From ownership to access: the rise of subscription-based models 

Guest blog authored by Matthew van der Heijden, Solutions Architect for CPQ, CLM, Synthesis Systems 

The evolving landscape of product and service sales 

The way companies sell products and services is continuously evolving. In a relatively short period, we have shifted from traditional on-premises software solutions to cloud-based software as a service (SaaS) offerings. This trend has been further expanded by the emergence of infrastructure as a service (IaaS) and platform as a service (PaaS), which offer varying levels of flexibility and control for businesses. 

Surviving the next decade 

Adapting to these evolving sales models is essential for long-term survival. The disappearance of half of the Fortune 500 companies over the past two decades highlights the consequences of focusing solely on transactions rather than building strong, long-term customer relationships. 

Key success factors 

Companies that have thrived in this changing landscape share three key characteristics:

By embracing these principles, companies can position themselves for success in an environment where anything is now a service.

The rise of XaaS (anything as a service) 

The XaaS model encompasses a wide range of offerings, from traditional IT services to more unconventional ones. Understanding the nuances between these models is essential for businesses to select the most suitable option. 

Beyond these core models, we are seeing a proliferation of specialized XaaS offerings, such as: 

Like the shift in software delivery, we also see a growing trend toward equipment as a service (EaaS) models. Rather than purchasing expensive equipment outright, companies can lease it and avoid tying up capital in assets. This also shifts the responsibility for maintenance and support to the original equipment manufacturer (OEM) or service provider. 

Industries that are increasingly adopting EaaS include: 

Characteristics of EaaS candidates 

Common characteristics of businesses or products well-suited for an EaaS model include: 

It would not be surprising to experience resistance to the subscription model in more traditional industries with extremely expensive equipment, such as the heavy equipment industry.  Companies and customers in this sector are not used to the subscription model and typically rely on buying, leasing, or renting.     

Most customers are used to owning the equipment rather than paying for usage. Implementing a subscription model will require a significant shift in customer mindset and acceptance. The recent contracting economy may assist in this, where suppliers can continue to deliver their equipment, and customers use it at a much lower cost.  

For the OEM, adding a subscription service for physical goods will also require a significant effort. It will add complexity to their traditional business model, and agreements must be updated to include maintenance, repair, and service. Also, the coordination to provide these services will be managed differently in a subscription model.  

All these challenges aside, there is also a huge upside potential. Companies have the opportunity to gain customers that OEMs could not reach before, and being ahead of the competition in offering this flexibility may pay off in the long run. 

Exploring the elements of the EaaS model 

Let's walk through the quote to cash (QTC) process in an EaaS scenario, along with all the applications involved.  

Most companies have a CRM system in place. This is typically the source for all commercial interactions with their customers: account management, aead and opportunity management, and tons of reporting capabilities to control and analyze the data in CRM. From the CRM application, users can launch the quote process. For companies that manufacture complex products and services, this quote process starts in an integrated CPQ solution. 

The selling process for equipment manufacturers is typically complex and time-consuming, especially when the customer can select from many options and variations for the final product and services. Think about a punch/laser machine for sheet metal, a welding robot, or an electro-hydraulic servo-synchronous press brake.  

A modern CPQ application like Conga CPQ seamlessly integrates with the CRM application.  

As a minimum, the CPQ application should be able to handle: 

In addition to these minimum capabilities, the following functionality also should be available in a CPQ solution. However, in some cases, the CPQ application uses a third-party service to fulfill some of the capabilities:  

For some of the equipment manufacturers (project-based), the CPQ solution should also be able to handle product customization. 

The CPQ solution should also be able to handle multiple price types (recurring, one-time, metered), the term, and some additional attributes or options that come with EaaS—like required operation monitoring devices and periodic maintenance services. 

Once the quote is accepted and transformed into an order, multiple other systems need to be informed about the new order: 

Let’s review each of these systems and explain their role in the EaaS process. 

From an ERP/order management perspective, there is not much difference between a machine built for a customer who acquires the machine to own it and a customer who uses it through a lease agreement. 

In an EaaS process, a lease is called a subscription, and the contract that CLM handles is extremely important. The contract will describe the obligations of the customer/lessee. Because the OEM/lessor is not in possession of the equipment, the contract needs to spell out the rules for subscribing to the equipment in detail. Here are some examples: 

Conga CLM is an robust contract management tool that can easily handle all these contract requirements—and more. 

The billing in an EaaS situation can be complex. A fixed amount and a variable amount are based on some metered value like time, distance, number of movements, number of days used, etc. Conga Billing is fully integrated with Conga CPQ, and both solutions are part of Conga’s holistic revenue management platform. 

IoT is not an application like CPQ, CLM, and ERP. In this use case, it is a technology used for communication from the equipment to the billing system and the CLM system. Billing involves the usage of the equipment. For CLM, IoT can provide data for obligation management:  

The goal is to have this automated so the CLM system can warn the OEM (the equipment owner) when a contract is not respected.  

There is also a great advantage for the equipment's OEM: many machines are already equipped with these devices, delivering tons of accurate machine data and operating insights to the OEM or service provider. Machine learning and AI algorithms provide feedback for product improvement but also present alerts and information that prevent systems from breaking down, which could be expensive and inconvenient for the equipment user/operator.  

All these technologies and applications exist in the real world, but you need a trusted system integrator to make them work for your organization in an automated and synchronized way. However, it is not only about the applications. It is also important that the processes are well-defined and will work in your organization.  

Conga constantly innovates their applications to better align with their customers' needs. Examples include Conga's CPQ, CLM, and Billing applications, which are CRM and ERP agnostic. Other more detailed examples are performance improvements on large and complex configurations and quotes, better obligation management, and AI assistance in the CLM process.  

At Synthesis, we have experience in all these applications and the integrations that come with them, and we can help you transition.  Our Platinum partnership with Conga means we have the right solution ready for you.