Many of you will have come across acronyms such as SAAS (software as a service), or IAAS (infrastructure as a service). Both are methods of renting software and hardware, rather than buying it.
This should be distinguished from hire purchase because you don’t own the hardware (or software) at the end of a fixed period. You don’t have to buy it at “fair market value” and you aren’t forced to keep paying for it for a lengthy period. Subscription is much more flexible, because you can change your plan and your product at any time.
Subscription plans may vary in their form. There may be simple monthly charges. Or you may be charged based on usage. Sometimes there may be one-time charges, or a combination of all these.
The key is transparency and flexibility. You should be able to quickly adjust your subscriptions to what you need right now. Whether that’s more cloud-based storage for your files, or more bandwidth for your website traffic, or less of something because you’re going overseas for a month.
Building better relationships
Subscription-based services are a great way for companies to build ongoing relationships with customers.
It means that a small business or home-based worker, as a client, has a lot more freedom and leverage as they can leave and move to a new provider at any time.
Subscription means that companies will be working harder to retain customers, and be more responsive to their needs and feedback. It’s no longer a “single sell” and walk away. It’s an ongoing relationship where both parties want to stay happy.
Bye bye to cost blowouts
Another advantage is easier accounting, because you know what your costs are. You don’t have to worry about suddenly getting hit with huge upgrade or replacement costs in a couple of years’ time.
Your tax returns get easier, with far fewer complicated depreciation calculations to make, as subscription payments are usually fully tax deductible. And you don’t end up stuck with cupboards full of outdated hardware or software licenses.
Getting better service
The 20th century was about products, and buying once, and not expecting to see a customer again for many years. Businesses and consumers bought boxed products: VHS tapes, vinyl records, external hard drives, software CDs, newspapers. Go and look in your garage or loft, and you can guarantee there are boxes of products there that no one buys any more, only rents.
The 21st century is about buying services, and nurturing customer relationships. You listen to a stream of mp3s from your subscription music services, while reading The Economist online, backing up your files to Dropbox in the background.
The Subscription Economy is a swifter, smarter, more seamless world.