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The rise of Subscription Economy: Zuora

Nurdianah Md Nur | May 12, 2014
Businesses need to adopt a subscription-based revenue model in order to stay relevant to their customers in future, advised Zuora’s CEO and founder.

Are enterprises in Asia currently using the subscription model? Which industries are more enthusiastic about adopting it and why?
The Subscription Economy is a global phenomenon, including across Asia. Why? Because the Internet is a global phenomenon!

For example, video streaming subscriptions such as Youku have taken off in a big way in Asia, especially in China where online video has already supplanted broadcast and pay TV. A new online movie streaming platform, Hollywood HD, was launched in Thailand. There are also similar services in Japan, Indonesia and Philippines. Car sharing through services like WhizzCar are another growing trend in Asia with the congestion in the cities here. This shift is primarily driven by customer demands: they want the convenience and easy access to these products and services. A big enabling factor to this shift is the improving technology that allows companies to provide these services - from broadband internet access to the proliferation of smartphones.

From Zuora's perspective, we see a lot of growth in the market in regions like Asia. Over 25 percent of our business now comes from outside the US and we have increased our employee count outside of the US by 40 percent in the last year. We have seen a rise in demand for our services in the region with some early adopters in Singapore like Singapore Press Holdings (SPH), ViewQwest and PropertyGuru.

What are the challenges that enterprises will face when they switch to a subscription model? How should businesses overcome them?
Business models in the Subscription Economy are inherently different, which can create challenges for companies looking to thrive in this new world. Success is no longer gauged by counting the number of units of your product you have sold. Rather, success is measuring how many customers are using your service on a recurring basis and how successful you are at monetising those recurring relationships. New pricing and delivery models are required, such as subscriptions, sharing and rental goods and services. These bring new challenges and complexities for enterprises. For example, instead of tracking how many USB flash drives you ship, you can provide cloud storage space through a variety of pricing plans such as usage based, pay-as-you-go or a fixed subscription. You will need a billing solution that would enable you to automate your metering, pricing and billing for different bundles and configurations quickly and accurately.

Designing a new business model built around recurring relationships is easier for companies that are starting with a blank sheet of paper; for those who aren't constrained by a legacy of product-centric business processes, mindset and legacy IT systems. For large, global enterprises that have a traditional product based business model, the transition can be a significant challenge. Large, monolithic ERP systems which sit at the core of enterprises today make it difficult for them to swiftly and easily embrace alternative business models like subscriptions. While they are great as a backend 'system of record", they are too rigid, slow and unsuitable for new subscription based order-to-cash processes.  

 

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