Subscription Model Comparisons

We're moving away from charging for *access* to software and toward charging for the *work delivered* by software & AI agents. Don't freak out: this doesn't mean everything will become *pay-as-you-go* overnight. I can think of 7 flavors of charging for work: 1️⃣ Pay-as-you-go - No commitment, totally flexible - Enterprise procurement teams usually *hate* this! - Works best when your customers can bill-back the expense or bake it into an operating budget - Otherwise, there's a risk of customers policing their own usage (taximeter effect) 2️⃣ Subscription + pay-as-you-go - Small level of commitment helps 'lock customers in' and give them access to advanced features, support, etc. - Works well when the usage metric is getting commoditized (ex: SMS messages, compute, storage) -- you can advertise a low usage fee & make up for it with the subscription fee - Still not quite loved by enterprise procurement since their bill isn't predictable yet now includes multiple line items... 3️⃣ Three-part tariff (usage subscription + PAYG) - Similar to the above, but with a larger subscription fee that includes some level of usage "included" - Folks usually advertise the initial usage as a gift ("get your first 500 SMS messages for free!") - Including a minimum level of usage helps get the customer hooked & usually incentivizes more overall consumption 4️⃣ Usage-based subscription (high watermark) - Customers commit to a certain level of usage or tier (ex: up to 5,000 API calls per month); this is typically "use it or lose it" - Subscriptions are for a high watermark of usage -- if usage exceeds the plan in a given month, they immediate move into upgrade territory - Fear of overages + usage fluctuations encourages sales to over-sell & customers to over-buy 5️⃣ Usage-based subscription (annual drawdown) - Similar to the above, but the usage allocation can be consumed flexibly over the course of 12 months similar to a gift card - This gives the customer plenty of time to monitor adoption & plan for an early renewal/upgrade if usage is trending above their commit - Great for customers with seasonality or month-to-month usage fluctuations who still want a predictable bill 6️⃣ Roll-overs - If the customer doesn't consume their full allocation, they can "roll it over" to the next year -- typically only if they commit to a flat or increased renewal - More customer friendly, but also more painful to manage! 7️⃣ Adaptive flat rate - The customer commits to a usage-based subscription, but can use the product as much as they want with no overages/upgrades during that period - Their tier resets up/down at renewal based on their actual usage behavior - Much more predictable for customers while encouraging them to increase consumption (downside is that you could be stuck with the costs!) -- I suspect most folks will offer multiple options as they seek to balance lands, expands & tough procurement convos. The downside: complexity.

Subscription beauty in 2027, still growing, but very different from what worked in 2020. A few years ago, subscriptions in beauty felt like a NOVELTY driven by discovery: monthly boxes, sample sizes, surprise. That model hasn’t disappeared, but it’s NO LONGER the center of gravity. As we move into 2027, subscription has evolved into something more PRGAMATIC: a retention engine, a data loop, and, when done well, a margin stabilizer. The short version: subscriptions are still relevant, but only if they solve a real, ongoing need. >>GROWTH has matured. +Beauty e-commerce is growing (high single–low double digits). +U.S. subscription beauty revenue sits around $3–4B. +Retention, monthly churn hits 5–10% without active optimization. +Subscription growth is shifting toward refills, replenishment, and personalization over discovery boxes. >>THREE MODELS are outperforming: The shift: from “subscription box” to “subscription logic”. The winning brands today don’t just sell subscriptions. They build their product and operations around recurring behavior. 1.-Refill-first systems. Concentrates and waterless formats go mainstream: buy once, refill on repeat, lower cost, less waste, less friction. 2.-Routine-based subscriptions. Built around rituals, not randomness, acne, hair repair, skin barrier. The product becomes a system. 3.-Adaptive personalization. No more static quizzes, subscriptions adjust to usage, seasonality, and changing needs. >>PRODUCT CATEGORIES that work best. Not every product belongs in a subscription model. The strongest performers share one thing: they run out. Discovery-heavy categories (like color cosmetics) are weaker unless tied to a system or strong community. +Skincare basics (cleansers, serums, SPF, barrier repair) +Haircare routines (especially treatment-led systems) +Derm-inspired or functional beauty (acne, aging, scalp health) +Ingestible beauty (with caution, regulation and trust matter) +Refillable essentials (deodorant, body care, cleansers) >>Benchmarks to keep in mind (2027 REALITY CHECK) These vary by category, but a healthy subscription DTC brand typically targets. If you’re far off these ranges, the issue is usually product–market fit, not marketing. +Conversion rate (site → subscription): 3–8% +Month 3 retention: 50–70% +Month 6 retention: 35–55% +LTV:CAC ratio: 3:1 or higher +Subscription share of total revenue: 40–70% for mature brands >>A SIMPLE WAY to think about it Subscription in beauty is no longer about selling more products. It’s about OWNING THE ROUTINE. If your brand can become part of someone’s weekly or daily habit, without adding friction, you have a real shot at building a durable DTC business in 2027. Lets go for it! Featured Brands Atolla Biossance Beauty Pie Bite Beauty Color Wow Curology Function of Beauty Hanni Hims / Hers Joonbyrd Prose Routine #beautyprofesionals #dtc #subscriptionbusiness #beautyfounders #ecommerce #brandstrategy #beautybusiness

