companies need to know how to capture and compare this data to reach a clear understanding. The companies that do this well will be the ones to continually impress and retain customers.

It's no surprise we're seeing a massive boom in the -as a service and servitization industries. With better customer experiences, instant delivery, and improved data reporting, companies have the opportunity to grab major market share. But companies need to ensure they are taking advantage of these unique qualities in order to stay on top and beat out competition.

Want to learn more about how to ensure the success of your SaaS business? Sign up now for our new SaaS Success Series:

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Published by Niclas Lilja March 25, 2020
Niclas Lilja

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