In a subscription economy, vendors are allowing customers to either pay as they go or pay via monthly or yearly subscriptions. There has been rapid growth in subscription e-commerce business models over the past five years. They are also becoming increasingly popular in the business world, as buyers appreciate the greater flexibility afforded by this approach. There’s new evidence that the shift is paying off big for businesses — as subscription businesses are already growing 9 times faster than the S&P 500, according to the Subscription Economy Index (SEI) from Zuora. [i]
Capital expenditures (CAPEX), are funds used by a company to purchase major physical goods or services that will be used for more than one year. Operating expenditures (OPEX) are the costs for a company to run its daily business operations.
Software purchases can fall under either category. Software can be considered a long-term asset and qualify as a CAPEX that depreciates over the lifetime of the product or solution. It may also be considered an ongoing cost of doing business, and therefore an OPEX. Organizations choose their preferred business model based on several factors:
According to a survey conducted by IDC, the acquisition cost of solutions is the largest hurdle for businesses to clear when automating document based workflows[ii]. A subscription model addresses this concern as it allows businesses to pay as they go and align spending with usage of the software. Affordability is the key benefit as OPEX offers a lower barrier to entry.
Scalability is also a critical business need, whether companies face seasonal changes in workload, the business grows or the size of the business changes because of mergers and acquisitions. Subscription-based pricing gives customers the flexibility to scale up and down based on the needs of the business.
The subscription-based model gives subscribers access to the latest software version (a common requirement to take advantage of the latest features and capabilities), and the cloud ensures that everyone is using the same version.
And as improving cash-flow is a common business priority, funding projects from OPEX budgets helps maintain a lean balance sheet while preserving cash flow.
Alaris now offers its software platform as a subscription. Alaris Capture Pro Software and Alaris Info Input Solution are now each available as a one-year subscription in addition to existing perpetual licensing options.
Harvey Spencer from analyst firm HSA notes “we have seen over 100% growth in OPEX related capture services in our latest worldwide capture market report versus overall growth of 11% – clearly the industry is rapidly moving to a services model. In a fast-changing environment, it allows a flexibility of services in response to growing customer demand”
Gartner predicts that “by 2020, all new entrants and 80% of historical vendors will offer subscription-based business models, regardless of where the software resides. ‘What began as a trickle a few years ago has become a stampede of vendors wanting to make a move to a subscription business model’.”[iii]
Capture software will follow trends as businesses look to integrate their software contracts into their subscription-based business models. Kodak Alaris is committed to support clients who prefer traditional perpetual licenses as well as those who prefer a subscription-based model, including partnering closely with businesses during this transition to help choose the option that makes the most sense.
About the Author
Petra Beck is the Director Worldwide Customer & Market Intelligence Strategy for Alaris, a Kodak Alaris business. She manages market and business intelligence as well as thought leadership marketing for the division.
Mrs. Beck has more than 20 years of experience in the market of Information Management holding various international positions with Eastman Kodak Company before transitioning to Kodak Alaris when the company launched in 2013. In her career Petra has been leading Customer & Market Intelligence, divisional and corporate strategic planning as well as thought leadership efforts.
Petra Beck holds a degree in Business Administration and has gathered experience in working with several multi-national companies in Marketing Intelligence functions.
[i] Zuora, Subscription Economy Index™ (SEI), November 2017 https://www.zuora.com/resource/subscription-economy-index/
[ii] IDC White Paper, sponsored by Kodak Alaris, "Automate your information capture workflow," August 2017
[iii] Smarter with Gartner, “Moving to a Software Subscription Model,” 30 May 2018., https://www.gartner.com/smarterwithgartner/moving-to-a-software-subscription-model/