Wednesday, 13 April 2016 15:46

Subscription economy is unstoppable


Faced with a huge upfront CapEx (capital expenditure) or pay as you go (OpEx) with the ability to scale up or down – no wonder almost every industry is moving to the subscription model.

At this year's Subscribed Conference, Zuora, the world’s leading provider of subscription billing, commerce and finance solutions, unveiled a report by MGI Research (registration required for free report) that estimates the global market for Subscription Economy SaaS tools will be more than US $100 billion through 2020, with 20% of Fortune 1000 companies adopting these solutions.

In the report, Mark Sisco, Director of Operations at NCR, is quoted as saying, “Ability to switch from Capex to Opex has been one of the main drivers from NCR to explore new business models. The subscription model has allowed us to introduce offerings that are very robust, quite affordable and easy to access by small customers who don’t have a lot of technical knowledge or a lot of capital to outlay.”

The report also forecasts the total addressable market (TAM) for Zuora’s Subscription Billing platform will be nearly US $15 billion by 2020, growing at a 50% compound annual growth rate.

“We have claimed that all companies are moving to the Subscription Economy, and this study shows that to be true,” said Zuora CEO Tien Tzuo. “It’s clear to us that the shift to subscription business models requires Relationship Business Management (RBM tools that will drive deep subscriber relationships and create opportunities to monetise virtually anything. We will continue to lead the industry in supporting our customers’ need for rapid innovation, flexibility, and agility to grow and prosper in the future.”

The MGI report is a comprehensive study of Subscription Economy SaaS services and tools, described as Agile Monetisation Platforms (AMPs), which includes nine categories: agile billing, financials, order management, e-commerce, customer support, CPQ (Configure-Price-Quote), contract management, revenue recognition, and mediation. The study includes 34,796 companies in 116 countries across ten major geographic regions. The report accounts for almost $50 trillion in revenue or 60% of worldwide GDP and more than 70% of North American GDP. North America has led the move to these SaaS services and tools, and over the next 24 months, markets beyond North America will accelerate adoption, led by Japan, China, Germany and the UK.

Companies are no longer focused on just shipping products. They are building new services and experiences for their customers -- experiences that deliver outcomes, not assets. This requires companies to move from "selling units" to "monetising relationships." To meet the changing needs and expectations of today's customers, businesses are realising they need to offer new services that can be monetised in more flexible ways. The rise of the Internet of Things creates further possibilities to offer whole new classes of services and experiences from established industrial companies -- creating an unprecedented opportunity for a mix of recurring and usage-based pricing models.

Matt Anderson, Chief Digital Officer at Arrow Electronics, is quoted as saying, “If you had a pacemaker that had sensors in it you could charge for a subscription for heartbeats! If you had shoes that had sensors in them, you could charge for how many kilometres do you want to walk per month! Those kinds of business models never existed before.”

The report further suggests that because these new SaaS services and tools can support rapid scaling for top-line growth and increased customer engagement via data and analytics, spending for these solutions is now being prioritised. Similarly, companies seeking to improve their efficiency by consolidating some out-of-date and disparate systems through a new monetisation platform will also benefit, fuelling additional demand.

“As enterprises attempt to shift to new subscription and on-demand business models, they realise their existing business systems are wholly inadequate,” said MGI Research Analyst Andrew Dailey. “In fact, in some industries, legacy business tools are delaying business model migration, creating an existential threat for some well-known companies. Also, recurring revenue business models require new approaches to product management, sales, marketing, and even finance.”

At US $50.441 billion, North America is the largest geographic component of the overall TAM. On a combined basis, Asia (East Asia, South Asia and Southeast Asia), at $24.847 billion, is the second-largest component, and Europe, at US $22.757 billion, is the third. The report projects growth in AMP sales in Australia, New Zealand and Oceania from US$88 million in 2016 to US$413 million in 2020 (CAGR: 47.18%)

  • More than 80% of the overall TAM is represented by companies with over US $1 billion in annual revenues.
  • Industrials at US $26 billion, Information Technology at US $22 billion, and Consumer Discretionary at US $14 billion represent the top three opportunities for Subscription Economy services and tools. Energy, Consumer Staples, and Financials also have a five-year TAM of more than US $5 billion.
  • IOT adoption will be a significant factor in driving spending, as increasing control capabilities and data collection will stimulate innovation with new pricing models.
Read 2661 times

Please join our community here and become a VIP.

Subscribe to ITWIRE UPDATE Newsletter here
JOIN our iTWireTV our YouTube Community here


The past year has seen a meteoric rise in ransomware incidents worldwide.

Over the past 12 months, SonicWall Capture Labs threat researchers have diligently tracked the meteoric rise in cyberattacks, as well as trends and activity across all threat vectors, including:

Encrypted threats
IoT malware
Zero-day attacks and more

These exclusive findings are now available via the 2022 SonicWall Cyber Threat Report, which ensures SMBs, government agencies, enterprises and other organizations have the actionable threat intelligence needed to combat the rising tide of cybercrime.

Click the button below to get the report.



It's all about Webinars.

Marketing budgets are now focused on Webinars combined with Lead Generation.

If you wish to promote a Webinar we recommend at least a 3 to 4 week campaign prior to your event.

The iTWire campaign will include extensive adverts on our News Site and prominent Newsletter promotion and Promotional News & Editorial. Plus a video interview of the key speaker on iTWire TV which will be used in Promotional Posts on the iTWire Home Page.

Now we are coming out of Lockdown iTWire will be focussed to assisting with your webinars and campaigns and assistance via part payments and extended terms, a Webinar Business Booster Pack and other supportive programs. We can also create your adverts and written content plus coordinate your video interview.

We look forward to discussing your campaign goals with you. Please click the button below.


Ray Shaw

joomla stats

Ray Shaw  has a passion for IT ever since building his first computer in 1980. He is a qualified journalist, hosted a consumer IT based radio program on ABC radio for 10 years, has developed world leading software for the events industry and is smart enough to no longer own a retail computer store!

Share News tips for the iTWire Journalists? Your tip will be anonymous




Guest Opinion

Guest Interviews

Guest Reviews

Guest Research

Guest Research & Case Studies

Channel News