Subscription and X-as-a-Service Models Explained

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What Are Subscription and As-a-Service Models?

Subscription and As-a-Service models represent a fundamental shift in how companies sell and deliver products and services. Unlike traditional sales, these models focus on providing ongoing value, turning ownership into “usership” and one-time transactions into long-term relationships.

Subscription models involve selling products or services on a recurring basis, typically monthly or annually, providing customers continuous access rather than ownership. As-a-Service models go one step further by focusing on outcomes or usage, where customers pay based on the value they receive or their consumption.

These approaches enable companies to tailor offerings to customer needs, delivering flexibility and convenience while creating stable, predictable revenue streams.

The Idea Behind Subscription Models

Traditional product sales often put the burden of maintenance on the customer, which can create misaligned incentives between the seller and buyer. With Subscription and As-a-Service models, however, the provider’s profitability is directly tied to the product’s performance and the customer’s satisfaction.

For example, consider a car operating under an As-a-Service model: the dealer is now motivated to keep the car in peak condition since they earn only when it’s running smoothly. This alignment creates a win-win relationship, fostering collaboration and trust between both parties. Customers become more willing to share data and feedback, leading to better service, improved product performance, and long-term partnership.

The core principle is that the provider and customer share the same goal—maximising the product’s efficiency and value—transforming the traditional transactional relationship into a collaborative one.

Key Benefits of Subscription and As-a-Service Models

Benefits for
Providers (You)

Predictable, recurring revenue

Customer loyalty & Shorter sales cycles

Competitive strategic advantage

Enter new market/customer segments

Opportunity for data-driven insights

Benefits for Customers

Lower upfront costs (OpEx vs. CapEx)

Access to the latest tech and updates

Flexibility to scale operations

Peace of mind - Optimised risk management

Improved end-of-life management

Benefits for Our Planet

Reduced resource consumption

Lower carbon footprint

Alignment of incentives (provider and customer)

Sustainable equipment lifecycle management

Business model part of the circular economy

Industry Applications: Examples of Subscription and As-a-Service Models

Engel

Injection-moulding-as-a-Service

Offers Injection-molding-as-a-Service, allowing customers to pay based on usage, eliminating upfront costs. This model eliminates the upfront cost of purchasing the equipment and provides customers with greater flexibility and lower costs compared to traditional machine ownership. The model is based on a usage fee that is determined by the number of cycles of the machine and the duration of use.

Heidelberger Druckmaschinen

Industrial-printing-as-a-Service

Provides Industrial-printing-as-a-Service, where customers pay a monthly fee for print volume instead of purchasing machines. For a predetermined monthly print volume, the consumer pays a fixed fee. Heidelberger offers customers the equipment, workflow, consumables pre-matched to their requirements, internal expertise from print professionals, and continuing support through the Heidelberg Subscription.

Rolls-Royce

Power-by-the-hour

Implements a Power-by-the-hour model, charging airlines a flat hourly rate per engine while managing maintenance and check-ups. In 1962, Rolls-Royce developed the Power-by-the-Hour model, otherwise known as Engine-as-a-Service (EaaS).

Signify

Light-as-a-Service

From selling light bulbs towards selling an illuminance level per square meter. Customers pay for the service (e.g. annually) instead of buying LED lights. The subscription offers customers lighting for an annual fee, while Signify retains ownership of all fixtures and lights. Signify installs, maintains, services, upgrades, repairs, replaces, and ultimately recycles the light bulbs.

HILTI

Holes instead of drills

From selling drills towards selling holes via a fleet management programme.

The industrial equipment manufacturer Hilti offers their products in a subscription-based deal that includes product availability, maintenance, and possible replacements. It is essentially a guarantee that work on construction sites is never interrupted due to malfunction.

MICHELIN

Tires-as-a-Service

In 2013, Michelin launched a Tires-as-a-Service offering called EFFITIRES. This system provides a combination of outsourced tire procurement and a payment model based on usage (pay-per-driven-km). Such a system has been praised by customers such as Go-Ahead Group and HE Payne, who have found it to be beneficial in financial planning and cash flow optimization.

Challenges and Pain Points of Developing Subscription Models in Your Organisation

Pricing and Packaging Complexity

Crafting pricing and packaging strategies that appeal to diverse customer segments while ensuring profitability is a major challenge.

Customer Education & Adoption

Convincing customers of the benefits of a subscription model over ownership can be difficult, especially when it involves changing long-standing buying behaviours.

Operational Transformation

Implementing the necessary systems, technology, and processes to support recurring revenue models requires significant investment and expertise.

Financial & Compliance Hurdles

Accurately recognising revenue and navigating compliance with standards like IFRS 15/ASC 606 can overwhelm finance teams.

Cultural & Organisational Resistance

Internal teams may struggle to adapt to the new business model, leading to resistance and misalignment.

Risk Management
‍

Predicting customer demand and mitigating risks like churn and fluctuating usage can complicate revenue forecasting and operational planning.

P2S: From Products to Subscriptions

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Understanding Subscription and As-a-Service Models

What Are Subscription and As-a-Service Models?

The Idea Behind Subscription Models