As Tech business leaders, board members and other key stakeholders seek higher valuations, they’re concurrently striving to understand evolving go-to-market trends within the “Anything-as-a-Service” (XaaS) model.
Based on recent discussions with XaaS market leaders, our proprietary XaaS Benchmarking database, and our ongoing XaaS industry research, Alexander Group has composed five key predictions on sales go-to-market trends for 2022:
XaaS leaders can use these predictions to better understand where the tech industry is headed and how go-to-market changes are creating ripple effects across entire organizations. These predictions can help guide execution for 2022 and beyond.
Watch the videos within each section to learn more.
Alexander Group predicts that M&A and integration trends will continue to reflect broader XaaS industry-wide go-to-market trends in 2022, which focus on providing holistic platform solutions, improving customer experience and speed to value. Expectations for speed of integration will continue to increase, and goals will focus on time-to-value for end-user customers, thus improving the overall customer experience.
Top XaaS organizations are strategically using M&A to drive growth through acquisition, and Alexander Group research indicates leaders are prioritizing M&A deals focused on specific use cases for a greater range of plug-and-play capabilities and flexibility, building towards scaled tech ecosystems. There is a clear imperative to meet buyer needs, primarily in improving customer experience to drive the ecosystem strategy. For example, Cloud & Data Analytics are emerging as key building blocks within ecosystems and thus are appearing as higher priority acquisition targets.
Expectations for speed of integration will increase in 2022 as organizations focus on expansion because one of the key goals will be to create a seamless customer experience post-M&A. On the go-to-market side, key milestones for a successful integration will continue to include mainstreaming products into the portfolio carried by core sales teams, addressing potentially disparate partner ecosystems, and integrating roles and coverage, including rules of engagement for specialists.
Companies have evolved to recurring revenue/subscription business models…
Now, many companies use consumption solutions
As XaaS/recurring revenue models have matured over the last 10-15 years, companies continue to shift their licensing and pricing dynamics in response to changing customer preferences. Alexander Group predicts that in 2022, most tech companies will integrate consumption-based pricing as part of their overall go-to-market strategies, driven by changing buyer preferences and the rise of Product Led Growth (PLG), and innovative technologies. Furthermore, Alexander Group predicts that IaaS adoption and on-premise migration to the cloud will accelerate rapidly in 2022 as legacy hardware and software companies modernize.
Today, about 20-30% of companies are deploying some form of a consumption pricing model, and Alexander Group predicts that nearly 50% of tech companies will deploy some form of consumption pricing by the end of 2022. The consumption model will not replace existing subscription license models entirely. Rather, it will supplement subscription pricing across portfolios.
Alexander Group also predicts that 2022 will be the year that Infrastructure as a Service (IaaS) adoption will accelerate at a rapid pace. For example, buyers have seen the benefits of as-a-service in the software model and are demanding the same with hardware, which in turn also aligns all IT buying processes. In response, major hardware manufacturers are selling equipment “as-a-service,” whether as a subscription or consumption-based pricing model.
As buying preferences shift towards subscription/consumption and away from capital expenditure, Alexander Group predicts that on-premise migration to cloud will accelerate rapidly in 2022. Some leading factors for this include the notion that companies expect to accelerate Annual Recurring Revenue (ARR) growth to appease investors, and that privacy and security issues have been largely addressed and overcome in the cloud environment. Furthermore, the trend is clear: over the past 4+ years, Alexander Group has seen that the share of hybrid companies’ businesses dedicated to XaaS has increased substantially every year. On average, hybrids have now passed the “threshold,” meaning a majority of hybrid companies are now 50% or more XaaS.
Digital organizations are the way of the future, and revenue organizations are following the trend. Alexander Group predicts that in 2022, the Revenue Organization will have an increased role in IT governance. Additionally, there will be an emphasis on quote-to-cash, self-service enablement, and commercial AI applications. Digital investments will be a top priority for CROs to drive growth and create operational efficiencies in 2022.
Traditionally owned and managed by IT, Revenue Operations leaders are increasingly taking bigger roles in managing the IT strategy and tech stack. As the focus continues to shift away from buying and maintaining products to delivering end-user value, Revenue Operations will increasingly own the process of Revenue Organization IT strategy, implementation, training and ongoing business outcome monitoring. An example of this is CROs pushing to automate quote-to-cash/service processes to improve deal velocity and pricing consistency, a highly important function that crosses the marketing/sales/service spectrum, while concurrently involving key stakeholders in IT functions.
