Subscriptions aren't just for newspapers and magazines anymore.
From streaming services to meal delivery plans to clothing rental businesses, we've seen a huge shift in the economy toward subscription-based pricing models. As a matter of fact, the subscription economy has grown more than 435 percent in the last decade.
Another industry adopting subscription pricing is the Software as a Service (SaaS) industry. Rather than purchasing copies of software licenses, installing it on computers, then initiating software updates and cybersecurity maintenance, businesses are putting those tasks back in the providers' hands.
However, the word "subscription" itself almost begs the question: why pay for something regularly rather than make a one-time purchase, cut ties, and move on?
So what's driving this shift toward subscriptions for software? Below we'll explain the reasoning behind the trend and top benefits behind subscription pricing for SaaS.
Lower Upfront and Long-term Costs
One of the biggest and most immediate benefits of subscribing to a software product is the lower upfront cost. Under this model, customers don't need to pay a massive sum upfront for expensive software licenses and can instead pay a monthly or routine fee.
Cutting out the initial cost of large software purchases and spreading it out over a period of time creates a simplified cash flow and makes it significantly easier for businesses to allocate a budget for the infrastructure upgrades. The software subscription becomes a predictable, expected expense; like insurance or payroll.
Additionally, although the fee for a subscription is typically paid monthly, users can still budget for their software quarterly, annually, or over longer periods of time. This actually provides more flexibility for accounting departments with strict budget timelines. For example, if you have to plan and spend a software budget within a 12-month fiscal year, you'll still be able to allocate your total cost for that timeframe, but spread your payments out over time. For larger or more long-term projects, the first year's cost will be significantly lower than in a licensing model, and organizations typically spend less over the lifetime of their software as well.
When software companies sell licenses to an organization, the long-term and up-front costs are typically much higher than with a subscription model. Consider the following "add-ons" to a license that users are forced to pay for over the lifetime of their software.
We'll dive deeper into a few of these below, but they also certainly belong here as cost-centers.
- Service/Support Hours
- Replacement (when an old version is obsolete or no longer supported by the creator)
- Additional licenses (needed for organizations who are growing or will scale in the future)
On the other hand, subscription software almost always comes with service/support included, flexible user counts, and no need to pay a renewal or upgrade cost as those are included with your monthly maintenance. Since your subscription-based software is constantly improving, the only reason you'll ever need to replace it is if you choose to go with a different provider. Otherwise, the program you're using years from now will almost always be an improvement over what you initially signed up for, even though your price may stay the same.
Automatic software updates and lower expenses for the customer go hand-in-hand. SaaS companies have one critical focus: to maintain and update software and hardware products so they run smoothly for users. And so the users don't have to waste time manually doing it.
Customers never have to worry about missing out on the latest feature or completing an update manually. They also don't have to worry about the SaaS provider neglecting technical support. Users are free to focus on running their business- not worrying about software issues or update expenses.
The United States Federal Bureau of Investigation (FBI) now ranks cybercrime as one of its most important law enforcement activities.
Regular, timely updates are vital for software companies to ensure their customers' data and critical infrastructure are protected from the ever-changing cyber threat landscape. As mentioned above, SaaS companies immediately release updates and patches to deter hackers.
These automatic and routine updates take the burden of cybersecurity off the shoulders of the customers.
Subscription models allow for better personalization and scalability compared to traditional software models. Because of the subscription nature, SaaS models are designed to be flexible and scale with you and your business.
Add or remove users, swap out features, and make changes to your platform with ease.
Last but certainly not least, subscription SaaS companies put the "service" in customer service. It could be argued that the customer-centric approach in subscription companies is even the foundation for all of the aforementioned benefits.
As a blog from Greetly put it, "Perpetual software companies have got you locked in. It isn't much different than with a car salesperson. Once you drive off the lot, you've got the car whether it's right for you or not, and they've got their commission."
On the other hand, a subscription-based service creates an organic, ongoing relationship: this can include email communications about a new update, ensuring minimal downtime, offering help to diagnose an issue or address concerns, and continually working to improve the product.
There should be a relentless drive to ensure customers are pleased and comfortable with the functionality of the product, and that it adds value to the customers' business.
We want a relationship with you
Your job shouldn't be worrying about big software expenses, cybersecurity threats, software update headaches, or lack of response from your software provider. Your job should just be focusing on running your business.
Rather than paying one big upfront cost for a SCADA system that leaves you high-and-dry after your purchase, SitePro is in it with you for the long haul. We offer a solution that is consistently and regularly updated to ensure your infrastructure is protected and operating efficiently. Our customer service team is also available around-the-clock if you have any questions, comments, or concerns.
Our goal is to ensure the service you receive is worth more than the price you're paying for our software and hardware features. We'd love to chat more about how SitePro's subscription-based software can help your company operate with greater efficiency, transparency, and control than traditional SCADA models.