3 Reasons Businesses Are Moving To Services Models

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There is a general trend of IT companies switching to services-based business models in order to acquire streams of recurring revenue, but Paddy Srinivasan, from Xively by LogMeIn, a Boston-based networking company, said there are other "specific" reasons for this transformation.

"Companies are going from being a product company to a product-as-a-service company," said Srinivasan.

He said one reason companies make the change is that "they want to use their fiscal product as a platform; this is very different from having software as a platform," Srinivasan said. Using the product as a platform could translate to selling more hardware itself, or to sell more "consumables," like software.

The second reason, according to Srinivasan, is to use products that are "inherently connected" to lower existing service costs.

"And the third reason is, in using these products they want to establish a close relationship with the user of the product," he said. That means collecting data on end users through smart devices in order to more efficiently and effectively build a portfolio of products and businesses.

PUBLISHED JUNE 1, 2015