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With Digital Transformation making “ As-a-Service ” solutions mission-critical for both corporations and consumers , subscription-based models are no longer exclusive to B2C businesses and are fast emerging as a key delivery system for core B2B offerings .

Per IDC , the trend for software companies adopting a subscription business model is set to hit 17.9 % CAGR between 2021 and 2026 CAGR .

What ’ s more , subscriptions are forecast to drive 87.4 % of total software revenue by 2026 .

This is evidence that even for B2B firms a key aspect of operations is undergoing a noteworthy change . But gaining a clear understanding of subscription models and what they entail for the entire business is crucial to realize the impactful gains the model promises .

Understanding subscription models

Traditional ways of business involve an asset purchase model where customers pay a lump sum amount up front for the product or service as a perpetual license fee and continue to pay for maintenance , support and upgrades .

A subscription model flips the script by having customers pay a subscription amount either monthly or yearly . This amount is usually less than what is charged in a traditional model and provides customers access to the latest version of the product or service in real time .

Subscription models represent a paradigm shift for businesses as the endgame is creating customer experiences that lead to more renewals . Strengthening customer relationships by meeting evolving needs and wants consistently takes precedence over generating higher sales . It is necessary for enterprises and channel partners new to subscription models to take the long view and craft business models fit to meet a new mindset .

Impact for businesses and the channel

As more businesses migrate from on-prem to the cloud , a cloud-based subscription model is the way to go for both businesses and the channel today . Efficiently managed subscription models on the cloud can help end-customers offer new products and services that serve as gateways to new markets and , thus , increase revenue .

Additionally , a recurring stream of income can help businesses beat economic uncertainty and market disruptions .

Such a model can also help deliver seamless and simplified customer experiences that translate to stronger customer loyalty .

Shifting to a cloud-based subscription model may be a challenge for channel partners from a cash management standpoint , but the overall enhancement in operations is substantial . Through the cloud , channels can expand their catalogue and create a dynamic vendor marketplace for their customers to leverage .

This can help them integrate various solutions on to one platform , which can be used to launch offerings

Mark Tan , Vice President and Country General Manager , Tech Data Singapore

Through the cloud , channels can expand their catalogue and create a dynamic vendor marketplace for their customers to leverage .

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