Software publishers, like all companies, face increasing pressure to provide shareholders with assurances of sustained revenues, consistent growth, and, of course, greater profit margins. Historically, revenues were earned through traditional perpetual licensing models and maintenance plans. However, selling more and more lifetime licenses year after year has become a tough exercise. Let's face it—end users don’t always need additional licenses or wish to upgrade to the latest version at the pace publishers want.

The Shift to Subscription Models

Faced with the challenge of sustaining growth through perpetual licensing, software publishers have increasingly transitioned to full or hybrid subscription-based models to stabilize revenue streams. In our time working in software licensing and compliance, we've had the opportunity to observe how certain publishers have navigated the complex process of migrating large customer cohorts from one model to another. Of particular interest in recent years are the following examples:

• Adobe: Adobe made a significant shift with its Creative Cloud suite, moving from perpetual licenses to a subscription-only model in 2013. This change required users to pay a recurring fee to access software like Photoshop, Illustrator, and other Creative Suite applications.
• Microsoft: Microsoft has gradually transitioned its Office suite from a perpetual license model to a subscription-based one with Office 365 (now Microsoft 365). The subscription model offers continuous updates, cloud storage, and other services that aren't available with one-time purchases.
• Autodesk: Autodesk, known for its design and engineering software like AutoCAD, transitioned to a subscription-only model in 2016. This move aimed to provide customers with more flexibility and access to the latest updates and features.
• IBM: IBM has increasingly pushed its software offerings, like IBM Cloud and Watson, into subscription-based models, moving away from traditional licensing as part of its broader shift toward cloud services.
• Oracle: While Oracle still offers perpetual licenses, it has increasingly promoted its cloud services, including Oracle Cloud and Oracle Autonomous Database, which are available through subscription models. The company has also been encouraging customers to move from on-premises licenses to cloud subscriptions.

Accelerating Perpetual to Subscription Migration: Key Drivers and Strategies for Publishers

Beyond simply halting the sale of older perpetual licenses, there are numerous incentives publishers can offer to encourage customers to transition to subscription models early. Some of these incentives include:

• Discounted Pricing: Offering reduced prices for a limited period to encourage early adoption.
• Bundling: Providing additional features or services at no extra cost if the transition is made within a specified timeframe.
• Extended Support Periods: Offering longer support durations for new licenses compared to older ones.
• Premium Support: Providing enhanced services such as dedicated account managers or faster response times for companies that transition.
• Migration Tools: Developing tools that simplify the process of transitioning to the new licensing model.
• Professional Services: Offering professional services to assist with the technical aspects of the migration.
• New Features and Performance Improvements: Highlighting new features and performance benefits only available under the new licensing model.
• Security Enhancements: Emphasizing improved security features with the new license.
• Payment Plans: Offering flexible payment plans to reduce the immediate financial burden of transitioning.
• Contractual Incentives: Including clauses that provide additional benefits or protections if the transition is made.

While these incentives naturally encourage many customers to make the switch, large publishers with thousands—or even hundreds of thousands—of customers face the challenge of ensuring they all recognize and adopt the benefits of the new models within the desired timeline. If we’re honest, most customers won’t make the switch easily or willingly, and the transition is often met with resistance. So, what can you do to speed up the migration?

Strategies for Accelerating the Transition

From our experience working with a broad range of publishers over many years, whether they’ve already transitioned, are in the process with hybrid models, or need to accelerate the transition, two key strategies have emerged:

1. Subscription Transformation Service: A complementary, non-punitive approach to supporting customers in evaluating their installed base, usage, and total cost of ownership comparison between existing perpetual and newer subscription models.
2. Leveraging Traditional Audits: Using the audit clause to conduct a compliance audit, with the primary objective of encouraging customers to transition their licenses when non-compliance is identified.

Benefits of Each Strategy

Subscription Transformation Service

• Customer-Centric Approach: By offering transformation services, publishers demonstrate their commitment to supporting customers through the transition, fostering goodwill and loyalty.
• Facilitating Informed Decisions: These services help customers compare total cost of ownership, usage patterns, and potential savings, leading to more informed and willing transitions.
• Reduced Resistance: A supportive approach reduces resistance from customers who might otherwise hesitate to move away from perpetual licenses.
• Long-Term Revenue Stability: Subscription models typically offer more predictable revenue streams than one-time perpetual license sales.
• Enhanced Customer Insights: Through transformation services, publishers gain deeper insights into customer needs, which can inform product development and marketing strategies.
• Market Differentiation: Offering value-added services such as transformation support can position publishers as partners in customer success, differentiating them from competitors.

Leveraging Traditional Audits

• Identifying Transition Opportunities: Audits can uncover instances where customers are using outdated perpetual licenses, creating an opportunity to recommend subscription models.
• Encouraging Proactive Compliance: When audits reveal non-compliance, publishers can use the findings to guide customers toward subscription licenses, ensuring they remain compliant.
• Value Conversations: The audit process opens discussions about the value of current licensing arrangements, enabling publishers to demonstrate how subscription models offer better long-term value.
• Facilitating a Smooth Transition: Audits provide a structured approach to identifying gaps and helping customers transition smoothly.
• Maximizing Revenue Potential: Guiding customers toward subscription models through audits unlocks new recurring revenue streams.
• Building Long-Term Relationships: A non-punitive audit process can strengthen customer relationships by showing commitment to the most beneficial licensing model, fostering trust and loyalty.

Choosing the Right Program

When publishers consider implementing audits or subscription transition services, they should evaluate key factors such as customer impact, resource allocation, scalability, customer segmentation, timing, communication, and long-term strategy. These considerations ensure that the transition is smooth, scalable, and beneficial for both the publisher and the customer.

Conclusion

As software publishers continue transitioning from perpetual to subscription models, combining Subscription Transformation Services with strategic audits, along with traditional incentive schemes, can accelerate the process. These approaches not only encourage compliance and adoption but also strengthen customer relationships, unlock new revenue streams, and differentiate publishers in a competitive market.

As the industry continues to evolve, these strategies will be essential for publishers looking to maintain growth, stability, and customer loyalty in an increasingly subscription-driven world.

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