Ten years ago, it would have been hard to believe that access would ever hold more value than ownership. Flash forward to the last few digital-first, cloud-enabled years – and then once again to the last few months in which the entire world shuttered and has only just recently begun the process of opening back up – and that’s exactly what’s happening.
The following article was written before the start of 2020 when shelter-in-place and stay-at-home orders were issued in nearly every community across the globe. However, it may be even more relevant as businesses and organizations of all sizes and in all industries made significant albeit hurried technology investments to support a nearly entirely remote workforce. What on-demand and as-a-service offerings did you and your family lean on before you began working and living almost entirely from home? What do you rely on now? We’d love to know – leave a comment at the end of this article and enjoy the read!
Subscription-Based E-Commerce: The Beginnings
The influx of as-a-service and on-demand offerings over the last decade has paved the way for entirely new business models and marketplaces. It’s impacting consumers and businesses across a wide range of industries and specialties – including the IT procurement world with Tech Data’s Tech-as-a-Service (TaaS) offering! More on that below, but this growing business model has even infiltrated our vocabulary. The term “sharing economy,” also known as the peer-to-peer economy, wasn’t widely used until it appeared in Time magazine’s list of “Ten Ideas That Will Change the World” in 2011. Additionally, heavyweight service providers such as Airbnb, Uber, Lyft and Venmo – many of which don’t own or manufacture a thing – truly came into their own over the last few years, upending long-standing institutions in the hospitality, transportation and banking industries, among others.
Subscription-based e-commerce, led by companies like Amazon Prime, Netflix, Hulu, Spotify, Zendesk and Blue Apron, also shot up over the course of the 2010s. These businesses introduced entirely new revenue models designed to keep customers consistently engaged in long-term relationships. Over a five-year period starting in 2013, the subscription economy market size grew more than 100% per year, according to research from management consulting firm McKinsey & Company.
Life-as-a-Service is on the Rise
For many consumers, the abundance of as-a-service and subscription-based offerings hold more appeal than ownership. That’s because the ability to get exactly what they want, when they want it and without having to pay for what they don’t use is – in its own way – a form of currency. Adopting a “life-as-a-service” approach allows people to prioritize what’s most important to them – whether it’s being more productive at work or home, spending more time with their loved ones, carving out longer periods of time for the activities they enjoy, or any combination of those things. For many people, the convenience of having paper towels delivered to their homes on a subscription basis sure beats driving to the store and then standing in line to make the purchase!
Personally, I have fully embraced life-as-a-service. I subscribe to Home Chef so that I can make home-cooked meals that I pre-select each week without having to shop at the grocery store. On weekends, I often have Thai food or pizza from my favorite restaurants without leaving my house, courtesy of Grubhub. Dish soap, laundry detergent, garbage bags and the like land on my doorstep on a regular basis through my Amazon Prime subscription. Chewy.com delivers my dog’s food and treats before I run out of them. Netflix or Hulu movies and TV shows are streamed nightly, and Alexa is called upon to turn lights on and off, control the thermostat via Nest, and answer a variety of random questions. I subscribe to Spotify to listen to my favorite podcasts and music on my commute to and from work, and I can’t remember the last time I purchased a gift for a friend’s baby shower or wedding by walking into a store instead of picking items from an online registry service. I even met my fiancé a few years ago by signing up for the online dating site, Bumble! The result? I have far fewer weekend errands and a lot more time for hobbies and get-togethers with family and friends.
I’m not alone in my appreciation for and use of as-a-service and subscription-based services. A whopping 71% of consumers across 12 countries subscribe to a service, according to a poll conducted for subscription service provider Zuora. That same research shows that 74% of survey respondents believe people will subscribe to even more services in the future, and that their ownership of physical goods will decrease. Not surprisingly, companies are responding. By 2023, Gartner forecasts that 75% of direct-to-consumer businesses will offer subscription services.
Subscription-Based Models Work for IT Procurement Too
Think the on-demand, subscription economy is limited to goods and services like toiletries and Uber rides – or, in the business world, just software and data delivery? Not so. Just as consumers value the convenience, personalization and savings (whether it’s time, money or both) that come with these types of offerings, so too do IT solution providers. These companies are increasingly looking to supply their end users with customized bundles of hardware, software, accessories, activations and services – all in an efficient and effective pay-as-you-go model.
