The cloud, services and subscription economy revolution sweeping the world is part of a much bigger trend, and has implications in the relationship between customers and the ‘things’ they own and use in life.
This is actually the latest step of a progression that has been going on for decades, which I call the ‘Own-Lease-Rent-Subscribe Continuum‘. Let’s trace its progression over time:
Own: back in the day, if you wanted something, you bought it. Whether it was a house, a car, a big computer, or any other thing that was able to give you some benefit (a place to live, a way to get around, something to deliver your IT needs), if you bought it, it was yours to use forever, and in any way you wanted. There was even a romance associated with ownership, like the ‘Great Australian Dream‘ of owning your own home. But ownership required something not everyone had – money! If you didn’t have money, you had to get a loan from the bank, and if you could get one, that would leave you potentially paying off a large debt. That was OK for assets that you eventually wanted to own, but it gave rise to the next step in the chain …
Lease: if owning something took up cash that you either didn’t have, the next best thing to ownership was leasing. It gave you almost all of the attributes of ownership – having long-term access to an asset and whatever it can do for you – but without tying up cash. Leasing is similar to taking a loan to buy an asset – a financial device that allows someone to mimic ownership – and depending on your own cost of capital, leasing was often an attractive alternative to buying and borrowing. But leasing is typically used for a (relatively) long period of time – sometimes several years – and often takes a while to set up. What if you didn’t need the ‘thing’ for quite so long? In that case …
Rent: renting is a lot like leasing, but with a much shorter time commitment. Rent a car for a few days or weeks. Rent a room or an office on a short-term basis. Get in quickly; use the ‘thing’ for whatever you want; then get out just as quickly. But the pace of life kept increasing, and people wanted things for shorter and shorter times – just as long as they needed them but no longer, which led to …
Subscribe: the internet and cloud services have given rise to the subscription economy – the place where you can get access to a resource, or the supply of a product, on a regular basis. Things – both IT-based and others – are sold in ‘bite-sized chunks’ to exactly suit your requirements.
What has really happened through this trend? Much of it has been driven by the IT world, enabled by key technologies like the internet, virtualisation, and massive data centres. These have allowed infrastructure that is expensive and takes a long time to build to be made available very quickly in very small chunks, which suits the needs of a fast-paced IT world.
Most significantly, the romance of ownership is gone, and the emphasis is on utility. I don’t need to own a house; I need somewhere to sleep. I don’t need to own a car; I need to get from A to B. Car sales in some parts of the US have dropped significantly despite price reductions because the American romance with the motor car is also on the way out. This has given rise to entirely new business models in the non-IT world as well, where goods that people consume regularly are being repackaged as services, such as Dollar Shave, and this has had a disruptive impact on marketing practices.
What does this have to do with billing? Everything! Relationships with the things we ‘consume’ (rather than ‘own’) are increasing, and are being governed by ongoing supply arrangements between customers and vendors. What sits at the heart of these relationships, from a financial perspective, is billing. The entity that has the billing relationship with the customer essentially ‘owns’ the customer – they have the right to communicate with the customer regularly, and this can form the basis of a far deeper customer relationship.
This was also posted at Billing Bureau and Linked In.
