What is clear is that more and more consumers want it and businesses are adopting it for cash flow reasons (called OPEX) over the traditional pay upfront (CAPEX) model. In the end it is all about convenience and not being locked into non-scalable, hardwired models.

Zuora, a leading global provider of subscription billing, commerce, and finance solutions has announced results from a new survey of 104 technology, media and retail executives at the recent Ad:tech summit event in Sydney. While results may be a little skewed due to the audience make-up they are reasonable findings.

Consumer preferences are changing. They have an increasing — perhaps insatiable — desire to rent or subscribe to goods and services on a recurring basis, meaning companies must adapt their business models to remain competitive, protect market share, and ensure future growth.

Key findings from the Adtech Summit survey:

• 78% said that they were experiencing changes in the way in which consumers wanted to source goods and services.
• 31% indicated their businesses were changing or re-thinking the way they price and deliver goods and services by integrating new subscription packages.
• 76% expect revenue gains from new delivery models of goods and services to either increase or significantly increase during the next two years.
• 33% said the two major challenges they faced were finding ways to effectively launch new products and services, and building long-term customer relationships.

The three biggest business drivers for adopting new delivery models were:

• 16% creating new revenue opportunities
• 12% competitor differentiation
• 10% stronger brand affiliation

The results echo earlier findings of a survey of Australian, UK and US business in 2013. The Economist Subscriber Index Study found 80% of five businesses were experiencing changes in how their customers preferred to access their goods and services – 40% were reacting to the trend by implementing subscription services as part of their core business operations.

An April 2016 report by MGI Research estimated the global market for subscription economy Software-as-a-Service tools would be more than US$100 billion through 2020, with 20% of Fortune 1000 companies adopting these solutions. The same report found a US$820 million total Australian market for subscription economy software tools emerging in Australia. The report suggests that because these new SaaS services and tools can support rapid scaling for top-line growth and increased customer engagement via data and analytics, spending for these solutions is now being prioritised. Similarly, companies seeking to improve their efficiency by consolidating a number of out-of-date and disparate systems through a new monetisation platform will also benefit, fuelling additional demand.

Comment

While you would expect Zuora to be bullish about the subscription economy — frankly all it is, is a recurring revenue model — the world seems to have embraced it with gusto over the past few years. In part, that has been driven in business buy the ready take-up of cloud (subscription) and resultant things like Software/Infrastructure/everything as a Service.

But fundamentally it fulfils a basic need for both the customer and the supplier – a symbiotic relationship develops where the supplier has to prove its worth every "month" and the customer has to assess if the goods or services are doing what they were supposed to – or if they need to scale up or down their consumption. It’s a win-win "sticky" even if it may cost a little more in the long run.

If you want to read a little more on the subscription economy, Tien Tzuo, CEO of Zuora has an interesting article here.