Well, we are getting down to the short strokes regarding our preparations for TSIA’s industry conference this month in Las Vegas. At this conference, we will be presenting concepts from our latest book: Consumption Economics: The New Rules of Tech.
One of the key premises of the book is that the economic model for technology companies will dramatically change with the advent of cloud and subscription based consumption models. I won’t go into all the details here, but envision a world where technology companies make money per feature or per transaction as customers actually consume technology. This is very different from the current model where customer’s pay a chunk of money up front to purchase hardware and software. The difference in these two models is summarized in the image below.
We have been talking to many product companies about this move to a consumption based revenue model for the IT industry. Some are already seeing the shift. Others are skeptical. Well, I stumbled on a perfect example of consumption economics playing out at the processor level. Intel offers a processor upgrade service that allows customers to download firmware updates that unlock better performance. Here is how the service is positioned on the Intel web site:
Intel Upgrade Service provides your end customers with easily upgradable hardware so you can deliver the capabilities they want as they are needed. Budgets are tight and many small and medium businesses may not be able to justify a fully-featured system right now, yet would like to have that option in the future. Upgradable hardware is the answer. When your customers purchase a PC with qualifying Intel CPU and Chipset, they have a system that can grow to match their needs, and you have an opportunity to provide more services to that customer over time.
So, the next time you upgrade your O/S and it grinds your system to halt, you don’t have to throw away the machine or throw out the processor–you may simply need to download an upgrade from Intel for a few bucks. This is the perfect example of consumption based economics in the world of technology.
Join us in Las Vegas this month as we discuss how consumption economics will impact the business models of product companies. It is gonna be a bumpy ride…