The subscription economy is booming and organisations across the UK can now choose to buy anything-as-a-service (XaaS). Resellers, MSPs and distributors are adjusting their offerings to succeed in this new reality and that can mean working with new partners or refreshing their relationships with existing ones.
So, why is XaaS growing in popularity? “We live in a subscription economy where convenience, access to the latest technology and cashflow management are king,” commented Nathan Marke, COO, Giacom. “While parallels between B2B and consumer behaviours are clear, there are unique drivers within the B2B space that make subscription models particularly compelling. The pace of innovation and the growing need to mitigate heightened cyber threats are pushing businesses to prioritise modernity and reliability.”
Marke said he is seeing demand from SMB customers to shift their ICT spend to subscription models. He explained, “These offer predictable costs and a strategic partnership with an MSP, replacing the unpredictability and higher total costs associated with upfront payment models. Subscription-based ICT solutions reduce unplanned expenses and downtime, providing a seamless per user, per month model that simplifies operations while ensuring access to up-to-date, secure technology.”
Organisations are opting for XaaS as the flexible and scalable nature of these solutions enable them to keep costs under control.
Andy Bevan, head of cloud and digital transformation, Wavenet, said, “We are seeing growth in as-a-service offerings in all areas of the market because of the flexibility, scalability, and cost-effectiveness it offers organisations. Combining the benefits of reduced upfront costs, predictable expenses and the ability to pay only for what is used, the attractiveness of a consumption-based model is clear.
“Using the XaaS model, organisations have far faster access to the latest vendor technologies and services without the burden of traditional ownership or maintenance, and, through this agility, they can adapt quickly to changing market conditions in uncertain times.”
All stakeholders are moving from an operational expenditure (Opex) model to a capital expenditure (Capex) one. Jamie Hughes, UK sales director, Evolve IP, said, “The as-a-service model is highly accessible, allowing for seamless activation and deactivation. The Opex model is far easier to integrate into business operations compared to Capex, fostering greater growth and providing flexibility on a cost-per-head basis.
“This trend is driven by an increasing demand for recurring revenue across the entire supply chain—spanning distributors, supply partners, resellers, and end users. People are accustomed to paying monthly for services, both in their personal and professional lives. This approach is not only convenient and flexible but also much more attractive than large upfront costs.”
That viewpoint chimed with the opinion of John McKindland, head of partner channel UK, Sona Business, who also discussed the shift in purchasing models. He said, “XaaS is growing in popularity due to a major shift in mindset around the buying process, moving from Capex into Opex. It’s easier to budget and control costs, using technology as a service rather than leasing – to take advantage of a lesser monthly fee rather than a finance agreement with higher interest rates. There’s more flexibility to pivot and grow too.”
Adrian Sunderland, CEO, Jola, added, “Subscription services allow organisations to benefit from new technologies and services without spending large amounts of capex. It also allows them to scale up or down, which is invaluable for organisations facing seasonal demands.
“The key trends driving subscription services are the ever-accelerating march towards digital transformation and the cloud. This has created a virtuous circle. [There is] constant growth in customer adoption, [which] drives innovation, which delivers improved services, which drives more adoption.”
Continuing to succeed
Channel companies are shifting their business models to succeed in this new era. “Channel companies are transitioning from traditional, Capex transactional sales to value-based, recurring revenue models to meet customer demand for XaaS,” said Bevan, from Wavenet. “Resellers, MSPs, and distributors are making use of this flexibility to tailor new offerings focused services to add value, whether that is implementation, support, or optimisation. Indeed, in the MSP space, volumetric, or outcome-based pricing for managed services is gaining traction, matching the consumption model from the vendors.”
Bevan emphasised the long-term benefits for resellers and MSPs. He said, “A stronger customer relationship and delivering measurable ROI for the customer allows channel businesses to position themselves as strategic partners rather than mere suppliers. With investment in specific training and ensuring alignment with their chosen vendors, resellers and MSPs can take advantage to further maximise the opportunity and benefit for customers.”
Chris Angus, vice president for contact centre engagement, 8x8, added, “The majority of companies in the Channel are most familiar with and used to a product-centric revenue model – where they are focusing on upfront investments by selling one-time products. They will have to conduct a shift to a more service-centric model, where recurring revenue is the champion.
“This will likely take time to transition their financial model to account for the change in cash flow. That doesn’t mean they will starve in the meantime. Any organisation that makes good use of their consultative selling skills will find it a smoother transition and we have seen many channel partners successfully make the switch. It can be done – and very profitably too.”
