Why does software nowadays shift to a subscription service based model?

 

Subscription Service Model of Software – A Paradigm Shift

These days, end consumers are facing a new era of services known as a Subscription Service based model, causing a paradigm shift in the old software service delivery model – a mutually beneficial arrangement for the business and the client. Let’s explore the reasons behind the change in more detail.

Traditional Low-Cost Model – Context:

Let’s go back to earlier times when we had the only choice of purchasing a one-time business software while knowing that it might be expensive, but we had no alternate option. However, if we look at the overall idea of the subscription model from a layman’s perspective, then we realize that the concept of “recurring and low-cost” models already existed around us in terms of lease or rent and have been serving similar purposes up to a certain extent, not for SaaS software per se but in different ways and means.

For example, as we already know, renting enables us to own or get access to something without buying it, which may be done monthly without requiring lump sum payments. Further, we must have taken a rented apartment or automobile at some point in our journey. That’s because our financial constraints prevent us from purchasing a car or a house/apartment. Today, rental services (online or offline) are still valid and needed in the current environment and will always be.

Key Pointer:

In short, we can infer some of the traits from the above as the primary forces behind the subscription service-based business model.

-Affordability
-Full access to features/capabilities
-Minimum commitment period (including easy cancellation of contract)
-Overall ownership experience

Today, we can correlate and experience the same with the software industry, where businesses want to engage more and more clients by offering their products/services regularly due to market competition and sustainability. The software sector also recognizes their significance and positive impact on overall growth, which is the rationale behind switching from the expensive approach to a Software subscription model. In that, you pay a recurring charge, either monthly or annually, to access the software services. Furthermore, the contract frequently includes routine updates, support, and other features that aren’t available with a perpetual license.

More Insights:

The following list of drawbacks of the conventional software licensing model (perpetual license) explains why the move to a subscription model is necessary.

  • To begin with, a perpetual licence is typically expensive. As a result, covering the initial expenditures becomes challenging for small and medium-sized enterprises.
  • The licence model necessitates a distinct client-side setup (on-premise) with more cost, involving expensive hardware, resources, and any additional support required.
  • While the client may demand extensive support, including additional features as the company expands, the perpetual licences only include initial assistance for the duration of the contract. That will incur additional maintenance support costs.
  • Another crucial challenge for businesses is to keep production deployment infrastructure updated with the changing needs of the time, for example, OS upgrades, security patches, and data backup.
  • The conventional software programs were initially intended to operate offline, hence no automatic updates, and require manual intervention from the vendor side – this process takes time.
  • A customer may encounter issues with the vendor plus themselves if they cease the AMC contract, and as a result, customers will no longer be able to receive software updates.
  • Eventually, it becomes necessary to upgrade/update perpetual software as it grows outdated due to various risks like viruses, malware, and security vulnerability.
SaaS billing

Conclusion:

Subscription service-based software is making services more futuristic in today’s environment.

  • Above all, the new subscription mode takes care of all the issues mentioned above and offers a better experience for customers.
  • By offering a minimum commitment term, companies want to expand their clientele by allowing anyone to sign up, utilize the full range of services, and easily cancel anytime.
  • To remain competitive and support their clients’ growth and overall engagement experience, software companies continuously reevaluate and upgrade their services to offer extra features based on market needs.

The EarnBill as a SaaS application platform is ideal for startups and expanding businesses since it aligns with the modern subscription model. Along with providing complex billing, pricing structures, and charging capabilities without restricting features, users, or clients, it is also reasonably priced, given that you receive a robust and comprehensive billing and revenue system.

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