17 September 2015 | Martin Read
The speed at which we're becoming an entirely subscription-based economy is staggering.
So many one-off commercial transactions are these days absorbed into 'easily manageable' monthly or annual subscriptions.
Take Spotify: say goodbye to shiny discs and pay monthly for access to the entire world of music. Or software - why pay lumpy upfront costs and sizeable upgrade fees when you can guarantee the most up-to-date version for a smaller and more manageable monthly payment? Even car ownership has its own subscription model: put down a deposit and for the next three years pay what's effectively a monthly subscription; there's even the option of carrying on the arrangement with a new model at the end of an agreed term.
The appeal is clear. Consumers benefit from lower, more manageable monthly payments while suppliers get the security of reliable, regular income (and a degree of proprietary lock-in to a particular product or service 'ecosystem').
These routine monthly payments see you essentially renting commodities 'as a service'. And in business, 'as a service' (or 'aaS') is about to become huge.
Until now, it's mainly been an IT issue. As with many of the consumer models mentioned above, the move to host data on the cloud has allowed a variety of subscription models to flourish. Software service provision has been decoupled from the limitations of clients' local networks, transforming cost, risk and distribution equations for both parties.
IT providers have also realised that, since they're providing software as a service, why stop there? Hardware, maintenance and system infrastructure development can be combined into payment schedules linked to pre-agreed levels of service.
And where 'aaS' becomes really big is when previously dumb building services equipment is hooked up to the Internet of Things. Consider the impact of literally any piece of BSE reporting via an IP network; building users pay for minimum levels of service performance rather than the product behind that service, while the provider takes on all of the risk associated with equipment failure. This newly networked building services equipment gives users more control of performance and more capacity to monitor and manage down levels of use. Critically, it allows suppliers to measure all of this activity too - and that means new 'aaS' business models with procurement based on output as a service, not the product deployed to produce that output.
Suppliers are already feeling out the possibilities. Cisco's 'Light as a Service' is a two-year innovation project in which IP-connected lighting will use 'self-aware' technology to save energy and offer greater performance variety.
We'll be seeing plenty of similar 'as a service' models in which users buy not lighting, air conditioning or furniture but light, heat, perhaps even 'comfort'. All of this, together with the granular management of performance data, will link to current output models in FM service and affect the structure of those FM services too. Some very interesting discussions lie ahead.
Martin Read is managing editor of FM World