We're seeing the seeds of a revolution across consumer and corporate markets with the rise of the digital economy and subscription-based services.
As service provider offerings mature, the need for businesses to adopt innovative pricing and product packaging becomes ever-greater to enable differentiation in an increasingly crowded market and create value in customer relationships.
Here, we speak to Louis Hall, CEO, Cerillion Technologies about the issues around the subscription revolution and how the newly emerging cloud billing approach is helping to drive business agility and maximise revenue in the new economy.
TechRadar Pro: What evidence does your recent survey gives us that the 'subscription revolution' is actually happening?
Louis Hall: The research highlighted a shift in the way products and services are sold: away from a traditional one-off product approach towards a more flexible pricing model based on subscriptions and usage.
One-off pricing models are currently used by 84% of organisations surveyed but the research shows that this proportion is set to fall to 51% in the future. In contrast, new pricing initiatives built around an on-going service relationship are growing steadily, including subscriptions, pay-per-use and freemium pricing models.
We are experiencing a shift in the way people purchase and consume goods and services as part of the subscription revolution. The survey results reveal a distinct drop in non-digital products from 56% offering them now, to 45% expecting to continue offering them in the future.
Non-digital services follow the same trend dropping from 67% to 58%. In contrast, the proportion of companies offering digital products is set to rise from 39% to 46%, and those offering digital services will increase from 44% to 51%.
TRP: What are the main drawbacks with a subscription only business model?
LH: The simplicity of subscriptions makes them appealing to organisations and their customers, but in that strength, we can also see an inherent weakness. The best services are often the simplest ones but the simplest are also the easiest to mimic, particularly in the digital services market where the cost of entry is relatively low.
As competition increases, the need for innovative pricing and product packaging becomes ever greater in order to differentiate from an increasingly crowded market and create value in customer relationships.
Starting with a subscription-only offering is a great way to gain a foothold in the market and start developing services.
However, to move to the next level of growth, organisations need the flexibility to mix and match subscription and usage-based pricing models, and the system performance and scalability to support an exponential take-up of service users.
In short, to achieve competitive differentiation in tomorrow's economy, businesses must be able to manage complex billing relationships and package offerings to address the breadth and depth of consumer and corporate needs.
TRP: How are businesses changing the kinds of billing systems they use in order to differentiate themselves?
LH: The survey indicates that 53% of all businesses are still using either an in-house-developed system or manual processes to bill customers. But this situation is unlikely to last much longer. In-house systems are typically not agile or sophisticated enough to handle the changing billing needs of business as they transition to subscription services.
Instead, we are likely to see the ongoing rise of enterprise cloud billing. It is a new approach which can deliver agility for businesses in mixing and matching service and usage-based pricing models, while enabling them to quickly set up and start billing for a new service without the need for any infrastructure or upfront licence fees.
TRP: What does the survey tell us about how the emerging cloud billing market is likely to develop in the future?
LH: The survey results paint a picture of a market about to undergo rapid growth. It is currently relatively small in the UK, with just 4% of survey respondents using a cloud billing system or Software-as-a-Service (SaaS) approach.