No enterprise transformation without cloud computing
Customers no longer want to buy only products, but services subscribe. This trend has ushered in the era of "Subscription Economy" a few years ago. The dynamic that develops from it for markets and suppliers, is no longer to stop. This provides the increased business models to the test.
The Internet has changed not only the communication, but also the consumer behavior of people drastically. Thus, the price pressure due to the transparency of the web is growing. The transformation to a customer-oriented company, with flexible business models, provides the majority of companies are still major challenges. In many cases the existing IT infrastructure is overtaxed. Although it supports classical processes, but is too cumbersome and leaves no room for the timely realization of visions. Here's a quick rethink and a future-oriented transformation is asking my market research, because only so providers can respond to the changing behavior of customers and secure their market position.
According to a study, the IDG created on behalf of the Californian software vendor Zuora, the era of "Subscription Economy" has already begun. That Subscriptions model increasingly prevail, also show the achievements of pioneers in this market, such as Salesforce, Amazon or Netflix. Meanwhile, as well as companies from other industries have jumped on the train. The reason is obvious: the world there is, according to the SaaS specialists Zuora 6.8 billion potential subscribers who are open to new models of consumption.
Customers insist on more flexibility
More than 90 % of the companies surveyed for the IDG study confirmed that consumer behavior had changed both in the B2B and B2C in the world. Customers want to buy products or services no longer, but use them flexibly and individually for a certain scope of services on a subscription basis. The best example is the success of modern car sharing models with which the customer pays for mobility, but not for a private car. Even firms in other sectors are increasingly put on subscription-based business models. These include software vendors, as well as media companies or companies in the entertainment industry. Service provider for consumers, for example, auto clubs or travel review sites also rely on subscription models. These can also be found in the financial services, medical, education or agriculture. Even in the area of production, the "Subscription economy" has taken root.
"This trend requires companies a completely new approach and the transformation of their business models," says Tien Tzuo, founder and CEO of Zuora. "It is not enough for a product to require a low monthly price, and then to call a service." Rather be on the "Subscription Economy", a completely new approach asked which should be in the foreground, which is whom as is.
Pressure on suppliers is growing
This process may be noisy Tzuo not only play between product managers, the finance department and the boards, but ask for a new perspective, namely with regard to the relationship with the subscriber. From where comes namely, according to a 2014 study published by the Economist Intelligence Unit, this change essentially Dimensions from. Accordingly, 80 % of customers are demanding new consumer models, subscriptions, sharing models and leasing include - the complete purchase of a product is no longer up for debate.
This increases the pressure on the vendors and their system landscape, since the demands on IT processes and systems in relation to their individual adaptability are high. Meanwhile, most of the respondents, according to the IDC study well aware. Flexible payment options and the global availability of the service offerings were particularly often cited as critical.
But nearly a quarter of the study participants also acknowledged that their current IT structures with the requirements of the "subscription economy" are overwhelmed and they internally cannot map the relevant processes. Especially companies from the service sector, trade and the automotive sector feel concerned. To show that in the IT services sector, 56 % of customers want to relate services, which include not only services and products.
However, most feel trade and e-commerce, the customer demand for personalized and flexible service offerings. Although these touched on the internal processes, but could no longer be displayed as desired by existing solutions, said 38 % of the subjects. Every second respondent Trading Company therefore considers the need for more flexibility as the biggest challenge for the IT environment.
Implementation eats too much time
Still, however, takes in many companies the implementation of subscription and subscriptions models clearly too long. The IDG study found that nearly a quarter of respondents need more than a day, until a service is implemented and the customer is available. But the price adjustment often would last more than two days admitted more than half and a quarter even called reaction times of a week or more.
This remains much revenue to lie fallow, reported Marcus Worbs, partner in the Munich office of the consulting firm Goetzpartners. Because through business models along the lines of "Subscription Economy" Lasse generate and strengthen the economic position of an undertaking new sales potential. He speaks in this context of "Recurring Revenues" by which offers are to be understood, which could generate more continuous and stable revenues in addition to transaction revenues. The consulting company anticipates that the proportion of "Recurring Revenues" will increase significantly in the coming years both in the B2B and B2C segments.
A driver for it is also the "Internet of Things", which enables the networking of numerous products and services entirely new business models that pose new and, above all, continuous sales potential. As an example Worbs calls the classic tractor manufacturer, who linked his machines further products and services. These include the analysis of weather maps and forecasts, the use of sensors for temperature, air pressure or rain, as well as irrigation systems. Add to this the connection of optimization systems. This link helps the farmer to plan his work optimally and adapt to circumstances. Thus the income of agricultural enterprises optimize tractor manufacturer can in turn can monetize these services as recurring revenues.
New software category for the "Subscription Economy"
In order to assert itself in the "Subscription Economy" companies need new software solutions that adapt to the current needs and facilitate the transformation of business models. "Conventional CRM and ERP systems are unable to cope with the new task of flood and not geared for they were not designed for companies with business models Subscriptions base," says Alexander Zschaler in Zuora Sales Director Central & Eastern Europe. "In a world in which there are hardly any traditional customer, but are more and more subscribers, companies need to apply new technologies to manage the entire lifecycle of a subscriber."
Proactive IT with SaaS-based solutions (Software as a Service) can act as a bridge between business and technology. They allow the rapid creation of new solutions and the timely adaptation to new requirements. Modern tools have to cover the acquisition of new customers, but also support the automation of billing and payments. The key to building a successful subscription is also a flexible subscription management, subscriber timely up- or downgrades allowed, offers a straightforward option to extend the claimed that they perform, or to change flexibly according to your wishes.
Organizational transformation leads to success
Step into the "Subscription economy" but requires not only the use of new software tools but also the organizational restructuring in four main areas:
Subscriber Identity: it is not sufficient any longer to maintain and manage only contact customer data. A "Subscriber Identity Act" must contain supplementary information and to provide information on: purchases, products, local pricing, promotion, last payments and refunds as well as the extension of Subscriptions or usage data.
Subscriber Journey: makes it possible to accompany the complete storyline of subscribers from the outset. Based on the evaluated results an individual, personal care is possible.
Subscriber Culture: allows any employee, whether he sells, Product Specialist, financial expert or customer service representative to establish a special relationship with the customer and to maintain. The customer and his needs are in all actions always at the forefront.
New indicators: companies that work with subscriptions must be able to track a number of new indicators. These include Subscriber Health (subscriber growth and -change) Business Velocity (annually and total contract value), Subscriber Engagement (payments and cancellations), Subscription Finance (monthly and annually recurring revenue) and Relationship retention (extensions, upsells, termination rates).
In conjunction with a proactive IT processes and modernized so the transformation of existing processes is comparatively simple, says Zschaler. From this new business model can be generated that provide the customer and his needs at the center.
Billions software category under construction
Demand for technology "Subscription economy" creates a new, multi-billion dollar software category, which focuses entirely on "Relationship Management business," said Zuora founder Tien Tzuo is convinced. Although still there are no reliable statistics, Tzuo sees his optimism by statements made by customers already confirmed. Companies such as GM, News Corp and Schneider Electric will therefore generate in the future 40 to 100 % of its revenues through subscriptions. "If only ten % of all companies would switch 50 % of its revenues on subscriptions models worldwide, there would be a market effortlessly with a circumference of 10 to 20 billion US dollars," predicts Tzuo.
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