The subscription economy is gaining traction across all sectors – and is no longer the exclusive purview of the B2C sector
Pay-monthly or pay-as-you-go pricing models are not a new concept. As consumers, we rarely own our mobile phones, opting instead for pay monthly contracts which in most cases eliminate the need for upfront investment. We stream unlimited music and movies via subscriptions to Amazon Prime, Netﬂix and Spotify and procure products/services from companies such as JustEat, Uber and AirBnB, as and when we need them.
In business, the leasing model for print and MFP purchases is long established, but taking that one step further, the idea that organisations don’t need to physically own all of their technology is catching on too.
Carlo Longhi, Director and General Manager, Indirect channels UK and Ireland, Xerox, says that the ‘everything-as-a-service’ trend is undoubtedly being driven by the consumer world, whereby we procure either via a set monthly subscription, or on an on-demand basis.
“As consumers we have become increasingly attuned to the simplicity of these models at home, business buyers now want to replicate these methods at work. Previously businesses had to procure everything they needed outright – they’d buy a printer then pay for toner, buy a laptop and then have to buy a Microsoft Office licence or buy a smartphone and pay for data and calls,” Longhi said, adding: Nowadays, businesses want to procure on a usage basis which is billed as a per user quantity, without the need to necessarily own the asset outright. This involves a per user model inclusive of printed pages, mobile data and online storage which then allows for a modular or scalable variation, allowing to expand or decrease based on workforce size, or even add/remove components on a per need basis by department/team/location.”
James Turner, Regional Sales Manager, Y Soft concurs: “Most commodities and services are available paying a monthly subscription; TV, Insurance, Amazon products, home improvements and so on,” he said, adding: “People are used to adding smaller costs to monthly budgets so why should business costs be any different?”
Tony Milford, Managing Director, Vantage Computing says that the benefits of lower cost of entry, lower CapEx, easier scalability, multi-tenancy and device and location independence, are potentially a win-win for vendor and client alike.
“The world is tuned in to spreading costs over time, and happy to pay a little extra for this benefit. In the business world, paying on a monthly subscription model often turns what would be a capital expense into an operating expense,” Turner said. “This also makes it easier for businesses to adopt new technology as the cost barrier and lengthy approval process are eliminated.”
PAE Business is one firm that sees the benefits of providing products as-a-service. The PAE Premier model is built around providing all products as-a-service. “We launched Premier in 2012,” Managing Director Phil Madders, explained. “Once we had got through the painful experience of losing the large chunks of revenue coming in when we won a sale and completely migrated to providing our products as-a-service, it has become a fantastic platform for our business and for our customers to develop their ‘everything-as-a-service’ offering.” Madders argues that vendors should not ignore it: “Embrace it and include it in your business plan going forward,” he said.
According to John Gifford, Founder & Managing Director, Fiducia Strategic Consultancy, whether vendors like it/agree with it or not, the ‘as-a-service’ economy is too big to ignore. “Looking at the past 12 months within EMEA as a whole for example, traditional outsourcing fell nine per cent year on year to €12.9bn, while ‘as-a-service’ outsourcing rocketed 48 per cent to hit €4.9bn. Although not directly linked to hardware as such, it is very indicative,” he said.
“The growth rate is very high which naturally means adoption is too,” Gifford continued. “There is always the danger of course of organisations trying to make something ‘as-a-service’ that doesn’t necessarily warrant it, but you cannot deny the facts of the market.”
The debate is long over Gartner argues that the debate about whether the software industry will move from a traditional license and maintenance model to a subscription based model is long over. The analyst firm reports that there is now widespread adoption of software-as-a-service (SaaS) and that many traditional enterprise software providers have been forced to make the shift.
Research Director Laurie Wurster, said: “SaaS has not killed the software market, but is growing rapidly and pressuring legacy providers to include SaaS options or risk losing market traction.” Moreover, Garner predicts that by 2020, all new entrants and 80 per cent of historical vendors will offer subscription-based business models.
With software vendors leaping ahead in the subscription economy, it begs the question is the ‘everything-as-a-service’ economy too big an opportunity for traditional print providers to ignore?
“Undoubtedly,” says Phil Jones, Managing Director, Brother UK. “With so many elements of the marketplace becoming commoditised at pace, the trickle down effect from large enterprises to small and medium businesses demanding ‘everything-as-a-service’ will gather pace. We’re already seeing the significant growth of ‘born in the cloud’ resellers who are taking advantage of this market change.”
Jeremy Spencer, Marketing Director, Toshiba Tec UK says that to use the broad-brush approach to ‘everything-as-a-service’ is, in his opinion, too wide a brief. “But I do believe that much of an organisation’s requirements can be addressed ‘as-a-service’, so in that respect I do think that it presents an opportunity.”
Spencer continued: “Our aim is to ensure that we help organisations realise efficiencies and the constant development of ‘as-a-service’ means that we are able to act in our customers’ best interests by ensuring they pay only for what they use rather than over committing to products and services that they don’t need. This delivery method means that the measurement of efficiencies can be monitored, leading to a more trusted relationship and a better outcome for the customer.”
Opportunity for partners to differentiate
According to Shaun Wilkinson, Managing Director, UTAX (UK), the ‘everything-as-aservice’ mind-set is still very much in its infancy. “But it’s a massive opportunity for partners to differentiate and for customers to purchase more efficiently,” said.
“Many UTAX Partners are realising the opportunities this new economy can present and are noticing increased revenues as a result. We continue to encourage those partners yet to make the change to their business model, through highlighting the benefits that the combination of our devices and software can provide. Partners who implement the consultancy approach will realise that it’s the ideal opportunity to maintain, upgrade and sell to their client base solutions that can make visible differences to business processes,” Wilkinson added.
From a reseller’s perspective, Darren Bird, Head of Technology, Xeretec also concurs with the notion that this is too big an opportunity to ignore. “According to Deloitte, 70 per cent of companies think that ‘everything-as-a-service’ (XaaS) is ‘very’ or ‘critically’ important to their business success, so it is essential to embrace this shift,” he counselled.
“There’s no doubt that how we procure products and services is changing, from mobile devices to new cars. This consumer experience – and its benefits – is now spilling into IT procurement in the workplace. Companies of all sizes are looking at not just more cost-effective ways to acquire new products and services, but more effective ways of ensuring that those products and services are updated regularly and can scale effortlessly to benefit their businesses’ efficiency, productivity and security,” Bird explained.
“Customer expectations of deploying the latest ﬂexible technologies without requiring capital expenditure can only be achieved through the provision of ‘as-a-service’ solutions,” said Mark Bamford, General Manager, Hollis Office Solutions.
Hollis has always focused on the provision of end-to-end, holistic solutions selling everything-as-a-service. Instead of trying to sell on price, which is, according to Bamford, now a doomed strategy. “We have built a strong and stable customer base through the provision of comprehensive services charged on a monthly basis. In addition to generating ongoing revenues, this helps to ensure that customers receive the highest level of service and support at all times.”
In conclusion Bamford warned: “This operating model currently has so much momentum that traditional approaches will find it hard to compete, apart from in a small number of peripheral applications.”