Furthermore, Alexander Group predicts that Self-Service channels within consultative sales models will gain in popularity in the coming year. These tools have been primarily used in the SMB and Mid-Market segments; as 2022 unfolds, more self-service will become inherent in enterprise deals as buyers shift their preferences towards digital engagement. As a result, new roles will emerge to support self-service capabilities and be closely tied to the overall sales performance.
Lastly, Alexander Group predicts that XaaS Revenue Organization leaders will invest in AI/ML in areas such as opportunity identification, account prioritization, and early warning systems for renewals and customer success. More off-the-shelf applications will continue to be central to the AI/ML revenue organization strategy with AI/ML embedded into the distinct products. By the end of 2022, new processes and internal roles will emerge as a result of these applications.
24 is the average number of sales tools deployed by the study participants
4 is the average number of tools deployed for Sales Prospecting Intelligence & Routing
85% of sales apps are deployed globally to best manage data flow & mitigate tech stack proliferation
86% of participants are increasing investments in CPQ tools & Sales Prospecting Tools
0.34% is the average sales tech stack expense to revenue
Customer success has quickly become a cornerstone of a successful recurring XaaS revenue model, and 2022 will bring even more evolution to the function. Alexander Group predicts that companies will continue to expand their Customer Success organizations faster than sales organizations in 2022. And as Customer Success organizations mature, roles will specialize to become more focused on revenue generation. Finally, the evolving customer success manager (CSM) role will positively impact core seller job responsibilities in 2022.
Most XaaS companies today have CSMs and are continuously growing and evolving their Customer Success organizations. Alexander Group’s benchmarking database shows that on average, CSM headcount within XaaS organizations increased by nearly 50% between 2020 and 2021, surpassing overall Sales organization headcount growth, and this trend will continue into 2022.
Historically, Customer Success has focused on driving adoption, but companies are now finding that they can accomplish much more with CSMs if they specialize. Alexander Group’s research has identified at least five different CSM role types differentiated by the ILAER sales process – Identify, Land, Adopt, Expand and Renew. Other key job design factors will include CSM technical versus business focus, as well as use case versus reactive deployment.
As the CSM role will continue to evolve, Alexander Group anticipates more CSMs will drive revenue via growing involvement in renewals, upselling and cross-selling in 2022. As more companies invest in CSMs and they take on more revenue responsibility, the role of the core seller will be positively impacted by offloading certain tasks and shifting seller focus to high-value activities. Customer Success is becoming a team sport and will be increasingly viewed as a philosophy rather than just a distinct organization or job in 2022.
Alexander Group predicts that Partner and Alliance programs will go through a significant evolution in 2022, and XaaS organizations will continue to increase investments in channel enablement, marketing, and infrastructure to support these changes. Focal points of the evolution will include more integrated Partner & Alliance ecosystems, an increased focus on continuous engagement models, and an increase in multifunctional or “hybrid partners” over traditional partner types.
Alexander Group’s research indicates that successful companies are cultivating ecosystems of influential partners that can provide integrated offerings, services and support that can enhance their own offerings. In 2022, successful vendors will focus on enabling these partners with tools to communicate combined value propositions for both the vendors and partners. Companies who can orchestrate these ecosystems will outcompete the market.
This year will see the rise of the continuous engagement model, in which both vendors and their partners will continue to shift from “selling” to “serving”. Customer experience will be a core focus for all vendors and their respective partners, driven by a higher degree of customer expectations for integrated solutions amongst best-of-breed products and services. As all companies continue to pursue strategies for recurring revenue growth, channel programs will reflect those dynamics and will add resources forces on service, satisfaction, retention, and growth, rather than just sales-related incentives.
Hybrid partners will be preferred over traditional partner types in 2022. Leading partners will no longer be distinguished by a specific type, (e.g., VARs, distributors, SIs, MSP, SPs, ISVs) and will seek to establish deeper, more personalized relationships with customers to develop recurring revenue streams and provide more value-added services. This trend toward hybrid models will force technology vendors to redesign their partner incentive programs to be more holistic and evolve internal partner-facing roles to being aligned by functional experience rather than by partner type.
Alexander Group understands your revenue growth challenges. Since 1985, we’ve served more than 3,000 companies around the world. This experience gives us not only a highly sophisticated set of best practices to grow revenue—we also have a rich repository of unique industry data that informs all our recommendations. Aligning product, marketing, operations and finance efforts behind a successful sales organization takes insight and hard work. We help the world’s leading organizations build the right revenue vision, transform their organizations and deliver results.