GE, IBM, Komatsu and Other IoT Leaders Tackle Subscriptions

By Jayne Scuncio December 29, 2016

Two part (Part 1 and Part 2) feature interview with Junichiro Kuwano, President of Zuora Japan, in Biz Zine, originally in Japanese.

“Subscription model” (stock type business) is a model that continues to provide services within the contract period. On the other hand, the traditional typical business model is “product sales model” (flow type business), once you contract and sell items, you will receive one invoice and collection and one sales report. If it is a subscription model, for example, if it is an annual subscription with a monthly fee, billing and collection occur every month with one contract, and the same is true of sales.
Founded in 2007, 9 years ago from now, Zuora is a company that provides a business model change from a traditional product sales model to a subscription model and support for raising profit there using the cloud platform It is. Founder and CEO Tien Tzuo enrolled Zuora with two other members enrolled for nine years after being involved in the establishment of Salesforce.com.
In the rapid growth of Salesforce, Mr. Tzuo has two big experiences. One is the cloud as technology. Another thing was learning in trial and error about how to make monetization mechanism, culture, etc in the cloud subscription model.
Mr. Tzuo thought that when entering Salesforce, “When the business model shifts significantly from product sales model to subscription, someday will come.” So, as in the early days of the cloud, companies that have similar difficulties will come out. So, “Zuora is the company that started up in the sense that if you start up with Salesforce know-how, it will be useful for the world.” Currently, Zuora’s solution is introduced by more than 800 companies globally, it is unlisted, but it can be said that it is a unicorn company that has received a lot of attention.
In Japan, a fixed rate distribution service of music and movies such as Apple and NetFlix landed, and similar services started in Japan, 2015 was told as the “first year of subscription”. And in February of this year, we set up Zuora Japan office, which was incorporated into September. In Japanese language in April 2016, we are developing full-fledged sales activities.
Mr. Junichiro Kuwano, president of the Japanese corporation, said, “The subscription economy has been accelerating, mainly in Europe and the United States, here.” There are two reasons for that. One is that from a customer’s point of view, the needs are shifting from “owned” to “used”. The other is from a corporate perspective, it is a change from a product model. Companies in the past 100 years were “profitable models” by “making and selling products.” But in the 21st century, the model of selling products has become an era where it is difficult to continue to grow. The fact that more than half of companies in Fortune 500 in 2000 are already gone, due to acquisitions and integration etc.

The potential of IoT (the Internet of things) is to analyze and utilize data obtained from various devices and sensors. Business models that provide and sell to large numbers and automatically collected third parties are also appearing. When selling data gathered at IoT, the data gathered by the sensor is not sold at the price of each data unit, but a method of a monthly flat-rate system or a fixed-rate billing is adopted. Furthermore, a business model of monetizing with a subscription model will come out as soon as upgrading with plans of higher plans in the basic plan.
IoT talks about manufacturing network of sensor networks and scenarios of sales and production optimization, but European and American companies are looking forward to seeing the collected data as “new revenue source” and measuring the commercialization. For example, GE analyzes in real time with a sensor attached to the engine of a passenger aircraft so that you can learn where trouble occurred before you landed. By further optimizing the flight route, we are also offering a service that saves fuel economy. By making these pay-as-you-go and pay-for-pay type, IoT subscription business is monetizing.
“Predix” developed its own company as a platform for GE to maximize it from equipment and equipment by IoT. Zuora is adopted there. “We have set the goal of entering the world’s top ten by software by 2020 and are hiring digital transformations on the east coast, using a large number of engineers.
IBM is making similar strategic transformations. As IBM shifts from offering computer product sales models such as conventional general-purpose machines and providing IT solutions, in the last few years the performance has been extremely difficult. Currently, it is trying to monetize with a business model based on Watson which is cloud and artificial intelligence (AI). Both are subscriptions, and IBM also adopts Zuora there.
In Japan, Komatsu provides on-site solutions. By flying the drone and measuring the measured data into three dimensions, utilizing the simulated data, even young people can do construction work similar to skilled workers. Again Zuora is used.
In addition, Toshiba has also launched an organization to switch from “mono” business to “things + thing” business with IoT and Zuora, and is starting major change.