Many channel companies have already made the shift. “In many ways the transition has already taken place,” explained McKindland of Sona Business. “The as-a-service model has won the battle. Organisations and the Channel in general have moved with the times. There’s no going back now.”
McKindland recalled a recent conversation with a reseller who had moved everything across from Capex into Opex, with all products and services now sold for a monthly fee. He added, “I think we will start to see lots more businesses following this path. Whatever the hardware, it will become a rental model. Rather than a one-off transaction, this can keep customers on longer term contracts, which ultimately leads to more loyalty and revenue. It’s about making it easy for customers to do business with you.”
Hughes, from Evolve IP, added, “An increasing number of companies are adopting the XaaS model for several compelling reasons. Unlike a Capex sale, which is typically a one-time transaction that fades into the past, the as-a-service model fosters ongoing customer engagement. This creates continuous opportunities to strengthen relationships, introduce new services and generate additional revenue. It’s clear that this model is the future of business.”
The good news is that vendors and wholesalers can support their partners through the transition. Marke, from Giacom, said, “One of our key areas of focus is on guiding our partners through the transition to subscription-based business models. This process begins with helping MSPs recognise the significant growth and profit potential of cross-selling managed ICT solutions on a per user, per month basis.
“Once partners appreciate the value of this shift, we collaborate to map out the journey ahead. While the rewards are substantial, particularly when it comes to increased business valuations, transitioning to this model requires fundamental changes across the organisation.”
Marke explained that Giacom helps its partners in a number of different ways. “A good starting point is working together to evaluate the various cohorts of customers the MSP has, then developing clear strategies to migrate these customers from legacy models to subscription,” explained Marke. “We help conceive and build compelling go-to-market propositions that align with their customers’ evolving needs. Simultaneously, we help partners build out new skills to support critical growth areas where expertise may be lacking.
“Another essential aspect of this transition is developing the always-on managed services offerings that underpin subscription models. Most critically, we help partners to look in depth into their business processes to understand how software and automation can underpin the shift from one-off sales to subscription services, ensuring efficiency and scalability for long term growth.”
This shift can help channel companies become more valuable. Sunderland, from Jola, said, “Companies with high recurring revenues are more valuable than those relying on one-off sales.
“This was brought into sharp focus during the pandemic when companies with a high proportion of recurring revenues featured almost exclusively in private equity transaction news. Telecom resellers saw their multiples increase while more traditional MSPs had to batten down the hatches and furlough staff.”
Sunderland added that the Opex model has many benefits over Capex. He explained, “From the end users’ point of view, they usually have lower set-up costs and they pay over a period of time without having to sign a third-party lease. The monthly rental usually comes with a service guarantee, support and the ability to upgrade within the term. Suppliers who offer XaaS products to resellers remove the need for them to invest Capex in stock.
“XaaS products are in-the-cloud, and with little equipment on the end users’ premises, there is less to go wrong. By removing the need for engineers to attend the site, service overheads are lower.”
Elizabeth Sparrow, founder, Blabbermouth, added, “Many traditional resellers have seen their roles evolving, encompassing the responsibilities of an MSP. This shift from a transactional approach to subscription models also provides the opportunity for strong passive income, despite demand for more consistent and frequent touchpoints, with the right platform and automation capabilities.
“By forging relationships with best-in-class XaaS vendors to shoulder new responsibilities, core team members can focus more on key objectives – such as growth or new leads – while anything from tech support to marketing, HR to billing is outsourced.”
Emerging opportunities
While software kicked off the XaaS boom, nowadays multiple technology types are being sold as an as-a-service offering. Hughes, from Evolve IP, explained how his company works with partners to help them navigate opportunities.
Hughes said, “Service providers like Evolve IP are well-positioned to help resellers capitalise on emerging opportunities. We simplify the consumption of as-a-service solutions, which are versatile enough to meet the needs of various industries, rather than being limited to a specific niche. Customers can activate services for even just a few days and are billed only for that duration.
Hughes gave the example of a music festival requiring Wi-Fi and communication services, but only for a short period. He explained, “Our ecosystem makes this seamless and hassle-free. Additionally, there is a growing demand for integrated services on a global scale, where the flexibility of the XaaS model truly excels.”
The quick acceleration of AI adoption last year is also creating new openings for channel partners. “SMBs are very interested in the opportunities presented by machine learning and AI, and this is a key accelerant behind the shift to cloud and XaaS models,” explained Giacom’s Marke.
He added, “These technologies rely on accessible and well-integrated data stored in the cloud to deliver maximum value. Businesses with their data locked away in on-premise environments will struggle to get value from AI.
