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Consumption Economics: The New Rules of Tech
If you’re a tech company, the most dramatic effect of megatrends like cloud computing, managed services, and the rise of consumer technology won’t be felt in your company’s product line. The true disruption will be to your business model. Future customers won’t want to pay you high prices out of big “CapEx” budgets anymore. They will expect lower “cloud” prices paid from “OpEx” budgets only when and if they successfully consume the business value of your products. How your company reacts to this risk shift could either accelerate the commoditization of your products or lead you to a new stage of profitable growth. For the first time, the tools are on the table to truly eliminate barriers of cost and complexity created by the last generation of tech. Consumption Economics is the owner’s manual for tech company executives who want to drive their company successfully into the next one.
240 pages, Kindle Edition
First published October 27, 2011
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Displaying 1 - 23 of 23 reviews
February 15, 2016
Or Crossing the (SaaS) Chasm.
Nicely structured and usefully provocative. An easy and necessary read for anyone working in the software space post-2010. Glad to see reference too Geoff Moore and Phil Lay.
Nicely structured and usefully provocative. An easy and necessary read for anyone working in the software space post-2010. Glad to see reference too Geoff Moore and Phil Lay.
April 24, 2021
Fantastic read. This book was written somewhere around 2011 and it is unbelievable that the authors had such fantastic vision of predicting how the consumption economy will work. An absolute gem of a book if you want to understand the rise of a subscription-based economy, whether it is Netflix, Uber, or any cloud-based technology company. The authors touch about the subject which focuses on how technology companies need to reorient their business structures. The key learning from this book is to understand about the business of your customers, focus on business outcomes, the importance of engaging with end users, and how data can be leveraged to provide precision marketing and sales. We also learn about how services need to be reinvented in technology companies to address consumption-based models. There is currently no single solution to meet the constantly changing consumption-based business. It needs to transcend sales, professional services, technology services, business verticals, business understanding to really drive high consumption utilisation by the customer. A must read if you are interested to know all about consumption economics.
June 29, 2013
Informative and intriguing perspective on the the impact of consumerization to the world of enterprise software sales and purchasing. Provided a new perspective; risks shift to the vendor, adoption and ROI are better measures for the customers for valuing software purchases. increased revenue requires an increased volume of micro-transactions .
January 29, 2024
I did read this for work, but it was a very helpful ground setting topic that focuses on the world of Enterprise IT Consumption Models. This book broke down parts of the history of Software development and IT procurement in the past but provided explanations of its evolution to today via the cloud models. This evolution is especially relevant in my industry and helps shift my mindset to customer success and support, ensuring that our customers are addressing the widening IT gap presented in this book, and focusing on micro transactions and usage overall opposed to large annual contracts.
Good read overall to start the year ahead and understand more about my companies business model.
Good read overall to start the year ahead and understand more about my companies business model.
September 5, 2020
Despite being written back in 2011, "Consumption Economics" is still quite relevant to SaaS and Cloud-based technology providers.
I read many of these business books every year and most often feel content to walk away with a few good lessons. This surprisingly short book was chock full of great insights, bold predictions and sound advice.
Definitely worth a read to get a better understand of the accelerating transformation of software and technology into Cloud-oriented providers.
I read many of these business books every year and most often feel content to walk away with a few good lessons. This surprisingly short book was chock full of great insights, bold predictions and sound advice.
Definitely worth a read to get a better understand of the accelerating transformation of software and technology into Cloud-oriented providers.
October 22, 2019
Really good book for understanding the shift in the VAR model of macro services to micro services. The book was published prior to Microsoft Azure emerging to be the force it is today (2019). However, the principles still apply.
May 10, 2018
The current revolution in technology. Might not be so current after all, it's almost history. Almost.
April 25, 2019
Too old, not relevant anymore.
January 10, 2021
The future is now. Cloud economics helps pave the road for the transitions software companies are making and will continue to make in the near future to endure the rapid pace of cloud.
September 19, 2016
the relevance of the book was more prominent during the 2012 -2014 period. now since it's after the fact of cloud adoption by tech and consumer companies the book serves the purpose of CV revalidation of the facts you are aware of.
December 14, 2016
Compelling case made for the transformation taking place in the tech sector. The authors successfully bring the issues with making the necessary changes to the fore. The ability to act on these and mitigate, particularly the change to the revenue flow, is still a debatable point as can be seen with other disruptive forces. Like all books of their ilk there is a tendency to repeat themselves however by and large the phenomena is well articulated with the reference to tree, branch, leave particularly illustrative. For anyone who has been brought up on a capital sale with a bunch of services to help implement sold at the point of sale this is a must, if slightly unsettling read. Highly recommended.
September 24, 2015
Insightful and still relevant (written in 2011)
A bit repetitive
Key takeaways
1. The true power of Cloud: connecting tech and end-user in real time + ability to aggregate and analyze usage data
2. Simplicity is the new sophistication (unused features are not neutral, but negative)
3. The need to harmonize services across all departments, make everyone responsible for driving consumption, and potentially establish a new services organization responsible for driving product improvements, self-support options, usability improvements and proactive maintenance solutions.
A bit repetitive
Key takeaways
1. The true power of Cloud: connecting tech and end-user in real time + ability to aggregate and analyze usage data
2. Simplicity is the new sophistication (unused features are not neutral, but negative)
3. The need to harmonize services across all departments, make everyone responsible for driving consumption, and potentially establish a new services organization responsible for driving product improvements, self-support options, usability improvements and proactive maintenance solutions.
