The value of the subscription economy is mainly in the experience. If customers or consumers want to exchange traditional ownership for use-based models, the ease of use simply has to be better than what people were used to. “Only then will people no longer cling to the status and pride that come with possession,” says Mel Jacobs, CIO, Private Bank and Corporate Institutional Banking at ABN AMRO.
Mel Jacobs, named CIO of the Year for 2021 earlier this year, was present as a guest in the first broadcast of CIO TV‘s summer series in collaboration with infrastructure and digital services specialist Equinix. She also believes that trust and speed are key. “What is cool today is passé tomorrow.” Organizations have to keep up with all social, technical, and economic developments. Collaboration between all organizational functions is crucial.
What exactly is a subscription economy? Nick Smaling, partner at Boston Consulting Group, explains it is an economic dynamic in which everything can more or less be shared: cars, houses, bikes, storage, and even dogs. “On-demand, peer-to-peer and based on circularity in which reuse plays a role.” He sees most developments in the field of mobility, lending, accommodations, and personnel. Technology is the key enabler in this respect, for example in the form of online platforms and data exchange between the various parties in the ecosystem.
“It‘s no longer about getting the customer to our channels, but being where the customer is”
According to Mel Jacobs, the subscription economy is dis-intermediating the current value chain. This changes the way of interacting with customers. Retail customers in particular are already used to subscription models such as Netflix, Swapbike, iCloud, and so on. “This usually concerns services that you can easily start and stop, for a fixed monthly fee.” ABN AMRO translates this phenomenon to the services it delivers to all its customer groups.
Scalability is important in this. Subscription models require a modular structure of services, which you combine in a smart way depending on the customer‘s wishes, and ditto support from IT.
“To this end, we are transforming the way we set up IT,” says Jacobs. “By building the IT and data infrastructure of the future now.” On top of this, ABN AMRO can flexibly and quickly deploy customer-oriented solutions that enable new business models. Modularity does indeed play a role in this. Sometimes she works with suppliers, sometimes she takes things from the partner ecosystem or develops them herself. “It‘s no longer about getting the customer to our channels, but being where the customer is. This normally requires adjustments to infrastructure, data models, and applications.” The transformation itself goes far beyond IT.
Ultimately, it’s about customer value, states Martin Olij, Director of Services & Infrastructure, Hewlett Packard Enterprise. Consumers are not looking for a brand or a specific IT infrastructure, but simply want a specific outcome on-demand, based on a need or challenge. HPE, together with its partners, must deliver services that are in line with the expectations associated with the flexible models of the modern age. “When it comes to our infrastructure services, we develop them with the experience our customers and their customers expect in mind. They can buy it, but also simply consume it and switch it on and off as they wish.”
The foundational infrastructure will mostly be both physical and virtual, according to Judith Gardiner, VP Growth and Emerging Markets at Equinix. “On the virtual side, we enable our customers to move to new markets and to scale up and down quickly.”
“Transformational leadership is needed, which brings together diverse functions and roles”
In a technical sense, Equinix supports the customer in their multi-cloud strategy, whereby part of the service provision comes from the network providers in the ecosystem. Often there are specific wishes; for example, ecosystem partners operating from the same data center with a view to limited latency, optimal application performance, security, and so on. “The speed with which you can bring all this together and launch it on the market is a key success factor in the current dynamics.”
A modular setup can be a perfect starting point for companies with a large amount of existing IT, who want to modernize their landscape. “We can connect these worlds efficiently, safely, and reliably, both within the organization and within ecosystems and chains.”
Another aspect of the subscription model is circularity – the way in which we deal with the available resources. Mel Jacobs: “Thinking from the perspective of chains and ecosystems, this goes back to production, possible reuse, and the further steps in the total value chain. That is an important sustainability-related business pull, partly enabled by a technology push.”
There are several drivers: technology, business, but also demographic changes. Factors accelerating adoption are the rise of mobile and location technology and online payments, the emergence of peer-to-peer models, increased transparency about the supply chain, and the desire to extract the maximum value from available assets – such as unused cars, storage, and working space, IT capacity and so on.
“Everyone in the organization must have the skills to meet the needs of our customers”
Digital trust is also crucial, adds the ABN AMRO CIO. Certainly when several parties are involved. this applies to both companies and consumers, who ultimately own their data. “We must keep this in mind in everything we do.”
The subscription economy revolves around a complete transformation of the operating model. Judith Gardiner: “That is why transformational leadership is needed.” ABN AMRO‘s Mel Jacobs: “Preferably a diverse organization. Also: strategy isn’t just for the top. Everyone in the organization must essentially understand the technology roadmap and have the skills to meet the needs of our customers. Leadership plays an important role here.”
Watch the full episode with some additional tips and recommendations for technology leaders.