The online subscription services business segment is hot and businesses are waking up to the kind of recurring revenue stream online subscription services bring. Over the last few years, subscription-based services have become a bit of the rage, declares SF Fashion+Tech.
More than a rage, IDC projects the software-as-a-service (SaaS) subscription service segment to increase revenues at 6X growth rate. Accenture estimates business process outsourcing (BPO), another subscription service segment, will top $300 billion in 2012. SaaS and BPO are online subscription service businesses.
Driving the growth of subscription services revenue is the concept-to-cash business model introduced by OneBill, a young SaaS company. Interest has been so strong that conventional businesses are looking at how they too can catch this wave by adding a subscription revenue component to their existing business strategy or revenue model. From healthcare to financial services organizations are looking at it to capture incremental and new revenue this way. With a little creativity almost every company can develop a subscription revenue component.
Concept-to-cash expands on the traditional lead-to-cash model. It enables myriad innovative pricing and revenue opportunities, everything from pay-per-use to tiered recurring revenue programs to conditional offers that can be mixed and matched in a variety of ways to maximize revenue from each customer.
Subscription services are attractive for their ability to reduce the customer’s cost by making it possible for them to subscribe to a service rather than buying outright. The lower recurring subscription cost makes the purchase more manageable. Customers that might not have been profitable before can become profitable now as subscribers to services delivered over the network. Subscription services also become a way to reach new markets and completely different customers from the organization’s traditional base.
The big obstacle to concept-to-cash subscription services revolves around the underlying subscription management platform. While the subscription services business has rapidly evolved, the underlying billing and management systems lagged behind, forcing companies to settle for inadequate systems that have been cobbled together from bits and pieces of existing systems. Specifically they try to modify their existing financial, billing, and accounting systems. The results are a kludge.
Lacking is an integrated, comprehensive online subscription services commerce platform that integrates all the business components required to support a subscription services operation, concept-to-cash. It also should be able to handle new and different services that may evolve later or to meet changing customer demands.
As a platform it should do it all: consolidate customer acquisition, retention, management, and critical business functions from marketing, sales, and operations as fully integrated capabilities and enable data to flow from process to process without special handoffs or the need for work-arounds. It also must handle the latest subscription service offerings, including contingencies and dependencies while supporting the process all the way through every piece in the service value chain—customer service, retention, billing, collections, settlement, and all the way to the GL. Finally it must provide analytics that lets management understand the activity, test and evaluate different offers and combinations of offers, determine customer value, and assess results to maximize return.
To date OneBill Software has emerged as the first such integrated subscription commerce platform on the market. Built from the ground up as a unified cloud-based platform, it is designed to address the needs of all participants in the subscription service process including marketing, sales, operations, IT, and channel partners.
A few others have started to introduce subscription services tools. One is Zuora, which describes itself subscription billing system.
Things will get even more challenging for IT as companies use subscription services as part of an effort to monetize social media. OneBill already has started talking about this.