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Subscription Software Licensing Model Brings Added Revenue, Ongoing Sales Effort

By Mae Kowalke, TMCnet Contributor

For anyone who has been near a computer in the last five years, it comes as no surprise that subscription-based licensing is on the rise among software developers. Moving to a subscription-based licensing model is not the end of it, however; shifting from a perpetual license model to a subscription model requires a drastically different way of doing business.

A new video put out by Flexera Software discusses some of these changes that come from the new licensing trends.

“To be frank, subscriptions become a manifold complexity issue compared today with perpetual licensing,” noted Michael Costa, principle solutions architect for Flexera. “That’s primarily because the sales process is continuous. That means that the licensing also has to be continuous. While in the past you might have given somebody a perpetual license and said ‘good luck,’ or given them an upgrade license for incremental upgrades over time, now you have to look at the regularity of that relicensing over time.”

There may be a certain amount or runway that customers have before they need to renew their license, but software developers need to continuously concern themselves with relicensing to maintain revenue.

This can put a greater emphasis on usage data. Since the sales process is continuous with a subscription model, developers can ill afford to be out of touch with how customers are using software.

Instead, developers need to mine usage data to uncover what features customers most use, and in turn how the software solution can be better and both retain existing customers and draw new ones.

Getting customers to start using the software also is becoming key.

“I’m seeing more clients not caring how you host your software or whether it is perpetual or subscription,” noted Jim Geisman, the principal and founder of Software Pricing Partners.

He likened the new software licensing environment to buying a new car.

“It is not unlike what happens when you go to buy a car,” he said in the video. “They don’t ask you how you want to finance it, but they ask you when you are going to take it off the lot.”