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Cloud is Taking Over

  • Eighty-one percent of adopters agree the pandemic has accelerated their organization’s shift to XaaS from traditional IT, and 55% report that the crisis is causing their organization to invest more in XaaS than initially planned.
  • Seventy-five percent of respondents report their organization already runs more than half of its enterprise IT as-a-service.
  • Six in 10 respondents say XaaS gives them a competitive edge and 8 in 10 adopters see XaaS as critical to the digital transformation of their company.
  • However, 93% of adopters report challenges scaling up their XaaS efforts including data security and privacy, inadequate IT skills to deploy and manage XaaS, concerns about unpredictable costs, and difficulty integrating with other systems.

Why this matters
Across industries, organizations aim for more control over the enterprise IT they use and how they pay for it — and that demand has been met by a shift to service-based delivery models for providing products, capabilities and tools. To obtain a cross-industry view of how organizations are adopting and benefitting from as-a-service enterprise IT, Deloitte conducted the “Everything-as-a-Service (XaaS) Study,” 2021 edition, surveying 600 IT and line-of-business (LoB) professionals from U.S.-based companies in Q4 2020, during the COVID-19 pandemic.

The survey found that the transition from traditional IT to XaaS — already well underway in 2018 — continues to transform the enterprise IT landscape, with the COVID-19 pandemic accelerating this transition. Leaders report that on average, their organizations are spending $20 million on XaaS in the current fiscal year with the overwhelming majority (69%) planning to increase investment in the next fiscal year, by an average of 23%.

COVID-19 accelerates shift to XaaS
The COVID-19 pandemic intensified the urgency for companies to adapt and become nimbler. This reality also demonstrated the value of XaaS, and accelerated the move away from traditional IT:

  • Eight in 10 adopters agree the pandemic has accelerated their organization’s shift to XaaS.
  • Fifty-five percent report the crisis is causing their organization to invest more in XaaS than previously planned.
  • Eighty-six percent believe XaaS is critical to strengthening their organization’s response to business/workforce challenges caused by the pandemic (46% strongly agree).
  • Eighty-eight percent believe XaaS will be crucial as their organization recovers from the pandemic (43% strongly agree).

Key quote
“The COVID-19 pandemic shined a bright spotlight on the importance of IT in maintaining business continuity. It also revealed the urgent need for companies to be nimbler and more adaptive to the ever-changing IT needs of users. This experience demonstrated the real value of XaaS and the cloud, and a shift away from a reliance on traditional legacy IT. Expect this trend to have staying power as the advantage of service-based technologies — and some of the associated behaviors— continue to provide measurable benefits and enable enterprises to compete more effectively.”

–  Paul Silverglate, vice chairman, Deloitte LLP and U.S. technology sector leader

XaaS gaining on traditional IT
The study shows that the trend to use XaaS to boost business agility, in addition to reducing costs and improving workforce efficiency, will continue to strengthen. The vast majority of adopters surveyed also report that XaaS has helped them create new business processes, products and services, and business models. It has even changed how they sell to their customers. Other findings:

  • Eighty-two percent view XaaS as very/critically important for their business success — an increase from 70% in 2018.
  • Six in 10 report gaining competitive advantage through use of XaaS — but as XaaS becomes ubiquitous, that edge may be harder to keep.
  • Furthermore, 8 in 10 adopters see XaaS as critical to the digital transformation of their company (43% strongly agree).
  • Seventy-five percent of respondents reported their organization consumes more than half its enterprise IT is as-a-service (with the remainder being traditional, non-service-based IT), up from 71% in 2018, and 87% expect to reach that level of adoption within five years.
  • Nearly half report their organization allocates at least half their IT spending to XaaS.

While XaaS has promising business upside, some challenges persist
While XaaS adoption seems to be on the upswing, and most organizations have been pleased with the overall IT experience they’ve had with their XaaS providers, the study also revealed some challenges:

  • Despite enthusiastically embracing the XaaS model, 93% of adopters report challenges scaling up their XaaS efforts.
  • Optimizing utilization remains a challenge. More than 4 in 10 companies use less than half of the capabilities of their XaaS solutions.
  • Only 3 in 10 adopters say they’re content to stay with their current XaaS providers.
  • Adopters want vendors to work with them on their challenges — guaranteeing reliability/performance, offering integration, helping optimize utilization, and providing strong data security — however, only 4 in 10 are “extremely satisfied” with their current vendors’ ability to provide these attributes
  • Eighty-two percent believe their organization could achieve better outcomes if providers behaved more as consultative partners.

Key quote
“Organizations embracing XaaS and cloud solutions aren’t just focusing on process improvement — they’re using XaaS to be more agile, experiment with innovative technologies like IoT-as-a-service and AI-as-a-service, and generally just compete more effectively. But XaaS is becoming ubiquitous, so those early adopters may have to work even harder to differentiate themselves. The good news is they can stay ahead by keeping a close eye on the marketplace for the latest XaaS solutions that fit with their business, and by aligning with providers that are genuinely dedicated to their long-term vision and success.”

–  Dr. Jeff Loucks, executive director, Deloitte Center for Technology, Media and Telecommunications, Deloitte Services LP

Connect with us on: @DeloitteTMT, @PaulSilverglate, @Jeff_Loucks

About Deloitte
Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world’s most admired brands, including nearly 90% of the Fortune 500® and more than 7,000 private companies. Our people come together for the greater good and work across the industry sectors that drive and shape today’s marketplace — delivering measurable and lasting results that help reinforce public trust in our capital markets, inspire clients to see challenges as opportunities to transform and thrive, and help lead the way toward a stronger economy and a healthier society. Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them. Now celebrating 175 years of service, our network of member firms spans more than 150 countries and territories. Learn how Deloitte’s more than 330,000 people worldwide connect for impact at www.deloitte.com.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.

S. Jack Heffernan Ph.Dhttps://www.knightsbridgelaw.com
S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.

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