Why you need to belong to the 80% of software vendors upgrading to subscription models
Jos de Kruijf, Founder & Partner TenX2
Although the majority of larger software vendors upgraded to the subscription economy, smaller organisations have not yet made that transition. Smaller vendors often value the advantages of a recurring revenue-based business, but are not always capable to follow lead. Gartner however, predicts that by 2020, more than 80% of all software vendors will have shifted to subscription based business models. This article is intended to provide some compelling reasons why you as a software vendor, want to belong to the 80+% in transition.
During the past decade, enterprises have transitioned from buying goods to subscribing services. Through that transition, software vendors including Adobe, Cisco and Microsoft, transitioned from traditional license organisations to recurring revenue-based businesses in the subscription economy. Through that process, they introduced flexible "pay-as-you-go” software solutions that through high-speed cloud enabled networks, became instantly available. Vendors supporting subscription models, enjoy the freedom and flexibility to release frequent functionality and feature updates while they have multiple options to develop new and creative licensing models to reach customers in alternative ways and with full flexibility to offerings around the number of licenses and user-based models.
Obviously, the migration to subscription models affects many lines of business including product development, marketing, billing and sales. The shift to the subscription model industry, requires a major change in sales strategy and formation of sales teams. Vendors through transition, are required to impress customers with higher levels of customer care and service. Vendors have to extend the service offering through the lifetime of a customer engagement by managing overall customer satisfaction, license churn and retention. Successful execution of these new service levels enables vendors to increase customer engagement with the option to upand-cross-sell licenses and services.
Transformation to subscription models require a balanced approach as the vendors bottom-line are likely to suffer during the first years of service. This could be caused by a combination of deferred revenue and transformation of business without structured approach. Recurring revenue-based businesses in the subscription economy are not a guaranteed success, but if software vendors are willing to transform the internal organisation and provide relentless focus on process and customer success, they are more likely to achieve better results. Are you ready to engage with subscription experts that can guide you through the transition process? Is your company seeking predictable recurring revenue streams and transparent customer engagements?
TenX2 partners are available to engage with software vendors that are considering a transition to the subscription model industry. They are highly capable to guide the vendor through the entire migration process. Please contact us at firstname.lastname@example.org for more information.