Subscription pricing models may be an unforeseen casualty of the economic downturn, paving the way for usage-based billing.
Subscription pricing models have permeated everything from cloud services to mobile apps and are a far cry from the early days of computing and the internet. For those old enough to remember, software was sold — often in a box — for a one-time fee for that major version of the software. When a major new version was released, users could usually pay a cheaper upgrade fee to move to the latest and greatest.
With the rise of the internet, however, subscription models quickly dominated the market and all but supplanted the one-time fee model. Thanks to the economic downturn, however, Business Insider makes the case that subscription pricing may be on the verge of going the way of its predecessor.
In place of subscriptions, usage-based billing is the new hot thing in the software market. Rather than a flat monthly rate, usage-based billing only charges customers for what they actually use. As Insider points out, this is not uncommon among cloud providers but is poised to spread out to other areas of the industry.
The model could be a viable and appealing option for much wider use, especially as businesses are looking to rein in expenses wherever possible.
“If you think about the evolution of business models, it’s always trended more and more towards being more friendly to the customer,” Rishi Jaluria, an RBC software analyst, told Insider. “It is very likely, in my opinion, that there will be more companies that are either on a consumption model or offer a consumption element to the model.”
Jaluria’s views are shared even by those entrenched in the subscription model approach.
“The best companies are saying, ‘We want to have a mix of models that really accommodates all our different customers,’” said Tien Tzuo, CEO of Zuora, a subscription-billing-management company. “Different customers might want different things as well.”