Finance must adapt to cloud-based subscription models.

Author:Naukam, Drew
Position:SPECIAL DELIVERY
 
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What happened to a simple sale and a handshake? For a wide range of businesses, the days of getting a product on a truck and celebrating a major sale are over--replaced by a maze of opportunities for recurring revenue brought about by online delivery.

The desired predictability of a monthly revenue stream is driving product innovation and drastically changing the way companies and customers interact. This shift is impacting all sectors of the economy, but the software industry is clearly at the forefront as organizations scramble to deliver their products under a Software as a Service (SaaS) model.

Indeed, it used to be that subscription models were reserved for businesses like service providers and media organizations. The cloud, however, has opened this world to nearly every company that delivers downloadable content. Most major software vendors have or are considering cloud offerings, and the tech dustry is rife with start-ups taking advantage of low barriers to entry. This paves the way for innovative offerings that compete with name brands in the software sector. The playing field is being levelled, and the software and technology industry is responding.

In short, tech product roadmaps all point toward the cloud. But the back office is another challenge entirely, especially when it comes to adapting financial processes and controls. Software companies have optimized their finance processes around traditional licensing models, and subscriptions require financial organizations and the IT teams that support them to completely re-think their operations to make the most of this tectonic shift.

Subscriptions are the New Black

Subscriptions are becoming pervasive in our economy and our lifestyles. Entertainment, antivirus, project management, bookkeeping, cosmetics, and enterprise IT--once distinct or boxed purchases that now show up on a monthly tab.

The wave is not likely to abate any time soon, as consumers are clamoring for on-demand services in all corners of the market. A study by the Economist Intelligence Unit (EIU) reinforces the need to keep moving in this direction, noting the influx of subscription or rental based technology at the enterprise level. "Thirty-seven percent say that their business units increasingly prefer to rent goods rather than purchase them, while 35 percent say that they prefer to access goods via subscription," the study found. "As a result, over one-half of companies (51 percent) are changing, or in the process of changing, how they price and deliver goods and services."

Subscription delivery through the cloud is the natural evolution of product sales, marketing, and distribution; it is prompting companies from start-ups to multi-billion dollar enterprises to reinvent the way they deliver their products and services. The move from boxed delivery to a cloud-based subscription model means companies can provide more customized solutions, extend customer relationships more easily and consistently, and gain greater control over distribution channels. For the CFO, subscription revenue inherently provides a more predictable revenue...

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