Customer Management

Software Microservices Open Up New Business Models for Companies

Software Microservices Open Up New Business Models for Companies

This interview was first published by Steve Norton in the Wall St. Journal with the title, “Software Microservices Open Up New Business Models for Companies” on June 18th.

Companies are trying to move beyond selling products to creating lasting relationships with customers. Many are seeking new revenue streams by selling software and other products as a service, similar to the model used by Inc.

Automakers such as General Motors, for example, look to interact directly with customers via connected-vehicle systems that help find nearby restaurants or parking lots. Manufacturers are looking beyond selling physical equipment to services that can monitor the health of that equipment in real time. Caterpillar Inc. is nurturing a growing line of subscription data services, analyzing data from sensors connected to their machines to help customers run building projects more profitably.

To take advantage of the subscription model, CIOs must move away from large, centralized systems and embrace a microservices architecture, in which software applications are deployed as a set of independent, reusableservices, said Tien Tzuo, founder and chief executive of Zuora Inc., a decade-old company that provides cloud-based software to help companies manage subscription services. Doing so can allow firms to spin up new applications more quickly, and provide flexibility around where and how they run.

Mr. Tzuo spoke with CIO Journal on Friday about how companies are shifting to subscription-based business models. Edited excerpts follow.

WSJ: What kinds of firms are making the switch to subscription models?

The technology vertical is probably farthest along. Adobe…their shift to subscriptions is giving the whole software sector courage to do the same thing. We see a lot in media. We’re also seeing quite a bit in manufacturing: Caterpillar, Ford, General Motors. These are companies with physical products that they’re realizing are smart products, and they’re finding all these new revenue streams that they now can create and sell and monetize.

What are the biggest hurdles for companies trying to make the shift to subscriptions?

The way you build product is different. Modern companies are iterating based on what customers are doing and making quick decisions. There’s an acceleration, and you need the data, what people are clicking on. What should we be looking at, and how do you personalize down to the individual user?

What CIOs are struggling with is they just spent 20 years standardizing these systems of record, built around an SAP or an Oracle core. Now the business is coming in and saying we need to iterate, we need to be agile and we need to experiment with a bunch of things. The way the IT organization works now … they say, OK, we can put it in our backlog, and in 12 months we can deliver something to you. The business says, I can’t do that. I need something now. There’s an agility there that IT needs to start to support, which means this whole infrastructure that they’ve standardized on is actually holding them back.

How do CIOs begin to facilitate the switch?

A company that’s more of a digital company will do a wholesale replacement of the quote-to-cash process. They’ll rip it out of Oracle and SAP and they’ll put it on a modern stack like us.

A company like Caterpillar or General Motors says we’re still going to sell a lot of cars, but we (also) need a connected-car platform. So they’ll put a subscription management platform on the side of their core business. We’ll still use (the core system) to sell cars or to sell tractors, but let’s put in the digital platform or the subscription platform here.

How does corporate IT architecture begin to shift over the next few years?

You’re starting to hear a lot of people talking about microservices. Silicon Valley companies have always talked about that, but now you’re hearing it in enterprise IT. The general pattern is that the big monolithic system is not going to work. It just won’t scale. So how do you build systems that are independent and have their own data stores and can be hosted anywhere?

We would argue that there should be a three-cloud architecture. We would say the anchor systems are your customer relationship management system, your financials — because at the end of the day you do need financials — and then you have what we call a subscriber management system. In these modern business models, you need a hub that shows your key subscribers and what they purchased. Your interactions with customers now are not some customer buying 50 widgets of something, and if you log in we save your payment information on file. Your customers say this is the subscription I have with you right now. It’s about modifying these plans, which is very different. That system then orchestrates provisioning and fulfillment, it orchestrates the accounting system, it generates all the invoices and payments that are related to all those plan changes.

Having a three-cloud architecture, and then having things bolt around one of these three clouds is a stronger way to go.

How far along would you say customers are in switching to microservices?

It’s very early. This is going to take five to 10 years. They’re probably trying to building new things on microservices, but they still have a lot of legacy stuff.

As subscription happens, how does the role of the CIO change?

The biggest thing is the classic model of IT, saying can you give me all of your requirements and I build something for you over time, just doesn’t work anymore. I don’t know what I want. I don’t know which connected car service will make a lot of money. I don’t know what the right pricing and packaging is that I’m going to hit on. I can’t even tell you all of the things I’m going to launch in the next 12 to 18 months. So when (business units) go to the IT organization and want to support something, they need to be able to do things in chunks and iterate really quickly, and so their systems have to really be able to support that.

Nintendo drops Virtual Console model in favor of subscriptions

Excerpts from the article by Rebekah Valentine on

Nintendo drops Virtual Console model in favor of subscriptions

In a post on the official Nintendo website last night detailing the Nintendo Switch Online service, the name "Virtual Console" was conspicuous only by its absence.

Upon reaching out to Nintendo, Kotaku learned that this omission may be a permanent one, as the spokesperson replied via email: "There are currently no plans to bring classic games together under the Virtual Console banner as has been done on other Nintendo systems."

