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Key Findings
By 2015, more than 40% of companies selling media and digital products, such as software,
services and content, will rely entirely on software as a service (SaaS) or hosted subscription
management services to manage their fulfillment, entitlement, billing, renewal and customer
loyalty requirements.
By 2015, 35% of Global 2000 companies with nonmedia digital products will generate
incremental revenue of 5% to 10% through subscription-based services and revenue models.
Subscription revenue streams can help to smooth out seasonal revenue peaks, generate
incremental revenue from add-on services, and strengthen the customer experience and
customer loyalty.
Recommendations
Companies with subscription management systems in place should use data from customer
subscriptions to re-examine products, revenue models, and, most importantly, your company's
customer relationships and customer experience.
Consider the potential cost savings, but also the potential disruption involved in moving from
currently implemented solutions to new offerings.
Analysis
The Subscription Economy
Subscription management applications (SMAs) enable a company to manage the business
processes required by a subscription product model. A subscription business model is
characterized by a product or service that is paid for by the customer or consumer on a continuous,
periodic basis; includes ongoing access to content, products or services for the life of the
subscription agreement; and fosters a degree of customer experience or customer loyalty that is
unique from a purchased product.
The "subscription economy," as it is sometimes referred to in the press, is a market reaction to a
growing range of media offerings (newspapers, magazines, books, music and movies) and
technology products (applications, services and related content) that can be delivered digitally.
Subscription management business models are most common in companies that provide products
that can be delivered electronically, including media and software, and, in some industries, add-on
services that can be delivered digitally.
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Interest in subscription management is also being spurred by the rapid popularity of tablet devices,
including Apple's iPad, Motorola's Xoom, Research In Motion's (RIM's) PlayBook, and other
portable devices that encourage the consumption of applications, movies, publications, data and
related digital content. Today, subscription management is largely limited to companies that sell
media-based or digitally delivered products, such as music, movies or publications on a
subscription basis. However, some companies that sell physical products to industries such as life
sciences (medical devices and diagnostics), high tech (computers and communications), or process
and discrete manufacturing (automated manufacturing tools) are developing strategies to generate
incremental revenue streams through the use of subscription business models based on
subscription services, such as diagnostics, monitoring and data collection.
Adoption Cycles
Adoption of subscription management falls into three categories (see Figure 1):
Figure 1. Subscription Management Market Adoption
Type A:
Established
Markets
Type B:
Emerging
Markets
Type C:
Embryonic
Markets
Adoption level:
Deep adoption and use of
subscription management, but
majority of company revenue still
comes from purchased or licensed
products.
Subscription management is
mostly based on internally
developed solutions.
Adoption level:
Deeper use of subscription models
and subscription management
applications/services. Minority of
revenue is subscription-based, but
growing strategically. Incremental
revenue generated through
subscription-based services, and
value-adds.
Adoption level:
Little/no current adoption, but
strategy development occurring in
some companies.
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Manage customer experience through subscription management and related areas, such as
billing and entitlement.
Build a customer annuity through predictable revenue, services and revenue recognition.
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Address concerns with intellectual property protection, licensing, access control and dynamic
fulfillment.
Manage delinquent and nonpaying customers, and a higher volume of payment transactions.
Summary
Leverage the subscription management strategy process to re-examine products, revenue models,
and, most importantly, your company's customer relationships and customer experience (see
Figure 2).
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Subscription Management
Usage
Management
Billing
Management
Entitlement
Management
Content
Management
Fulfillment
Management
Delivery
Management
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