Tuesday, 22 August 2017

Talking about the subscription economy

This morning I went down to Darling Harbour to attend the Zuora conference, a one-day event for people who registered online with this American software company. Company founder Tien Tzuo was first up. The company was founded in 2007 and now manages 70 million subscriptions, and has 800 employees in 18 countries. The first slide I chose to go with this blogpost is one of Tzuo's, and it shows that companies that have a subscription model for customers are growing nine times faster than S&P 500 companies.

With the software the company supplies, customers are "freed from the shackles of time or location", said Tzuo. The word "freedom" came up again and again in the promotional material the company brought to the event. Certainly more and more things are available via a subscription these days, and Tzuo told delegates that Oracle's cloud business was growing at 30 percent per year. The New York Times, he added, was on the way to three million subscribers.

Some unexpected candidates are appearing within the subscription economy, too. Tzuo pointed to the way that Japanese heavy-machinery maker Komatsu has automated its business using sensors and software. The company can now get drones to map an area of land, then send the resulting data to a computer, where a complete redesign of that area of land can be planned by operators. The heavy equipment is then sent in to do the hard work of earthmoving, and such vehicles are often completely automated.

Another customer of Zuora's is Servcorp, which started out in Australia subletting office space to companies and individuals. The company now operates in 22 countries and 52 cities in 10 different languages. Their customer billing is through Zuora software. Tzuo also mentioned Stitchfix, an American company that sends packages of clothes to subscribers, who can return items that they don't want to keep.

Next up on stage was Paul Shetler, a consultant who noted that there are now 3.5 billion people on the internet. He also remarked that there are new types of subscription businesses, such as "tractors as a service", which is what US company Caterpillar provides to many of its customers. "Pretty much every company today is competing with a digital services company," he said. "If you're competing with a digital services company, you're a digital services company."

Shetler remarked on the recent statistic being bandied about in the public sphere that Australia has had 26 years of uninterrupted growth. "You don't have another 26 years of uninterrupted growth in Australia," he opined. For companies here, new realities throw up a set of new challenges. "Bureaucracy," Shetler said, "tries to maintain itself." You need to have the political will necessary to make changes from the top, he added. All businesses these days, he went on, are IT and service design businesses.

We then had Katelyn Bonato from Deloitte's talking about the new AASB 15 accounting standard which the US-based Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have developed. The new standard concerns "the recognition of revenue from contracts with customers", and will impact on businesses in Australia from 2018. The new standard was created, Bonato said, because "the FASB and the IASB wanted consistency globally". And she added that it's "not just a revenue change opportunity it's a whole wider opportunity".

The last speaker I'll mention here is Stuart Thornton from event sponsor worldpay. Thornton came up on stage after lunch and gave delegates a short, potted history of payments which, he said, began 2.5 million years ago with the use of nuts. Coins appeared about 3000 years ago, and banknotes around 600 years ago. These days, he said, "Payments is all about reducing friction." Which brings me to the second photo attached to this post. It lists a few of the new ways that payments will likely be able to be made in future.

In Singapore, where Thornton is based, he said, there are people working on, "Using social media data to prove who you are." And there may soon be applications that can give you a credit limit based on your device activity alone. In future, he went on, when you walk into a store there will be cameras with facial recognition software connected that can identify you and allow you to pay for things without using cash or a debit or credit card, because the store will already have a relationship with you that it draws on to make a decision about whether to trust you. He called this kind of scenario "translucent payments".

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