May 26, 2013
Good book to describe the mind shift involved with the cloud and the resulting economics. Very relevant for high tech industry today and I believe it highlighted a number of challenges to the traditional software companies (including the one I work for). I found the first half the most interesting and relevant but felt it dragged for a bit while describing the change required for Service organizations. Still a very good read for those in the industry.
March 2, 2014
The only business book I have read that was fascinating end to end and didn't feel like somebody took a pamphlet and turned it into a book by repeating themselves over and over. Plus, it was reading about my industry (technology) by somebody who knows my industry intimately. Awesome book. Highly recommend reading if you are in tech.
July 6, 2013
The book discusses the shift away from up front up-front to consumption based billing. Worth reading - it covers the changes occurring in how companies buy technology and services and how this will impact technology companies selling processes.
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January 2, 2016A little redundant
The book is good but a little redundant. I think it could be shorter and still deal with the topic, which is actually a great one. I totally agree with the author's point that consumption is the current most relevant subject for technology companies.
The book is good but a little redundant. I think it could be shorter and still deal with the topic, which is actually a great one. I totally agree with the author's point that consumption is the current most relevant subject for technology companies.
August 10, 2012
I found this most interesting because it covered the real, "why," behind cloud computing...from a buyer's perspective.
July 17, 2014
A great reminder on how history repeats itself with new trends to support the evolution of business. Interesting read for someone just moving into cloud-based work on why business is going there.
September 27, 2013
Very good book explaining why the economics of the cloud will forever change IT.
September 7, 2015
A little dated, but well worth the investment of time.
February 1, 2015
Good overview
Good read for techies. overview of the cloud, why we are moving that way, and the impact on IT organizations.
Good read for techies. overview of the cloud, why we are moving that way, and the impact on IT organizations.
March 12, 2016
Another must-read for anyone working in the IT field. It helps understanding what is driving the biggest IT companies and what they are aiming for in the next couple of years.
July 7, 2017
The core message of Consumption Economics (which was written in 2011) goes something, "The old product lifecycle for IT is dead. The cloud has 'shifted the rules', and brought life to a new, continuous model where the accruement of micro-transactions drives revenue, bringing a renewed importance to pleasing the decentralized 'end-user'.
Either the shift towad the XaaS model was obvious six years ago, or the authors of this book were ahead of their time in understanding the next generation of tech businesses.
Key to understanding this shift is the 'Margin Wall' which arises when cross-company product differentiation slows, leading to a wave of commoditization (and lower revenue). The old business model ('Product Playbook') tackled the Margin Wall by releasing and discrete increment on the product as a means to solve an existing problem or create an innovative capability. In the new Consumption Model, the only way to hurdle the consumption wall is to increase the volume usage. This means focusing on MT's (even in the enterprise space) and its three dimensions (1) More Features per User; (2) More Users per Month; (3) More Apps per User.
The authors predict that that the Services branch of the Companies will become best equipped to deal with the responsibility of driving platform usage. Built atop the back of big-data and monitoring, the rise of Account Services Organizations (ASO's) is foretold as the next major importance branch of business organization. The role of ASO will be to provide tech support as well as monitor consumption habits and upsell micro transactions.
The role of sales teams will still be to make deals with technology officers that bring enterprise (and public sector) end users to the platform. In order to retain long-term relationships with end users, sales teams will become beholden to customer satisfaction metrics.
Summed up, the end-to-end consumption cycle is compared to the growth of a tree: (1) Sales sells the trunk; (2) CPS preps the customer; and (3) Account Services grows the tree.
With this in mind, the key to success in the capital market may be to accurately and reliably forecast consumption – making an understanding of Consumption Economics absolutely key.
Either the shift towad the XaaS model was obvious six years ago, or the authors of this book were ahead of their time in understanding the next generation of tech businesses.
Key to understanding this shift is the 'Margin Wall' which arises when cross-company product differentiation slows, leading to a wave of commoditization (and lower revenue). The old business model ('Product Playbook') tackled the Margin Wall by releasing and discrete increment on the product as a means to solve an existing problem or create an innovative capability. In the new Consumption Model, the only way to hurdle the consumption wall is to increase the volume usage. This means focusing on MT's (even in the enterprise space) and its three dimensions (1) More Features per User; (2) More Users per Month; (3) More Apps per User.
The authors predict that that the Services branch of the Companies will become best equipped to deal with the responsibility of driving platform usage. Built atop the back of big-data and monitoring, the rise of Account Services Organizations (ASO's) is foretold as the next major importance branch of business organization. The role of ASO will be to provide tech support as well as monitor consumption habits and upsell micro transactions.
The role of sales teams will still be to make deals with technology officers that bring enterprise (and public sector) end users to the platform. In order to retain long-term relationships with end users, sales teams will become beholden to customer satisfaction metrics.
Summed up, the end-to-end consumption cycle is compared to the growth of a tree: (1) Sales sells the trunk; (2) CPS preps the customer; and (3) Account Services grows the tree.
With this in mind, the key to success in the capital market may be to accurately and reliably forecast consumption – making an understanding of Consumption Economics absolutely key.
Displaying 1 - 23 of 23 reviews