I posted a few weeks ago about Microsoft’s vendor financing campaign, and it does make sense. Denis Pombriant makes a nice point in his latest CRM Buyer column about how vendor financing can “decentralize credit” and act as a nice stimulus. I agree – but I see vendor financing in two ways. I think for hardware and other “fixed price” IT items that tend to have larger price tags, the usual financing model can work. For others, i see the subscription model and variations of that model as the key aids to rebuilding a credit model that makes sense.
The subscription model has already proven itself a great way for companies to build renewable revenue streams – and insures consistent service for the end user. The lower up-front costs make sense in this economy, as I see risk aversion becoming a long standing trend. The traditional license/maintenance model is pretty much dead in my opinion.
But I see the subscription model potentially becoming even more elastic in the coming months (it may take a bit longer, however) as economic issues, but also technology enablers make true utility models finally available to providers. In the utility subscription model, I see the channel having a very important role.
SaaS has helped establish the subscription model as we know it today – but I think true cloud-based applications and other IT areas will see further distillation of the subscription model. Channel partners that buy access to applications in the cloud in bulk can then meter out the uage of these cloud-based applications according to various pricing models.
This allows seasonal spikes in application usage (holiday sales, tax time, etc.) to be paid for as spike, and not as reserve application seats or logins that essentially go wasted for nine months of the year. There are many other use-case scenarios as well – such as rolling usage for call-center agents and other 24-hour operations that are not fully staffed at all times. Of course – the “infrequent use” types of application roles can be looked at here as well (think: the CEO who only logs in to a CRM system once a week).
Like I noted above, the enablement of this model is more of a technology issue than a simple pricing issue. But help is coming. One close to home example is SugarCRM’s Data center Edition (DCE). DCE will allow channel partners to create many different instances and user types for Sugar-powered applications, and dole them out to users in various ways, priced accordingly.
All of this will further the value-based software model that I see continuing to drive innovation. Srating with open source and SaaS, moving into the cloud – value models are popping up, and with perfect timing…