Your "recurring revenue" might not be recurring in a buyer's eyes. [SaaS Buyer Analysis: Part 3 of 8] I analyzed 61 SaaS buyers to understand their recurring revenue requirements. The bar is higher than most founders think. What I found: → 34 buyers explicitly state recurring revenue requirements → Average minimum: 50–80% recurring revenue → 8 buyers require 90%+ recurring → 5 buyers say “100% subscription model” But here’s where founders get tripped up: Not all recurring revenue is created equal. The hierarchy of "recurring" revenue: Tier 1: True SaaS subscription - Monthly/annual contracts that auto-renew - Predictable, forecasted revenue - What buyers actually mean by “recurring” Tier 2: Highly repetitive - No contract, but customers buy monthly/quarterly - Predictable patterns, not guaranteed - Some buyers accept this (“recurring or highly repetitive”) Tier 3: Repeat customers - Same customers return sporadically - Not recurring by PE standards - Won’t count toward your recurring % in diligence The brutal truth about managed services: One buyer said: “SaaS without a large managed services component.” Translation: If 30%+ of your revenue is services, you’re not really SaaS. Why? Services don’t scale. They add people costs and lower your margin and multiple. The 90%+ club (the strictest buyers): These buyers want pure subscription models: → “80%+ of revenue recurring” → “90%+ annual retention rate” → “90%+ NDRR” → “Subscription model that doesn’t require heavy support” They’re not just measuring recurring revenue — they’re measuring how much actually recurs. Retention vs. Recurring: Founders say: “80% of my revenue is recurring.” Buyers ask: “80% of last year’s recurring revenue still here?” That’s Net Dollar Retention Rate (NDRR) or Gross Revenue Retention (GRR). The trap: - Counting everything that could be recurring: - Setup fees (not recurring) - Annual contracts you must resell (risky) - Wild usage-based pricing (unpredictable) - Optional maintenance contracts (not true recurring) If you’re below 50% recurring, three paths: 1. Restructure before selling - Move one-time fees into subscriptions - Bundle services into pricing - Extend contract terms 2. Target buyers who care less - “Special situation” or strategic buyers - Accept a lower multiple 3. Grow into the requirement - Convert customers to subscription - Show the trend toward 80%+ recurring The number that matters most: It’s not “% recurring revenue.” It’s “% of last year’s recurring revenue renewed this year.” That’s what buyers underwrite — and what separates true SaaS from software with subscriptions. Know the difference. #SaaS #RecurringRevenue #M&A #Founders #NDRR

