Subscription business model was pioneered by magazines and newspapers, but is now used by many businesses. Rather than selling products individually, subscription sells periodic (monthly or yearly or seasonal) use or access to a product or service.
The major reason behind opting this kind of model is for flexible billing, flexible pricing, add /modify/downgrade services frequently, to avoid long term lock down with only one service, and potential opportunities for cross sell and up sell for sellers. In today’s world as most customers are moving towards SaaS or Pay-per-view kind of model, so, this subscription type economy is becoming very popular.
Industries that use this model include - mail order, book sales clubs and music sales clubs, cable television, satellite television providers with pay-tv channels, satellite radio, telephone companies, cell phone companies, internet providers, software providers, websites (e.g., blogging websites), business solutions providers, financial services firms, fitness clubs, lawn mowing and snowplowing services and pharmaceuticals, as well as the traditional newspapers, magazines and academic journals etc. Typically transactional order fulfillment economy is focused on single sell, whereas subscription economy is focused on the maintaining ongoing relationship with customer. The model of future business is not purchase of good and services, but a price provided to customer for an ongoing relationship.
Gartner forecasted earlier that by 2015, 35% of Global 2000 companies with non-media digital products will generate up to 10% of their revenue from recurring models. Researchers and analysts agree that this subscription business models based on digital commerce will soon be adopted in every industry, and that they will drive significant revenue growth in the coming years.
This model will enable enterprises to maximize customer loyalty, secure predictable revenue, and often gain a significant competitive advantage. Subscription order types has its own life cycles and that depends on following events:
Netflix, Amazon, Salesforce, Spotify, Hulu, zipcar, VMware etc. are example logos of Subscription Economy. Key Enterprise Functions in this model are:
Prior to release 12.2 Oracle’s O2C (order to cash) process did not provide a good seamless process to manage this subscription commerce.
This is because:
Due to many Gaps we have seen many oracle customer have started doing customization to mitigate these Gaps. But oracle 12.2.2 going forward have introduced many new features in E-business to strengthen their solutions for subscription economy.
Release 12.2.2 addition
Before R12.2. You could only order extended warranty contracts in Order Management. But this release onward, you can order service contracts of type Subscription Contract using Oracle Order Management (to sell and fulfill your subscription services) and have the application create the appropriate contracts automatically. You can order Tangible as well as Intangible subscription contracts. Tangible subscription contracts are fulfilled through Order Management. You can record Subscription Contract specific attributes such as Start Date, Period, Duration, and Subscription Template on the order line. As currently supported for standard inventory items, you can attach Extended Warranties to a Subscription Contract as well. Additionally, you can include a Subscription Contract in a model/kit. After fulfillment of the line, a Subscription Agreement is created in Service Contracts.
Currently, when an Extended Warranty is invoiced through Order Management, the invoice amount is for the entire duration of the Extended Warranty. In this release, additional billing options have been introduced for Extended Warranties and Subscription Contracts. The options are as follows:
Release 12.2.5 addition
Oracle Order Management now gives you the ability to add a subscription service as a promotional good when creating a sales order. Oracle Advanced Pricing now passes a subscription service flag to Oracle Order Management during the pricing call for the sales order which determines whether the item is a subscription service or a subscription item.
In addition, Oracle Order Management now gives you the ability to import subscriptions as included items of a kit/model from external systems. Importing included items from external systems enables you to enter the subscription details such as, start and end dates on the included items of the model/kit.
Release 12.2.6 Addition
Recurring Billing Oracle Order Management extends support for flexible ordering of products, services, subscriptions and warranties with new recurring billing options. Oracle Order Management now enables you to bill your customers on a recurring basis for standard items they are ordering on a sales order line. In Oracle Order Management when your are entering a sales order you can now create a billing plan for the sales order line. When you create the billing plan you have the option to specify a fixed number of billing plan lines or an indefinite number of billing plan lines. After the billing plan is created and source order line is closed, the new Create Billing Lines concurrent program is run. The Create Billing Lines concurrent program creates bill only (based on defaulting setup providing a defaulting rule has been defined for a billing line) sales order lines for each of the billing plan lines associated with the billing plan in the same sales order as the billing plan. These bill only lines interface data to Oracle Accounts Receivable which then creates the invoices against them. As the recurring billing process goes along, you can view the billing plan to view the amounts you have billed to your customers and the amounts you have yet to bill to to your customers.
You can refer to this video link for details on 12.2.6 new features - http://education.oracle.com/pls/web_prod-plq-dad/db_pages.getpage?page_id=904&get_params=cloudId:243,objectId:14783
If you are using Oracle E-business suites for your enterprise and likes to discuss on your current business process gaps around subscription management - you can mail me - firstname.lastname@example.org