Thinking Subscription Software License? Review These 3 Considerations First

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Practical considerations from a recent panelist discussion on subscription licensing

I recently served as a panelist at TechWeek Chicago where the topic of discussion was subscription licensing. Many application producers and device manufacturers are diving head-first into adopting a subscription license model in their software licensing solutions portfolio, so I thought I’d lay-out a few key areas to help frame the discussion:

1.     Perpetual v. Subscription

As we were sharing our thoughts on subscription licensing it occurred to me that some in the audience didn’t realize what some of the basic differences were between perpetual and subscription licensing models from a software monetization perspective – so here’s a quick primer on some key differences between the two:

Table

2.     Practical Considerations

In my 25+ years of experience I’ve found that application producers shouldn’t shift to a subscription model just to keep up with what’s trendy – they need to look at how software licensing solutions can help them accomplish their business goals. Let’s consider an example:

In your business planning meetings, your organization sets an annual revenue growth target of 10%. While the goal is simple enough, the devil is in the details for any application producer. Here are some things you might consider from a software licensing perspective:

  • Would a different mix of features give us a product that would sell better than others in our portfolio? Can we easily configure a new product from existing features?
  • What size companies are we targeting? Are they larger companies that have more of an appetite for a perpetual licensing model? Or are we targeting smaller growth companies that want to lay out less cash so a subscription model makes sense?
  • Can we shift our internal operations from what we’ve always done to a subscription model? Will our ERP/CRM combination give us what we need for the shift? What teams should we involve to shift to subscription?

3.     Stakeholder Discussions

One thing I’ve found to be beneficial is to get multiple stakeholders involved early on in the licensing discussion. Below are a few questions you should be asking your respective team members before adopting a subscription license model:

  • Product Management: Do we have visibility into who owns what products?
  • Finance: How will this impact our quote-to-cash processes? What is the impact from a revenue recognition perspective?
  • Product Development: How will we implement software licensing solutions into the product so that it’s scalable and responsive to future market demands?

I hope this overview has helped, and please see below for additional resources. Let me know if you have any questions or want to learn more!

-Geoff

Geoff Surkamer is the Vice President of Worldwide Software Monetization at Flexera.

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