The Nintendo Switch Online service debuts this September. Last night's announcement included pricing, feature, and membership details as well as how its classic game service will work. Subscribers will be able to download and play 20 total classic NES games at launch (including Super Mario Bros. 3, Donkey Kong, and The Legend of Zelda) with more games promised later on.

Virtual Console has been a popular request for the Switch since the system was announced. As a doubly effective approach to combating software piracy and monetizing old games, its presence on the Wii, Wii U, and Nintendo 3DS systems earned Nintendo a reputation for keeping its classics alive. Since launch, Virtual Console kept titles from the NES, SNES, Game Boy, Game Boy Color, Nintendo 64, and many other systems affordable and easy to acquire where original copies would typically fetch high prices at used game stores or online.

Nintendo's statement closes the door on further Virtual Console speculation as it continues to emphasize its new model for releasing classic titles. By shedding the Virtual Console label, Nintendo reserves the right to recreate audience expectations for such releases. With Nintendo Switch Online subscription games, Nintendo commits to at least a console-worth of the more popular titles in a subscription-based model. While there has also been word the company was planning to add GameCube games to the Switch's offerings, that report emerged months before the system's launch, and has not been corroborated since.

Nintendo Switch Online isn't Nintendo's only plan of attack, nor are other publishers ignoring the shift. For Nintendo's part, it has the NES Classic and SNES Classic retro consoles and Arcade Archive games such as Punch-Out!! Then there's Hamster's growing library of classic Neo Geo titles on the Switch and upcoming collections such as Sega Ages and Capcom's Mega Man X Legacy Collection keeping old games selling on modern systems.

All you need for a Volvo XC40 subscription is your iPhone

Excerpts from the article by Rob LeFebvre on Engadget

All you need for a Volvo XC40 subscription is your iPhone

Getting a new car is getting even easier these days. BMW, Lexus and Volvo have all started selling cars via subscription. The Care by Volvo program gives you an all-wheel-drive XC40, insurance, routine maintenance, roadside assistance and no money down for $600 a month. That sounds pretty great, but it's also super easy to sign up. Now you can sign up and pay for your monthly car sub via an iOS app and Apple Pay.

You can use any iOS device to run the Care by Volvo app, of course, and both Touch ID and Face ID work to authorize the payment. The app allows you to take a virtual tour of the XC40, configure your own with options and fill out your details for the subscription. All of this right from the app — no need to visit the website. Once you submit all your details, a Volvo concierge will get in touch to coordinate delivery.

Read more on Engadget

Lincoln adds more pre-owned vehicles to its subscription service pilot

Excerpts from the article by Mallory Locklear on Engadget

Lincoln adds more pre-owned vehicles to its subscription service pilot

Lincoln announced this week that it's expanding the pilot of its subscription service. The company said late last year that it planned to launch such a service and while a small selection of 2015 models have since been available through Ford's Canvas platform for those in San Francisco and West Los Angeles, Lincoln is now including a much wider range of 2017 pre-owned vehicles for customers in West Los Angeles. Monthly payments depend on the mileage package a user wants, but they also cover insurance, warranty, maintenance and roadside assistance.

A number of automakers have embraced subscription models, though most of them offer new vehicles through their services. Lexus and BMW both announced subscription services recently while Cadillac, Volvo and Ford launched theirs previously.

Lincoln, which unveiled its Aviator SUV earlier this week, also includes its Pickup & Delivery service with subscriptions of its 2017 vehicles. If the vehicle needs service, Lincoln will send someone to pick up the car and drop off a loaner. And post-service, the car is returned in the same manner.

You can check out the available 2017 models here.

Porsche subscription model is working and it’s attracting younger drivers

Excerpts from the article by Kellie Ell on CNBC

Porsche subscription model is working and it’s attracting younger drivers

Porsche Passport, the luxury car brand's subscription service that began in Atlanta last November, is attracting younger-than-expected drivers to the 87-year-old legacy company.

"We engage people with a brand that they usually wouldn't," Klaus Zellmer, CEO of Porsche North America, told CNBC's Phil LeBeau while in New York City for the 2018 New York International Auto Show.

"We're conquesting a target group, and engaging them with a brand, who do not want to commit to a three-year lease. They just want to go month by month and are willing to spend for that," Zellmer said.

Porsche Passport, which provides subscribers with access to Porsche vehicles via a mobile app, is currently only available in Atlanta, home to Porsche's North American operation, as well as Clutch Technologies, the company hosting the app.

The month-to-month subscription gives customers two price options: A flat fee of $2,000 or $3,000. The subscription includes a $500 activation fee and credit check, and covers vehicle tax and registration, insurance, unlimited mileage and maintenance. Smartphone users can download the app and begin using the same day or schedule future rides. 

The program may be part of what's giving the company a boost in an otherwise grim industry. While U.S. new vehicle sales fell 2 percent in 2017, Porsche's sales in the U.S. had its eighth consecutive year of growth. The company's overall value increased nearly 42 percent, as market cap shot up to $24.457 billion this month, compared with $17.26 billion last March.

Zellmer said the growth can be attributed to many things, including tax reform and modern lifestyle habits.

Read more on CNBC