Whilst attempting to look graceful on a cross-trainer at my local gym this morning, I started to think about their business model. The gym at 07:30 was nearly empty, yet they still thrive as a business. How? Subscription. They have a solid recurring revenue base through Direct Debit with numerous members every month. Whether the client comes 7 times a week, or just 1, the gym still wins.
How many businesses are like this? Is there a way in your industry to look at a subscription based model, or like many do you start from zero every month and hope the sales come in to cover costs?
The IT industry has been aware of subscription models for some time. In my business, we focussed heavily on generating support contract business, and then delivering award-winning service to ensure customers renewed year-on-year. This ensured we started every month, quarter, and year with a good percentage of our operating costs covered. We could accurately forecast into the future, helping us to grow.
It seems the new buzzword of the moment is “Cloud Computing” – IT systems delivered virtually to end-users without the need for physical servers and infrastructure housed on-site. It saves on staff cost, equipment cost, operating cost, heating, light, power etc. Neat model, but it has been around a while – I remember applying for an IBM job ten years ago to look at delivering ASP – Application Service Provision – effectively providing access to desktop applications over the Web. From ASP we moved to “Software as a Service” or “SaaS”. Now we are in the era of “The Cloud”.
I’m noticing that there is a big shift in Enterprise software providers and niche IT consultancies, starting to really focus on delivering Cloud based services. However, I personally feel that outsourcing just your e-mail or your CRM isn’t enough. The real value is going beyond. Helping your customers with real-time analytics of their data – helping them to predict risks, provide new intelligence and make real-time decisions before it’s too late. Cloud based analytics and intelligence – now that’s cool.