When you buy industrial software, you are not just choosing features. You are choosing a financial strategy that will impact cash flow, P&L, and your ability to modernize the plant for the next 5–10 years (and beyond). Using the example PERPETUAL vs SUBSCRIPTION A) Perpetual + Annual Support = US$20k license (one time fee) + 20% annual support.... ***Means “You are committed to this platform” [Higher CapEx, Lower OpEx] B) Subscription (annually) = (normally is 40% of perpetual license with annual support included).... Means “You are buying optionality and agility” [No CapEx, Higher OpEx] In the example from the chart is: Years 1–4 → Subscription is cheaper Year 5 → Break-even point both models cost ~USD 40k Year 6+ → Perpetual + Support becomes the cheaper option CONCLUSION: Both models cost the same at Year 5. From Year 6 onward, the perpetual + support model becomes cheaper in total cost of ownership. → Perpetual + support tends to win on total cost and control. → Subscription tends to win on speed, flexibility, and lower risk. REFLEXION: So the question for leadership is not “CapEx or OpEx?” The question is: “What does our time horizon and risk profile look like?” If the platform is core to your long-term digital roadmap → Perpetual + support often wins on TCO (time cost ownership) and control, assuming a 5–10 year horizon (and beyond). If you are still validating the use case, consolidating vendors, or the scope may change → Subscription wins on speed, flexibility, and risk management. Each option has its own pros, cons, risks, and advantages. The decision should not be based on “we’ve always done it this way.” Analyze both models for each specific project, and for major decisions, avoid leaving the choice to a single person.... make it a structured collective decision. #DigitalTransformation #CaPex #OpEx #FinancialStrategy #GENESISv11

(DAY-2) 🔍 License Types: Perpetual vs. Subscription 🔍 Understanding Oracle's licensing models is crucial for organizations to manage costs, ensure compliance, and align with business goals. Today, let’s dive into two widely used license types: Perpetual and Subscription Licensing. --- 1. Perpetual Licensing A one-time investment that gives organizations indefinite rights to use Oracle software, provided they pay annual maintenance fees for updates and support. Key Features: Upfront cost with long-term ownership. Annual support fees (typically ~22% of the license fee). Common in on-premise environments. Example: A company buys Oracle Database Enterprise Edition for $200,000 with an annual $44,000 maintenance fee. Over 10 years, they spend $640,000 in total. Best For: Businesses with predictable workloads and a preference for long-term ownership of software. --- 2. Subscription Licensing A flexible, pay-as-you-go model, ideal for dynamic businesses needing scalability. Costs are typically billed monthly or annually, making it a popular choice for cloud services. Key Features: Lower upfront costs; predictable recurring fees. Scalability to increase or decrease usage based on need. Includes maintenance and updates in the subscription fee. Example: A startup pays $5,000 monthly for Oracle Cloud services. In the first year, costs are $60,000. In the second year, increased usage doubles their cost to $120,000. Best For: Businesses with fluctuating workloads, limited initial budgets, or those moving toward cloud solutions. --- Comparison at a Glance 1. Perpetual Licensing Cost Structure: High upfront cost with indefinite usage rights; annual support fees (~22%). Scalability: Limited, as resources are fixed. Ownership: Permanent. Best For: Businesses with predictable workloads and a preference for long-term ownership. 2. Subscription Licensing Cost Structure: Recurring monthly or annual payments with lower initial costs. Scalability: Highly flexible; adjusts with usage needs. Ownership: Temporary, based on the subscription term. Best For: Organizations with fluctuating workloads or cloud adoption goals. --- Which Model is Right for You? Perpetual Licensing suits businesses that prefer long-term control and can manage hardware. Subscription Licensing is ideal for organizations seeking flexibility, especially in cloud environments. Both models have pros and cons, so aligning your choice with your organization's operational strategy is key. --- Tomorrow, we’ll delve into Processor-Based Licensing and Core Factor Calculations. Stay tuned! Feel free to share your questions or experiences with these licensing models in the comments. #OracleLicensing #SoftwareAssetManagement #ITCompliance #CloudSolutions #TechInsights #Oracle