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How the Subscription Economy is Changing the IT Landscape

Written by on October 1, 2018

IT teams usually work with shoestring budgets and high operating costs that leave very little wiggle room for innovation. Legacy IT systems that need large capital spends only add to the budget burden. Thankfully, the ‘subscription’ business model is changing the way we run our digital businesses. Enterprises are running away from on-premise systems and moving to the cloud for security, scalability and cost flexibility.

 

From Build to Consume: Implications on IT operations

  • Cost-effective

In the traditional license model, you pay an upfront fee to get the software, which eats into that year’s budget. You then pay a 20% maintenance fee for the remaining years of the contract. Every time you need an upgrade, you also pay additional licensing costs and implementation fees. In the subscription economy, you only pay for what you need or what you use. The pricing is transparent and you have a better control over your budgets. The subscription model has made software deployment nimble and scalable. Instead of buying expensive perpetual licenses in a capex model, businesses can consume IT as a service with flexible subscription plans.

  • Scalability

The subscription model allows businesses to easily ramp up or wind down their deployments in response to business needs. The traditional license model is not flexible to accommodate today’s rapid business changes. Investments require an accurate forecast of an unpredictable future and budgets are not optimally used. Additionally, businesses are usually seasonal or cyclical, meaning you don’t fully utilize the licenses through the year.

  • Room for Innovation

The subscription model replaces big blocks of investment with agile and granular operating expenditures. This reduces the financial burden on IT operations, making room for strategic IT initiatives and innovation projects, year on year. With low monthly costs, shorter budget approval processes and reduced operating costs, the IT team can now innovate and add greater business value in newer and faster ways.

Also, see : Legacy systems : A Barrier to Digital Transformation

  • Transparent

The subscription based pricing is as transparent as it can get. With objective and unit based pricing, the subscription fees leaves no room for ambiguity. The subscription model makes it easy asses ROI regularly and calibrate budgets in real-time. The try-before-you-buy offering also makes the vendor’s value offerings transparent and enables business to make informed decisions on their IT purchases. The legacy license fee model makes it impossible to track ROI on a capex purchase because you can’t try before you buy to understand value creation.

 

Doing More with More

The expectation from IT has always been to do more with less. The subscription model changes this for IT teams. With businesses increasingly deploying digital transformation initiatives, subscription based fees frees up legacy-locked capital.

Change at scale and speed, goes hand-in-hand with a pricing model that optimises cost, on-the-go. Businesses must start adopting cloud services powered by nimble monthly subscription fees that are tailor made for today’s digital-business landscape.

Businesses have realised benefits beyond cost-savings with adopting the subscription payment model. Based on our experience working with businesses moving away from traditional legacy systems and their payment model, we have put together a compelling financial case for cloud-based IT service desks.

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