Impact of changing pricing strategy from perpetual to subscription licensing on an organization

Abstract

There is an increasing trend in SaaS businesses to offer products and services via subscription licensing. According to a Gartner Study', 80 percent of software vendors will change their business model from perpetual licensing to subscription pricing by 2020. This implies that existing software companies will need to transition to subscription licensing to continue to stay relevant in the market. Strategy change of this nature is not straightforward, and requires a lot of key departments to come together to execute it well. This thesis focuses on understanding the impact of the shift to subscription licensing on external customers and internal departments (sales, marketing, product management & finance) of organizations that make such a change. Reactions of external customers are analyzed via a case study on Tableau, which recently moved to a subscription based model for its Business Intelligence (BI) software. Senior leaders from various SaaS companies were interviewed to understand the organizational structure required to implement a successful change to subscription licensing. Finally, this study provides some actionable insights for organizations that are planning to switch to a subscription based pricing strategy.