Last month, Aria gathered customers and partners in Copenhagen for Recur, the company’s user conference series. IDC Research Director Mark Thomason took the stage to share the firm’s most recent research capturing attitudes, perceptions, trends, and best practices gleaned from vendors and enterprises across multiple industries on a range of topics related to digital transformation, monetization, and pricing strategies. These are some of the highlights and key takeaways from Mark’s presentation:
Companies across a wide swath of industries continue to engage in efforts to digitally transform their businesses. With greater frequency, they are turning to SaaS software solutions for automation of ERP, CRM, Quote-to-Cash, and other business, operational, and financial functions. That said, in many cases, those same companies are still using spreadsheets, manual processes, and outdated technology for several activities. For example, 56 percent of IDC vendor respondents said their customers had been using spreadsheets for price optimization, and 49 percent were using a manual or custom application for subscription management1. While much progress has been made in automating monetization process in the past 10 years, penetration remains rather low, and companies in the early stages of their transformation should not feel left behind.
Throughout the pandemic, conventional wisdom suggested that consumers would scale back subscriptions to curtail discretionary spending. In the final analysis, however, subscription companies fared well in making it through the pandemic in good standing. Success can be attributed to the flexibility subscription companies were able to offer customers, including the option to delay and defer payment or pause subscriptions. Subscription companies successfully prioritized customer retention and churn management, and it paid off. Covid also impacted digital transformation efforts, with 47 percent of enterprises accelerating their digitization roadmap once the pandemic hit.2
With IoT and 5G as the primary drivers, new connectivity offerings continue to flood the market, many with highly specified vertical applications. More than 35 percent of traditional enterprises have now adopted recurring models3. Enterprises are motivated to pursue new monetization strategies to differentiate themselves, disrupt the market, and deliver an enhanced customer experience. Hardware companies continue to seek new and innovative ways to add software and sell a unique service offering on a subscription basis. Monetization models continue to evolve with increasing complexity, with the adoption of consumption and usage-based models growing. But in some corners, enterprises and consumers alike still opt for more static, predictable, and consistent monthly billing.
Data and Connectivity
Traditional enterprises pursuing recurring revenue models and procuring disparate software platforms to support these ambitions crave easier integrations with existing and neighboring business systems along with fast access to data. Getting data into systems and enterprise data lakes and then extracting that data faster for conversion into useful and actionable insights that enable teams to “do things better” remains a pervasive challenge. Enterprises adopting new SaaS solutions want a degree of interconnectivity that enables systems to speak to one another and share data seamlessly.
As companies move to consumption-based models, they need help establishing price. In the near term, linking price paid to value received, then measuring and iterating, is essential – which is why the flexibility of an agile monetization platform is key. Price Optimization and Management tools are available and most effective where the business model is a physical good or a service, like plane or train tickets, or where high volumes of simple transactions or high volumes of customers are involved. Recurring revenue models and subscription-based businesses, on the other hand, are typically more complex with significantly lower data volumes. However, as AI and machine learning technologies improve at utilizing sparse amounts of data, expect these price optimization tools to evolve and become both available and of great value to recurring revenue businesses as well.
To watch the entire presentation, please check out the on-demand recording of Monetization Trends in Enterprise Businesses.
1: Source: IDC Survey of Monetization SaaS Vendors, May 2021
2: Source: Future Enterprise Resiliency & Spending Survey Wave 7, IDC, August 2021
3: Source: Future Enterprise Resiliency & Spending Survey -Wave 9, IDC, October 2021