Understanding the Subscription Economy and Payment Model

CTS offers our public and private sector customers a complete portfolio of communication solutions – available with flexible financing and subscription options.

‘Subscription’ is a commercial model in which a customer makes recurring payments for ongoing access to a product or service.

The subscription economy exploded over the last decade. However, much like every macroeconomic trend, there are some assumptions about subscription that don’t tell the whole story…

Myth 1: It is a B2C Thing

Much of the growth in subscriptions came from business-to-consumer (B2C) activity, with consumers subscribing to everything from clothing and food to music and streaming TV.

However, subscription payment models are increasingly being offered by B2B organizations. Most (61%) enterprises are now aggressively shifting toward paying for all technology via subscription.

Myth 2: It’s All About Cloud

Certain categories are almost exclusively transacted via subscription – for example, Infrastructure as a Service, Platform as a Service, and Software as a Service.

Software and technology that isn’t cloud-based is also being sold via subscription. A McKinsey survey of large enterprise IT decision-makers found that demand for on-premises subscription software increased significantly over the past decade. 82% prefer to access their on-premises software via subscription. The simplicity and flexibility of the subscription model are the main reasons cited for this shift.

Myth 3: It’s All About the Finance

Subscription generates a recurring cost line driven by ‘on demand’ variables such as the number of users, hardware, or software usage. However, subscription is also about the customer experience.

Subscription models enable organizations to better serve their customers – they can get closer to the customer, understand them, and be more responsive. If you take care of the customer, the subscription numbers will take care of themselves as satisfied customers renew.

Myth 4: It’s a Startup Thing

Amazon and Salesforce, two subscription trailblazers, were once startups. Today, both are now established organizations that use the subscription model to meet customer needs and grow their customer base.

Subscription is for “everyone and everything,” delivering benefits to both the customer and the supplier. Organizations that have had revenue built on perpetual licensing have rapidly transitioned to subscription models. Mitel, as an example, certainly isn’t a startup, but now offers subscription models across their portfolio.

Myth 5: It’s a Subscription-only World

We now associate the subscription model with successful companies like Adobe, Amazon, Netflix, Microsoft, Salesforce, Google and many others. However, subscription may not be for everyone right now.

Not every organization (and consumer) will want to transact via subscription for every product, app, or service. Some will want to buy outright. Providers should offer choice and flexibility, providing the widest set of commercial models to meet the widest set of end-user and financing needs.

Choice is Important

CTS offer a variety of cloud and on-premises solutions to keep your organization connected – public cloud subscriptions, private cloud services, on-site systems, and hybrid arrangements.

Talk to our team of experts and learn more about our end-to-end design, local to global deployments, and outstanding local support. Contact CTS today at 800.787.4848 or jnolte@ctsmd.us.


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