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May 10, 2022

Why the shift to a subscription-based model is booming

What is a subscription-based model?

Instead of a one-off purchase of a product, the consumer or organisation pays a certain amount per month for a product or service. This can range from a vegetable box, to furniture, cars or in our case, IT services. For the consumer, this is advantageous due to the efficiency and automatic payments. On the other hand, it is advantageous for organisations because it gives them more insight into their costs and it frees up their staff. Through subscriptions, both organisations and consumers are entering a phase where access to near-limitless resources is a new reality and can be paid for as needed. 

Our purchasing behaviour has changed tremendously over the years, as we rely more than ever on a subscription-based model. Traditionally, we focus on a linear model of demand and purchase, but the sharing economy is booming like never before, both in B2B and B2C. Many organisations are switching from traditional CAPEX to OPEX. Why is this happening now? There are several reasons.

 

Why are we switching on a massive scale to a subscription-based model?

1. The pandemic changed people’s purchasing behaviour

The subscription economy has grown nearly six times over the last nine years (over 435%) and the uptick is expected to continue1. What impacted the shift? Digitisation has accelerated enormously due to the pandemic and has also greatly influenced the shift to a subscription-based model. As stores closed due to the multiple lockdowns, businesses and consumers were seeking more flexible and convenient ways to sell and purchase goods and services2. This shift is fuelling a subscription economy that’s on pace to reach $1.5 trillion by 2025, according to a report by UBS titled Investing in Digital Subscriptions.

 

2. Switch in generations | Ownership vs Usership

All generations have different needs and desires. Last year, the oldest Millennial turned 40. Millennials are no longer "the new generation on the work floor", they have been in the labour market for a long time and have secured positions in management. This generation doesn't care about owning products, they prefer to have access to a resource with unlimited products or services3. For example, why would you buy a car when you can lease one and have access to different services?

 

3. Subscription-based models ensure ease of mind

Let’s dive a bit deeper into the example of the car: if someone opts for a car lease, he no longer must worry about the costs of maintaining a car, because it is all covered in his monthly payment. Is it time for a small maintenance visit? Fine, you can just make an appointment and go to your local dealer. You continue to pay your monthly fee and you are good to go.

Many organisations are leasing their company cars, why not apply this to other areas? If your IT team doesn’t have to take care of the purchase and maintenance of hardware, it frees up their time and they will be able to focus on bigger projects. We can help your IT team with Device as a Service

 

4. Subscription-based models provide predictability in costs

Subscriptions not only create convenience and stability, but they also make your costs predictable. Because of the recurring payments, your expenses become more transparent, which in return leads to better financial management. Therefore, more and more organisations are switching to a subscription-based model. Today’s subscription is one of the most dominant monetisation models (36%)4.
 

DAAS, a subscription-based model at Bechtle

Bechtle offers Device as a Service, where your organisation pays for a fixed amount per month for compute and/or mobile devices. The monthly fee includes IT lifecycle services such as swap, data wiping, reverse services, and desk-to-desk support. Devices are delivered ready-to-use, and device management is taken care of for you. This frees up time and ensures your colleagues are always working with the most reliable devices.


Interested to know more?

Go to www.bechtle.es/it-solutions/modern-workplace/device-as-a-service



1 https://whatsnewinpublishing.com/the-subscription-economy-has-grown-over-435-in-9-years-and-the-uptick-is-expected-to-continue/

2 https://www.pwc.com/gx/en/industries/consumer-markets/consumer-insights-survey.html

3 https://www.ncr.com/blogs/millennials-and-the-sharing-economy

4 https://venturebeat.com/2021/09/25/53-of-software-companies-will-move-to-subscription-models-by-2023/

 

 

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This post was published on May 10, 2022.