Topic: Strategy

How To Turn Software License To Subscription?

Posted by john.donnery on 500 Points

I currently sell my software for $750, per user license. This is perpetual license, and every year they pay 20% for maintenance. More and more customers are asking about subscription model.
I'm looking for successful stories of transitioning from perpetual software license to subscription model - not Adobe, but small software vendors, distributors, without millions of customers. Looking for pricing ideas, how to 'sell' new idea to customers.

Thanks for any suggestions how to do it, what to be careful of. Any feedback is appreciated.

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  • Posted by Mike Steffes on Member
    Can you define "more and more"? It likely doesn't have to be an either/or change. Discover what the applicable segments want and provide it. Innovating for some future state is a long, harder-than-it-has-to-be road. Innovate for the present.
  • Posted by john.donnery on Author
    Yes, I'm thinking on having a transitional period when both licenses are available and test "more and more" subscription customers will turn into business. I want to design it good, so I'm looking for example of success stories that I can draw ideas from.
  • Posted by Jay Hamilton-Roth on Accepted
    In general, subscription means cloud-based software (think SaaS). You could transition your desktop license into a time-expiration version (rolling out a new version to support this "feature"), but it can be tricky to do this right.

    From a marketing perspective, these articles may provide the insight you're looking for:
  • Posted by matthewmnex on Member
    In general, and without knowing anything about your application, you will need to make some changes to the software itself in order to monitor, manage licenses.
    For instance, what happens if a user fails to pay the subscription? you need an ability to 'turn off' access temporarily and then reactivate later when you collect.

    You have to think about your support cost. Traditionally, this was sold as an annual fee on top of the base license. Since you are moving to subscription, you need to ensure that you are collecting enough to cover the support.

    If you are going to run it in the cloud, as opposed to on the customer premise, then of course you have to think about your hosting costs and these can be very large.

    If you are moving from 'on prem' to cloud, then the responsibility for security changes also so you will need to be sure you can support security and MFA / SSO etc.

    There are 101 things to consider and the transition is much harder than people imagine.

    On the other hand, if you just want to allow users an easier cash flow model and offer the same software that you currently offer with no changes, then it is not really a subscription but instead a 'Software Lease'. Instead of charging US$ 750, you can charge X per month or per quarter with a defined end of term (1 year or 3 years). Don't forget to add cost of money on the price.

    Contractually, a subscription and a lease are different animals so seek proper legal advise on how to write the contracts.

    Fell free to get in touch if you would like further info.

    Good luck with your project.

  • Posted by john.donnery on Author
    Thank you, I think subscription is easier for accounting vs lease, for customers. Subscription is operating expense, for exact period, with all cost included. I think this is easier to accept, since a lot of software is going into this direction.

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