Jaakko Elovaara 19.05.2020 7 min read

The pros and cons of a subscription-based business model

Firstly, I hope you are all safe and healthy. What a winter and spring it has been, unreal.

Kindly find some thoughts and observations about subscription-based businesses and their benefits in these times. This pandemic time has left us with lots of new ways of living and working.

 

The traditional, prevailing wisdom was that we IT vendors could never provide the service we do without being mostly in the office. Having to deliver the services remotely has crushed that belief. Companies will never return to the pre-pandemic normal status quo; employees will take remote working as a default and assume mobile flexibility, questioning the necessity of (air) travel and all in-person meetings.

 

Business executives who have experienced firsthand the shortcomings of old legacy technology environments will demand IT departments to accelerate roadmaps for application and infrastructure modernization, a high-performance data network, high-availability architectures, automation for scaling, speed and reliability, and cloud for scale and flexibility.

 

COVID-19 pandemic has led to enormous job losses, businesses going belly up, a deep decline in discretionary spending and applying more debt - lots of debt. Enterprises have been busy ensuring credit lines and limits to prop up their balance sheets.

 

Corporations’ information technology budgets are being retooled and adjusted as enterprises are starting to consider their post-pandemic recovery plans. It is very probable that IT projects will be viewed through a completely new lens that revolves on savings, flexibility, agility and resilience over old relationships and “how this has always been done” mentality.

 

The new reality means that information technology budgets are going to be cut also, partly significantly. Incumbent software solution providers are seeing their deals postponed or disappeared from sales pipelines and without doubt some ongoing deployments will be frozen and cancelled. The old way of sourcing legacy technology with slow solution deployment cycles and heavy, upfront professional services element is going to be history, as well as a commitment to 10-year deals with forced old technology upgrade projects and regular price increases. Customers expect results and clearly, they deserve results.

 

Subscription-based solutions and services with flexibility, agility and genuine cost efficiency will grow fast, and dominate over time. It is 100% sure that the C-19 pandemic triggered this transition to happen faster.

 

Would you see any corporate CIO to propose or insist on a massive incumbent on-premise IT project with ancient underlying codebase after this pandemic experience? I do not think so, or it would be that CIO’s last task before packing his stuff and closing the door. Companies will require to see tangible results and return on investments with clear milestones and KPIs.

 

Good to note that in the B2B software business the services (deployment) element can be a part of a flexible subscription as well, easing the idea of outsourcing some tasks to industry solution expertise organizations instead of trying to hire inhouse, which is never going to be as cost-efficient in this modern technology scene.

 

The general sentiment in global subscription-based offerings’ scene can be summarized as follows, starting basically now:

  • Accelerating: video streaming, Digital news and media, E-learning, communications software, data connectivity
  • Having limited impact: B2B and B2C software, Information services
  • Declining: Consumer Internet of Things (IoT), Business IoT services, software for small businesses, memberships
  • Shrinking: Travel and hospitality, sports-related services

 

There are probably no major disadvantages in moving to constantly developing, genuine subscription or pay per use software offerings.  These offerings can help customers scale and adapt to any situation as we have seen already this year.

 

Subscription technologies are modern, well designed to match current needs of customers, and not “ripping off” the customers but providing the measurable added value to them. Moving old legacy IT systems to “so-called cloud services” and figuring out a monthly payment plan for customers is not the recipe for success and productivity.

 

The real digital-enabled software solutions do the “things” much better, much more affordably and way faster.

 

For the past decade, Youredi has been developing integration services to the global markets – from building an integration expert team to manage customer projects to providing a cloud-based iPaaS to automate integrations. If you are facing the mentioned above changes in the business environment or just considering shifting your integrations from legacy systems to modern cloud-based solutions, our team is here to help you with your integration needs.

 

Contact Us

 

avatar

Jaakko Elovaara

Chief Executive Officer

RELATED ARTICLES