What Should Cisco, HPE, and Juniper Do to Thrive with an XaaS Model in Automating Cellular Infrastructure?

As we proceed through this new decade, telco leaders will use software to automate network services and innovate in product engineering (see IN-5994). For example, Communication Service Providers (CSPs) continue to embrace automation software platforms to reduce complexity in their operations and, by extension, lower costs. With a growing adoption of software platforms, vendors’ classic sales model is becoming more and more challenged each day (see IN-6651). In the “old” model, Research and Development (R&D) was about features, sales was about getting big deals, and service was about implementing and fixing technology. Now, the industry realizes that it can capture new value if funds are redeployed in software and associated Anything-as-a-Service (XaaS) models. With XaaS models, CSPs seek to tie their tech spending to business value realization and shift from upfront payments to pay-as-you-consume, or even pay-on-business-value-capture arrangements. Consequently, equipment-centric companies are investing in XaaS commercial models. Paragon Automation and Active Assurance from Juniper are cases in point.

For Network Equipment Vendors (NEVs), winning profitable new customers with XaaS models will take different skills and processes. For example, doing business with CSPs for companies like Cisco, HPE, and Juniper is starting to look more like a lab project than a product’s sales cycle. Increasingly, it will be challenging to design the entire solution until it is deployed and CSPs have “voted” with their selection and use of functionality. XaaS models warrant different attributes vis-à-vis NEVs’ existing product-centric processes. With XaaS models, almost all current organizational processes, tools, and skill sets may have to be adapted to become more valuable to end users. XaaS companies are consumption-based organizations in a consumption economy. Consequently, NEVs will have to move part of their investments and resources from “who has the best tech features” to “who has the best platform and consumption-based pricing model” to drive end-user adoption of automated assurance and cloud-centric products.

XaaS companies like Adobe and Salesforce understand the importance of empowering end users. These vendors allow their client base to choose their own tools and tech features. They have mastered the concepts and technology that enable them to do that. For example, Salesforce’s Information Technology (IT) function not only allows, but embraces, end-user choice within an overall, as-a-Service (aaS) consumption plan. That is because XaaS companies have direct line of sight to customers’ usage. The key enabling processes for XaaS models is real-time access to user data and the ability to aggregate and analyze that data. For NEVs, the activity and direct line of sight to real-time usage may not be available. They are not directly connected to the end user and all the data that are on the customers’ servers. NEVs can leverage real-time user data to change how they develop products, simplify their use, guide clients to increased capability and adoption, and increase customer value. But it will take time and effort to analyze the data, develop sales models, and do the marketing enablement of the products.

By and large, NEVs’ existing sales forces are designed, built, and managed much like an automobile mass production line: repeatable, predictable, and high quality (see IN-6511). Cisco, HPE, and Juniper understand how to optimize that business model. Their sales forces sell a product and capture maximum gross margin. By contrast, in an XaaS model, sales perform the critical role to make the “platform sale” to corporate customers. The sales process in XaaS companies is highly consultative. Salespeople are more service-aware, more skilled in business parlance, and more provocative. That is especially true if a vendor’s product is aimed at displacing an incumbent, or the customer is unsure how to benefit from the product. With XaaS models, NEVs may well have to transform their sales models in line with an XaaS consumption model (see IN-6172). Building an XaaS model is partially modernizing existing processes, but mainly it is about adding new ones. The major business process changes will be in sales, marketing, and customer service. But the key structural changes that enable those new processes will need to occur within the products themselves.

The focus for an XaaS vendor is not so much building technology features. XaaS vendors build a capability into products that allows them to easily tailor the interface for the individual end user in real time based on “ideal consumption roadmaps.” The operating model of an XaaS company satisfies a growing market trend of paying nothing upfront. Their customers pay for the technology as they use it. The risk, therefore, falls on XaaS companies to actively engage to drive product usage. The more usage they drive, the more business value they realize and the more revenue they secure. Revenue generation in XaaS models occurs at the micro-transaction level from inside actual products as they are consumed. XaaS companies design from the beginning to move much of what they learn from customers/channel partners into their offering. XaaS companies build their business models around affordable cost and scale. XaaS companies scale knowledge and insights that come from the market by embedding them into products. That enables them to deploy the best practices in much more targeted and in-depth ways.

In a similar fashion to established XaaS vendors, NEVs must use the experience and insights of their people to determine how their automation and assurance software products should be used and are being used by their most successful customers. Specifically, NEVs should build a layer of capability into their offering that takes learnings from market and product experience, dynamically and purposefully altering how the product presents itself to different end users in real time. For instance, product managers at Cisco, HPE, and Juniper need to apply various Business Intelligence (BI) and analytics tools to large usage datasets to make sense of what successful users are doing with intelligent automation products. This enables product managers to begin to identify how they want the products to create an optimized end-user experience and get full adoption of the product’s stickiest and most profitable features. NEVs need to supplement these human inputs into a consumption model with a new science of usage data analysis and service-oriented sales models.

For NEVs, XaaS sales processes will look very different: NEVs need consulting skills and service-oriented compensation models. NEVs need salespeople who think on their feet, absorb complexity and uncertainty, and are uncomfortable selling with canned sales pitches—salespeople who are business experts, rather than sellers of technology features. Salespeople for NEVs who embrace XaaS models will need to possess intimate knowledge of how their automation software, apps, and services apply to a customer’s commercial setting. They should comprehend the different use cases/personas needed to convey value. More importantly, they should help customers see the ways they can maximize value and outcomes from deeper product usage, be it automated assurance or other software functionality. A “sales consultant” may be a more apt description than a salesperson in an XaaS-centric company. Sales and service consultants at these companies have stronger vertical knowledge and business focus. For NEVs, intimate knowledge of the customer’s network operations and/or business model and processes would be essential to conveying value proposition, encouraging micro-transactions, and delivering outcomes.

In essence, if NEVs are to become XaaS companies, they need to identify the best practices for consuming their products’ value. Equally important, they also need to introduce the ability for the product’s consumption to be guided by the priorities of their corporate customers and/or individual end users themselves. An XaaS model for Cisco, HPE, and Juniper will mean that their service organizations are reengineered to monitor and increase adoption of their automation and assurance software. They do that both proactively and during customer-originated service requests. A services-led model will become the new high-impact, low-cost sales channel for driving micro-transactions (see IN-6404). As an XaaS company, a NEV’s service agents should be armed with high visibility into the customer’s situation and have in-depth insight into what the customer’s next best step is. The service organization needs to document what it has learned about the success of actual customers and the roadblocks that have prevented others from achieving the desired outcome.