IDC predicts that in 2020, consumption-based “as-a-service” procurement will surpass traditional procurement models in data centers and will account for as much as 40% of IT enterprise spending by large companies.*
In a recently published LinkedIn post, Kristi Kirby, Tech Data’s vice president, Vendor Management, Endpoint Solutions, likens this shift in the IT procurement business model to the ease and convenience that ready-made meals offer busy individuals and families – just like my personal life-as-a-service approach. The decision to buy pre-prepared, proportioned meals from a restaurant or local market eliminates the need to shop and pay for separate ingredients and the time required to cook the meal. Her point? Tech Data’s TaaS offering is also all about convenience and savings. It provides the ability to blend the company’s “comprehensive, end-to-end portfolio of products, endpoint solutions, next-generation solutions like IoT and data analytics, security and cloud solutions – in any combination – into a single subscription.”
Tech Data’s TaaS offering also allows customers to scale their subscriptions up or down as their business needs change. What makes this concept so unique in the marketplace, according to Kristi, is that it’s much more than a simple, one-size-fits-all offering. Tech Data can create any number of custom subscriptions to fit whatever business challenges its partners are helping their end-user customers solve for.
So, how does Tech Data TaaS work? Let’s imagine a company that needs to modernize its office space and replace outdated technologies and equipment. In a typical IT procurement model, that company would have to pick one standard device and deploy it across a variety of business functions – regardless of the work that function performs – and pay for it all up front.
“With our TaaS solution, a Tech Data partner that’s helping one of its customers update its office can provide different IT solutions and devices that meet the specific needs of each job function. If that’s done via subscription, the end users realize a huge cost savings versus having a large upfront capital expenditure,” Kristi explained.
In this example, the company’s Tech Data TaaS subscription might include a few printers, display monitors that are interactive, and the cameras and software needed to outfit a meeting room with a collaborative conferencing system. If it also has a mobile workforce, its subscription bundle can include mobile devices with connectivity. To top it off, Tech Data’s innovative TaaS solution allows its technology partners to wrap their own services into the subscription. As a result, the end user benefits from a highly custom, business-focused solution for the most affordable price.
When asked how she expects the TaaS solution to evolve, Kristi shared that many of Tech Data’s partners are already beginning to shift their own revenue models to offer subscriptions.
“Although TaaS is new in the distribution space, it seems that the entire world is shifting to a subscription model,” Kristi said. “At Tech Data, we are invested in helping our partners grow. One of the ways we’re doing that is by training them on how to offer subscriptions to their end users. Our partners who jumped on board as early adopters are doing very well and we encourage everyone to adapt quickly.”
Pretty cool, right? As for my final question for Kristi, who is a busy working mom with two young children, I had to know what types of subscription, as-a-service offerings she personally takes advantage of.
“In my household, we’re big Netflix watchers and we also subscribe to Audible and ESPN on demand,” she said. “It actually makes my head hurt thinking of how much we have delivered to our door through our Amazon Prime membership! We’re also regular consumers of meal and grocery deliveries. I have subscribed to house-cleaning and lawn services – even annual passes to the local zoo and Disney World. I think it will be very interesting to see where the subscription business model takes us over the next 10 years.”
*IDC, U.S. Buyer Business Value Expectations of Managed Services for Endpoint Environments, Doc # US44652419, February 2020
About the Author
Jenni Ottum is an Integrated Communications Specialist at Tech Data. She began her career in public relations and communications by working for a global retail and supply chain software provider. Since then, she has held several B2B marketing communications roles in the software space. Most recently, Jenni served as the Senior Director of Public Relations for SHE Media, a leading women’s media company with nearly 70,000 unique visitors per month and comprising four individual media properties, SheKnows.com, BlogHer.com, STYLECASTER.com and Hollywoodlife.com, as well as the #BlogHer conference series. In that role, Jenni led all B2B and B2C public relations and communications initiatives. Her background and profile can be found on LinkedIn.