The Subscription Economy

We now live in a Subscription Economy.

It was announced recently that Microsoft earnings from their Office365 online subscription-based-offerings had surpassed their more traditional “Box Copy”.  Microsoft’s gamble would seem to have paid off and begs the question – is the subscription economy here to stay?

So, what is the Subscription Economy?  And what does it mean for me and my business?

The Subscription Economy is a fundamental change in the purchasing process which uses a subscription business model rather than more traditional commercial routes. It takes us away from the more traditional pay per product system to receiving that product or a version of it “as a service”. If you consider relatively new models such as Netflix and Spotify and the huge growth they have experienced in a relatively short space of time, it’s easy to see why Microsoft made such seismic shift in their core business model. As a result:

• They have secured continued & recurring earnings.
• They have remained relevant in a modern and fast changing world.
• They continue to add to the product list and services provided through their subscriptions.

There are several advantages to this for us consumers.

• Subscriptions allow us to reduce upfront costs.
• It provides us with the opportunity to trial different software (often free) and products without a long-term commitment.
• It delivers improved customer service and tailoring of the products to customer needs or wants. (Netflix watch-lists anyone?)

How do I deal with this?

It’s easier to cancel a subscription with a small recurring cost than a more substantial contract. In the subscription economy, therefore, successful customer relationships are vital and so the best and most successful subscription companies are spending more on identifying product improvements and upgrades that are often automatically rolled out as part of the service. It is no longer as difficult to get out of a subscription as it may have once been and if you keep on top of the subscriptions you sign up for then you should be able to enjoy the benefits of this ever-changing landscape.

1. If I could offer any advice it would be this: This isn’t a fad: embrace it. The revenues that are being generated and the adoption of products available “as a service” do not show any sign of slowing and in fact, will increase greatly.

2. Investigate what products or services you currently have that can be upgraded or replaced by subscriptions. Perhaps your next server upgrade might be a Microsoft Azure Server?

3. Have you budgeted for all the changes that will come about because of the impending introduction of GDPR in May 2018? Could a smaller subscription based monthly payment be the difference between compliance and non-compliance?