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Technology is the Engine of the World's Biggest Economy, the Subscription Model is the De Facto Standard

December 14, 2012

Ryan2 by David Ryan, SaaSOptics

 

The subscription business model isn't new. What is new (and exciting) is that is has quickly become the de facto model for most software and content publishing businesses, and critically important for countless more technology companies.

 

Technology is the engine of the biggest economy in the world, and the subscription model is quickly becoming the dominant business model in that sector. Technology companies attract huge amounts of venture capital and the best, brightest, and the most innovative workers in the world. The stakes are high, competition is intense, and the pace is brutal.

 

And in order to survive in this high tension environment, industries develop key metrics to help gauge success and progress. The Subscription Economy isn’t limited to one industry. It’s in telco, communications, manufacturing, software, and retail. But no matter the industry, you need metrics - metrics for internal measurement and eventually metrics for the markets to be able to gauge your performance against your competition.

 

As an example, Airline industry analysts use metrics like "load factor," "yield," and "available seat-miles" to determine the success of their ventures. Within an organization, these types of key metrics can be used to measure performance against objectives, to determine where to invest capital, and how to compensate employees.

 

But many industry operating metrics don't appear on an income statement nor a balance sheet and may not appear in any published documents. However, they are measured and discussed from the boardrooms of the Fortune 500 company to the breakroom of the startup. Much of the awareness is being driven externally by capital sources, who need these metrics to measure the investment risks and to manage the ongoing performance of their portfolios. Venture capitalists have become the thought leaders with regard to key metrics such as churn, monthly recurring revenue and customer lifetime value.

 

Operating metrics are essential to running any business and are critical for decision-making around pricing, packaging, services, marketing and development of new goods and services. In a subscription business, understanding churn will enable you to focus sales resources, identify winning product packages, and target your marketing dollars to the right buyers. Understanding MRR growth and trends will help you create the right compensation plans and enable better cash flow planning.

 

Even with all the awareness and buzz around metrics and all the materials available online, knowing how to measure, track and use subscription metrics is still a challenge for most organizations. The challenges start with deciding which are the important metrics and how to actually calculate those metrics.

 

Take heart. It doesn't have to be complicated. Subscription analytics seem incredibly compelling, but at the same time can seem like a huge expense and huge mountain to climb. Wouldn't it be powerful if you could gain relevant analysis on key subscription metrics easily and consistently and at low cost? Imagine how you could leverage that analysis to drive your business forward.

 

And that is what we focus on at SaaSOptics. Out-of-the-box subscription metrics - fast, painless, and affordable. Join us with our partner Zuora to learn more.

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