“MSPs play a crucial role in enabling this transformation by ensuring that their customers’ applications and data are cloud-ready, secure and well-connected. This foundation allows emerging AI solutions to leverage data effectively, ensuring that AI works for SMBs and drives business success.”
Sunderland, from Jola, pointed to customer premise equipment (CPE) as one area of opportunity. He said, “We see shifts towards CPE as a service. This enabled, for example, many customers to deploy 5G routers in their networks where it would have previously been prohibitive due to the relatively higher upfront costs compared with 4G routers.
“This truly is a win-win. The reseller gains a more valuable and attractive solution to sell. End-users benefit from the performance and productivity from 5G technologies.”
XaaS innovations
This is now a mature market, but innovation is continuing at pace. AI is making its mark, with new possibilities in the IoT space. “The as-a-service market is rapidly evolving with several transformative innovations,” explained Giacom’s Marke. “AI-driven analytics are enabling businesses to unlock deeper insights and make more informed decisions.
“The integration of IoT devices is enhancing data collection and analysis, providing real-time insights that drive efficiency and innovation. Additionally, the development of highly customisable service packages is allowing businesses to tailor solutions to their specific needs, improving customer satisfaction and cultivating stronger relationships.”
Marke emphasised that these advancements “are redefining what MSPs can offer”, with MSPs now able to “deliver greater value to their clients and boost customer satisfaction, while still being competitive in a rapidly changing market”.
8x8’s Angus also expects AI to trigger further developments across the XaaS market. He said, “I know a lot of people are fed up with hearing about it, but AI is not going away, especially as we move towards a period of agentive AI.
“For those lagging a little, it’s all about refining their bots. OpenAI and Chat GPT have changed the game, rapidly responding to the increasing demand for tools to allow people to self-service, with intent and customisable experiences.”
Angus added that another “big change” will come in the workforce management (WFM) space. He said, “In 2025, AI will definitely play a massive role in the evolution of the workforce management, workforce engagement management and quality management space.
“The fact that you are now able to quality manage 100 per cent of your staff without having to put more people on doing that, that’s going to be a considerable change and improvement once more organisations implement it, and potentially could be a gamechanger for some.
“It would be very difficult to enable these new innovations in a traditional legacy communications infrastructure, so pivoting to the as-a-service market enables channel partners to stay cutting edge in their offerings.”
Software might have driven the explosion in XaaS offerings, but Wavenet’s Bevan expects this model to reshape many areas of the technology market.
He commented, “While originating in the world of software, and subsequently expanding into the realms of public cloud, the XaaS market has much more to offer. Subscription-based hardware models, such as device-as-a-service, are gaining traction in the modern workplace, reducing Capex for businesses and maximising the contribution to the circular economy.”
McKindland, from Sona Business, said, “Where I see innovation being made is how different products and services are bundled together. Single contracts and single price points for multiple services can simplify the buying process – from connectivity to licences to hardware. This generally generates a perceived better value rather than individual component costs.
XaaS solutions are also helping to enhance service delivery. Sparrow, from Blabbermouth, said, “Channel vendors are looking at how XaaS platforms can add further value to their proposition without widely evolving the operational provision of their business.
“XaaS platforms that have been custom-built for the Channel, like Bfusion, are increasingly providing quick turnkey solutions that enhance service delivery – whether for the end customer or reseller partners.”
Sparrow emphasised the reality that XaaS vendors might need to pivot to ensure channel companies can succeed with their solution. She said, “History has also taught us that the most successful businesses stay agile, which is a core benefit of XaaS platforms, enabling them to respond faster to change and remain dynamic enough to explore further innovations, whether that’s their solution or proposition.
“XaaS vendors also need to support every level of the channel chain – from wholesale distributors down to the smallest reseller – so it’s about more than simply offering a portal. More so, it’s about offering the visibility and functionality every level needs to assess the return on their investment.”
Integrations will also be vital, with these bridges between solutions enabling resellers and MSPs to create tailored solutions for their customers.
Sam Giggle, managing director of channel, Nebula, said, “In recent years, integrations have become a non-negotiable value-add, and vertical-specific integrations are driving innovation for both channel partners. Channel partners who adopt offerings built on the power of integrations gain a competitive advantage and generate additional revenue faster than competitors.
“Public and private healthcare organisations are at the forefront of this trend – they are seeking the highest level of data accuracy, reporting capabilities and have strict compliance obligations. These business drivers are prompting significant innovation.”
This market report was included in our February 2025 print issue. You can read the magazine in full here.