Subscriptions replace the significant outlay of buying perpetual software licenses with predictable low-cost payments making software more affordable. The benefits of the subscription model are vast. Subscribers are always up-to-date. They get the latest and most complete applications – all with minimal upfront risk and minimum impact on cashflow.
Microsoft recently announced it's the shift towards Microsoft 365, thus making purchasing perpetual licenses for it's Windows operating system a thing of the past. Dropbox, G-Suite, Xero, MYOB, Adobe products & Zoom are just a few more examples of software that are all offered as subscriptions. Why are all these businesses moving to this model? The answer is in the undeniable benefits to both the consumer and the provider.
For consumers, the value of a subscription model is in the affordability and adaptability. You don't need to make a significant upfront investment and hope it turns out to be the right choice. You can forecast and budget for a consistent monthly or annual cost.
For providers, the value of a subscription model is the ability to predict revenue through recurring sales. This consistency in revenue also allows subscription-based companies to calculate the lifetime value of a customer, scale resources and offer simple pricing. Implementing a subscription model helps shift the focus away from customer acquisition and more towards customer retention.
Software is never one size fits all. Some CAD/CAM software applications are ideal for designing cabinets fast and efficiently, and other software applications are perfect for manufacturing reception desks and commercial shops. Then you have software designed for 3D carving and signwriting. Most businesses might benefit from running all three styles of software, but the cost of perpetual licensing makes that unrealistic. That's why I am excited to see the shift towards subscriptions. It will give the consumer the ability to use the right tool for the job and the freedom to switch providers easier if their needs change.