Looking to add subscription billing models? Incorporating subscriptions can expand your product offering to garner new customers and generate predictable, recurring revenue from already established accounts. However, it does require some planning and strategic changes.
In Flexera Software’s video “Shifting From Perpetual to Subscription Software Licensing Models Doesn’t Have to Be Painful,” Principal Strategy Consultant Cris Wendt discusses why subscription software licensing models have gained favor in recent years, as well as two key factors to consider when shifting from perpetual to subscription licenses.
Subscriptions — Revenue Recognition Changes
The first point Cris talks about is the fear of changing revenue recognition. Because perpetual licenses provide complete revenue recognition up front and subscription licenses amortize it throughout the year, many companies are scared that offering subscriptions will hurt revenue. Cris says this is not true.
The reality is that subscription models are flexible enough to accommodate both smaller customers who are cash-flow sensitive or very large companies that prefer operational expenditures over capital expenditures.
Subscriptions — Operational Changes
Offering subscriptions brings many changes to the operational process. In the video, Cris talks about the need to automate your subscription license process because there are so many different events involved in the life cycle of subscriptions. These events include things like generating renewal notices, updating invoice and billing information, and complying with changing legal requirements.
With the renewed focus on customer relationships, the subscription economy is growing daily. It’s worth taking some time to see if this model if right for you. Check out everything Cris has to say in the video below.
For more information about overcoming subscription challenges, download our complimentary guide: Navigating the Subscription Solutions Landscape.