Gerry Kelliher explains why the way products are purchased is the greatest agent of change in organisations today
There’s no getting away from the fact that technology continues to transform everyday activities – in both our personal and working lives. While it’s very easy to focus on the actual technology enabling change – think cloud, data, Artificial Intelligence and so on – it’s perhaps the way technology is ‘purchased’ that is the greatest agent of change.
The last decade has seen a marked shift away from commodity purchasing towards the subscription-based economy. Microsoft talks about its cloud revenues. Oracle and SAP are the same. Adobe did a 100% shift. That’s the way the world works today. In fact, 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,” the research organisation said.
What’s more, the subscription economy has led to the development of some of the most disruptive businesses on the planet. Zipcar enables a world where you don’t have to possess a car; Spotify means you never need to own music; and organisations never need to physically own their technology.
These disruptors are proving popular because they deliver hassle-free ﬂexibility: there’s no need to worry about the assets; solutions tend to be scalable; and the subscription model can ease cashﬂow. That creates a much better environment for doing business.
The OPEX shift
Document capture solutions are no different, and demand for subscriptionbased products is clearly growing as organisations look to migrate away from CAPEX and onto OPEX models.
Indeed, Harvey Spencer from analyst frm 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.”
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. Or, it can be considered an ongoing cost of doing business, and therefore an OPEX.
OPEX is increasingly preferred for capture software, for a number of reasons. A survey conducted by IDC highlighted that the acquisition cost of solutions is the largest hurdle for businesses to clear when automating document-based workﬂows. 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. Plus, given the importance of carefully managing cash, funding projects from OPEX budgets helps maintain a lean balance sheet while preserving cashﬂow.
Scalable and reliable
Aside from the financial benefits, ﬂexibility and scalability are key drivers behind the rise of the subscription economy. Whether companies face seasonal changes in workload, the business grows (or is streamlined), or the size of the business changes because of mergers and acquisitions, subscription-based pricing gives organisations the ﬂexibility to scale up and down according to need.
In addition to its inherent scalability, the subscription-based model brings consistency. Subscribers always have access to the latest software version (a common requirement to take advantage of the latest features, capabilities and, crucially, security) and the cloud ensures that everyone is using the same version.
Capture software, like other digital technology, looks set to become increasingly subscription-based as businesses adopt new financing models and a more ﬂexible way of procuring technology.