Beyond The Subscription Economy

Subscription Economy

I’m suspicious of any technology or business model that claims to solve all of our problems. Reality is rarely as simple as the evangelists would have us believe. Back in the 1980s, for example, client/server was the disruptive new computing model that changed everything, replacing our dumb terminals and mainframes with distributed processing on clients.

Fast-forward to 2014, and today’s browser-based netbooks are close cousins to the dumb terminals of the past. Technology moves in cycles. So when we speak of the “subscription economy,” I take the discussion with a grain of salt. Yes, I recognise the power of the subscription model to disrupt markets. But for many businesses, the business model issues are not simple.

The Pure Play Is Elusive

Many industries have customer segments for which the subscription or SaaS model isn’t appropriate. Even Salesforce, the epitome of a B2B subscription-based business, is dipping its toe into managed services to address the needs of government institutions and others who don’t want to put their data in a public instance of their cloud infrastructure.

The Subscription Economy Itself Is Evolving

New business models are evolving. Consider the emerging concept of the circular economy. Carpet manufacturer Interface sees its role as providing floor covering services – recycling used carpet materials into new carpet once you are done with it. Is this a subscription? A managed service? I’m not sure, but it definitely requires maintaining an ongoing relationship with the customer.

Enter The Hybrid Business Model

Business models change like fashions. You can embrace one model entirely and build your business around it – many new businesses enter and disrupt markets using this strategy. But to remain successful over the long haul, chances are that you’ll have to manage multiple business models, either sequentially or in parallel. The multitude of technology businesses that sell both SaaS-based and on-premise solutions, perhaps with managed services as well, are examples of companies with “hybrid” business models.

The companies with staying power will be those that can adopt the business models that make sense for their specific market, solutions and strategies. They will share the following attributes:

  • Flexibility in managing structure, customer relationships, revenues and sales.
  • A comprehensive view of the customer.

Where does your company fall in the range of business models? Are you all-in with one model or do you support multiple business models? Are you considering adding a new business model, and if so, do you understand the revenue implications of that model?

Jim Dunham

James Dunham is the Senior Vice President for Product Management at ServiceSource. Over his 25 year career he has held virtually every job in software from coder to CEO. Previously, he was the Chief Executive Officer for Flat Rock Systems. James worked at SAP AG for 6 years and served as Group Vice President for the Governance Risk and Compliance product suite and Vice President of Solution Marketing for the Public Sector. James worked at Siebel Systems for 7 years leading five separate industry business lines as Vice President and General Manager. Over his career James has held positions in product management, sales, marketing and consulting. James serves on the Corporate Board of Otterbein Senior Lifestyle Choices and is the Chair of the Strategy and Marketing Committee. James has worked for the National Aeronautics and Space Administration and served in the United State Air Force.