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Tech industry subscribes to new revenue model

Tom Kaneshige | June 6, 2014
All signs point to a bright future for subscriptions. The Internet of Things and wearables mega trends promise to open the floodgates to subscription opportunities. For a case in point, Apple just bought Beats for $3 billion, not so much for the popular Beats headphones, but rather for subscription-based streaming music service.

"To help the financial community understand this business model transition, and with a goal to communicate our Creative business remained healthy during the transition despite declining reported revenue, we introduced several metrics to indicate the value of the new business we were building," says Mike Saviage, vice president of investor relations at Adobe. "This transparency calmed concerns about our reported financial results."

On the upside, Adobe gained new customers who were willing to pay the relatively cheap monthly subscription fee. In the past, many of these customers were likely pirating the software, Wadhwani says. Today, 20 percent of subscribers are new to Adobe.

Reaching a New Customer Base
Thermo Fisher Scientific, a $17 billion company providing innovative products such as a microchip that reads and analyzes DNA, has also made the shift to the subscription model. The move has led to new customers with no dip in sales. Scientists who could not afford the cost of Thermo Fisher Scientific analysis software before — or perhaps wouldn't use the software often enough to justify buying it — could now purchase the cloud service through a subscription based on usage.

Nevertheless, the subscription model has disrupted Thermo Fisher Scientific's entire way of doing business, even thinking about business, which isn't hyperbole.

"You have to take a long-term view, not a quarterly view," says CTO Mark Field at Thermo Fisher Scientific. "It's something we're still struggling with."


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