According to the Q1 2018 benchmarking report on Digital Commerce Trends in Software & Online Services Sales published by 2Checkout, 76% sales have been for recurring purchases in Q1 2018. For comparison, 49% of software sales were for subscription-based products and services in 2012.
Nowadays, more and more businesses, both small organizations and large enterprises, are enjoying the flexibility and scalability that SaaS providers can offer them. It wasn't the case when SaaS model just emerged. Initially, SaaS offerings were considered as a niche software delivery model, suited better to small businesses. One of the reasons that the SaaS model gained tractions was because of how it reduced the financial risks associated with deployment. Therefore, IT procurement manager can account such costs as an operating cost rather than a long-term capital investment.
For more information, please refer to the below.
https://www.forentrepreneurs.com/saas-economics-1/
https://www.forentrepreneurs.com/saas-economics-2/
https://www.information-age.com/subscription-billing-software-123473062/
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The subscription bulling model also has huge implications for for venture capital and private equity investments. The need to calculate life time value of customers has investors struggling to place a correct lifetime value potential for different businesses. That is why we have seen many subscription model companies receive very large valuations, but few actually reach their valued potential for investors. That said, the earlier companies such as Dollar Shave Club have lived up to their value. Additionally, when thinking about a consumers total wallet spend, there are limitations to their availability to sign up for subscription models. Therefore, the competition for all subscription models, regardless of consumer segment, has increased exponentially. Consumers are constantly presented with new, trendier subscription models that in turn ruins the idea of generating large customer lifetime value.
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