End Users To Vendors: We Want Subscription-Based Models

“I can’t tell you how many times I’ve said, ‘I’d like to get that software or hardware or something,’ But then you say, ‘I just signed a three-year contract with XYZ company. Now I’m locked into that so that’s at least three years away,’” says the Neil Kelly Company’s Bob Hestand.

As most business models across all industries shifted to include or expand their digital presence, many end users are learning they need something different from their vendors, including axing multi-year contracts and offering subscription-based models.

“I can’t tell you how many times I’ve said, ‘I’d like to get that software or hardware or something,’ But then you say, ‘I just signed a three-year contract with XYZ company. Now I’m locked into that so that’s at least three years away,’” said Bob Hestand, chief information officer and chief human resource officer for the Neil Kelly Company, a remodeling services and home improvement company based out of Portland, Oregon, at The Channel Company’s Midsize Enterprise Summit in Dallas, Texas this week. IT leaders across three different industries joined Adam Dennison, The Channel Company’s vice president of Midsize Enterprise Services, on a panel to discuss how the pandemic digitally changed their businesses and what they need now for business growth.

All three IT leaders said they would like to see a month-to-month subscription-based model from vendors instead of multi-year contracts.

Before the pandemic, Hestand said the company’s Pacific Northwest offices used to all have their own meetings.

“When we all went remote we said, ‘Why are we doing four of these meetings? Why don’t we all be together,’” he said.

[Related: These 33 Top Tech Companies Put Employees First: People Magazine]

While there was some initial pushback, the company did transition to have one collective meeting for its four offices.

“Now nobody wants to go back to the individual market meeting,” he said. “It has fundamentally transformed how we communicate and collaborate.”

Going digital has also helped customers as initial meetings are now online or over the phone. Some design meetings are also online.

“We actually found a lot of our customers actually liked that,” Hestand said. “They don’t want [to make] 15 trips to the showroom, they don’t want [to make] 10 trips to the office, so we really streamlined that process. And what we found is the process from lead to contract signing shrunk, because we’re more efficient.”

An initial online customer portal has also been implemented. And since shifting its business model, Hestand said the remodeling company has seen record setting profits month after month.

In being both the human resources and IT leader within his company, he said a lot of IT is being brought into HR as well.

“Bringing the technology side into HR is rethinking a lot of those antiquated, old processes that we’ve got,” he said. “Why do you need to fill out 37 forms? Why can’t you fill out one?”

When he took over human resources in March 2020, there was a stack of papers new hires had to sign. Hestand got that stack down to two sheets.

“It’s all electronic now,” he said. “I revolutionized a lot of our traffic by bringing some of our IT best policies or practices, those things that we do every day, into an area that hasn’t really always thought that way.”

He said while a subscription-based model would be a pain for the vendors as they would have to work harder to bring the end user back each month, “I think we’ll both be happier in the end.”

“I totally get it. As a vendor, you want to lock me into the three-year contract that way there’s a nice, deferred revenue stream for three years,” he added. “It totally makes sense. But it doesn‘t make sense for me, and I’m the person with the checkbook.”

For OOBE, an apparel design company based in Greenville, South Carolina, the company grew the B2B side and created a brand new mobile app to make purchase orders that much more seamless. Jeff James, senior director of innovation and technology for the company, said the pandemic actually allowed the company to step back and do a usability study to see how they can better their business model and position the company for longevity.

While it closed a physical store in Charleston, South Carolina, its online sales “went through the roof,” during the pandemic, James said. But brick and mortar stores aren’t dead, he added. While the company is still considering reopening a physical location, it wants to take that experience “and make it a digital one.”

James also suggested that more vendors implement cooperative purchasing agreements.

“The co-op could include 30 different companies. They come together and they buy software or products or services and they end up paying these reduced costs, but there may be longer-term contracts involved in it,” he said. “What happens now is we have vendors walk into my office or call me and they want to sell me a product at this high cost.”

A co-op agreement is intriguing to him because it’s a class of companies in the same revenue range.

“That’s compelling to me to be able to jump in with a group of folks,” he said. “If you’re doing really great business, we’re going to get together.”

Blaine Carter, chief information security officer for FranklinCovey, a Salt Lake City, Utah-based professional training and coaching firm, said the company was on a path to digital transformation before the pandemic.

“What we’ve found is that each different company that we teach has a different idea of what they’re looking for,” he said. “Everyone’s gotten so used to digital, and digital has to be a perfected medium for everyone that has to be flawless. But now it kind of has to be almost a hybrid approach that someone would interact with the company digitally, have that great experience, and then maybe also interact with them physically in some manner.”

What his company is seeing now is how to find a balance between interacting with customers both face-to-face and online and giving them both a great experience.

And that great experience can translate to vendors, Carter said.

“If the service is so compelling that people want to use it, I’d like to see more of that in the midmarket where the value proposition is so compelling that you don’t even have to walk into a three-year [contract] to be able to do it,” he said.