We’ve just released the latest update to the Subscription Economy Index (SEI)!
What is the Subscription Economy Index (SEI)?
The SEI, conducted by Zuora’s Chief Data Scientist, Carl Gold, is based on anonymized, aggregated, system-generated activity on the Zuora service, a comprehensive platform for subscription-based businesses. This index reflects the growth metrics of hundreds of companies around the world, and spans a number of industries including SaaS, media, telecommunications, and corporate services—and, new this update, IoT.
The explosion of recurring revenue-based business models
The breadth and depth of the data analyzed in this study speak to the rapid ascent of the Subscription Economy. Gartner predicts that by 2020, more than 80% of software providers will have shifted to subscription-based business models. In addition, IDC predicts that by 2020, 50% of the world’s largest enterprises will see the majority of their business depend on their ability to create digitally enhanced products, services, and experiences. This is a broad, secular shift.
Recurring revenue-based business models are not new, but they have exploded in recent years owing to cloud-enabled, pay-as-you-go services. As globalization has placed increasing margin strains on manufacturing and product sales, subscription-based businesses have benefited from stable and predictable revenue projections, data-driven insights from direct consumer relationships, and large economies of scale owing to relatively small fixed costs.
Top-level findings of this latest SEI update
The future of growth is subscription models
The message from this study is clear: When companies pursue subscription models, they find growth. While those growth rates may fluctuate, and are susceptible to broader market trends, recurring revenue models offer sustained and predictable returns that largely avoid the volatility of traditional “boom or bust” product cycles.
Tip from the creator of the SEI, Zuora Chief Data Scientist Carl Gold: Subscription Economy leaders must not waste their shots. Gold says, “With so much uncertainty in the business environment, leaders at subscription companies must make diversified and educated bets. Recurring business models have many advantages over traditional business models but also unique pitfalls all their own.
For more insight into ARPA vs Net Account Growth; revenue growth by company type; churn rates by business model, industry, company size, and region; and growth by region, download the latest Subscription Economy Index.