Everything as a service
Prediction #3 for 2021
As in earlier years, I have curated the most interesting and pressing digital trends for the year to come, which I will reveal in a series of ten articles — this is number three.
The future belongs to subscription-based models
Many of the services listed in my Tech Predictions this year, such as video conferencing technology or telemedicine, are made possible through as-a-service solutions. And the global pandemic has fueled the growth of digital subscription-based services even more.
Entertainment is an obvious example. While movie theatres were closed down, Disney+ launched. in Denmark. This happened in September and the service immediately became a hit. One month later 16% of Danish households used the service. Globally they went from zero to over 86 million subscribers and $2 billion in 12 months!
But pretty much all streaming services experienced unprecedented growth in 2020. Netflix added more than ten million new paid subscribers in Q2. Warner recently made a bold decision, and rubbed even more salt into the wound, by announcing that all their movie premieres in 2021 would be available at the premiere date on HBO Max.
We see the same development in a lot of other areas. Sports and exercise are changing due to lockdowns and people having to work out at home. A service like Peloton now has more than 1 million online fitness members and the virtual biking community Zwift has surpassed 2.5 million accounts — both examples of extremely successful as-a-service solutions in this area.
Shopping as a service is another growing category. Just look at the success of Amazon Prime. If you buy an annual Prime subscription for $119 and start to shop this way, you get all-year free same-day delivery and, on top of that, free access to Prime Video, Prime Music, Prime Reading, gaming etc. Amazon’s Prime member base is set to surpass 200 million by the end of 2020 and to reach more than 50% of all US households.
Even more specialized shopping solutions now come as a service.
Stitch Fix has turned personal styling into a service — you receive a big box of personal selected clothes to try on at home with the right to return the stuff you don´t like for free. The company has been so successful that they had to turn to data science and AI to help their 4,000 human stylists serve an impressive 3.5 million customers.
Another success story is Bark Box, co-founded by the Dane Henrik Werdelin in 2011. The company delivers a personalized monthly subscription box to dog owners full of toys based on your dog’s needs. They now have appx 600,000 monthly subscribers.
Even Apple is on the path to becoming a subscription-based service company with the launch of Apple One, a combination of six different services ranging from music, fitness and cloud hosting (200 Gb) for a fixed family price of $20/month (in Denmark Fitness and News are not available yet). Apple presented a record services revenue of $14.5 billion in Q4 of their fiscal year — before the launch of Apple One. That number will just continue to grow. This might be the main reason why Apple surpassed Saudi Aramco to become the world´s most valuable company in 2020.
And the move to everything as-a-service will continue to accelerate. Just think of ideas like automatic replenishment directly from your IoT enabled washing machine, dishwasher or coffee maker. If you combine that with AI-based anticipatory demand prediction, then you understand why Amazon will continue to be one of the winners of this century.
Business models with recurring revenue through scheduled delivery looks to be the big winner, not only judged by market valuation but also judged on consumer adaptation due to convenience.
For business-to-business the situation is the same. Company spend on services provided through cloud-based, on-demand platforms is already up 50% in 2020, and Cisco predicts that 70% of workloads will be handled through SaaS solutions by 2021.
So, with everything as-a-service increasingly becoming part of our everyday lives, now is the time for you to re-evaluate your business model to figure out how you can leverage the development and turn one-time purchases into subscriptions and recurring revenue.