Article How to develop a recurring revenue model for your SP business

By Insight Editor / 14 Apr 2022 / Topics: Cloud

It is difficult to build a sustainable business on one-time purchases. A subscription model offers more opportunities to create a steady stream of revenues and find new ways forward. The digital transformation has enabled all kinds of subscription services. Think about online magazines and newspapers, streaming services like Netflix or Spotify, and physical products like grocery boxes or cars. The subscription model is also popular among service providers since it holds enormous advantages for them and their customers.

The subscription model. What is in it for you?

For service providers, the subscription model is an attractive option, because it provides a continuous income stream. Your business becomes more predictable as you know your exact investments and what revenues to expect. Furthermore, you build long-term relationships with your customers and gain a better understanding of their behaviour, which helps to align your services with their needs.

From a customer's perspective, a subscription gives access to high-quality hardware and software without the need to invest in expensive infrastructure and software development. Instead, most companies focus on their core business and pay a monthly subscription fee to keep the IT engine running.

How to set up a subscription model successfully

Managed services are usually subscription-based. To develop a solid subscription model for your SP business, you first have to define your target customers and their needs. Then you can decide on the services you will offer and determine your pricing strategy.

The complexity of IT technology has increased immensely since the introduction of the (hybrid) cloud. Nowadays, most companies use a broad pallet of local and cloud infrastructure, applications, and databases. They need services on the cutting edge of cloud services and their local environment as security, backup, monitoring, and virtual desktops. As an SP, you will need people to design, set up, and maintain these services. This might be the most challenging part since talented IT staff is hard to find.

Choose the right platform

For years, big tech companies like Microsoft and AWS have successfully used a subscription-based model. As a service provider you can do the same. By partnering with Microsoft or AWS, you can benefit from economies of scale and develop a subscription model tailored to your niche. Even better, you don't have to build the services you will offer from scratch. There are advanced platforms available to facilitate your subscription model. Microsoft, for instance, provides the Service Provider License Agreement (SPLA) that allows service providers to license Microsoft Products to develop highly customised managed services for a broad set of customers.

Best of both worlds: subscription and on-demand

Once customers have subscribed to your regular services, you can also offer them additional, ad hoc services. This combination is already widely used in telecommunications and internet providers. They usually offer fixed bundles with limited data storage. If you temporarily need more capacity, you pay extra. A perfect solution for customers who don't want to upgrade their subscription immediately since it gives them more control over their expenses. For the service provider, these top-up services are lucrative business though there is more risk involved: if you offer ad hoc services, you must also be able to deliver on the spot!

Need help?

At Insight, we help service providers realize their business ambitions in a multi-cloud world and find new ways forward. As a multi-vendor software licensing, workload, and cloud platform specialist, we can guide you through all stages of your strategic cloud journey. We help you set up subscription-based services and accelerate your business no matter where you are in your journey. Contact one of our cloud specialists for a talk.