license subscriptions - a cash machine for your software

A Cash Machinefor Your Software

Ruediger Kuegler | VP [email protected]

Stefan Bamberg | Senior Key Account Manager [email protected]

A Business View

The User’s / ISV’s Experience

The Developer’s Perspective

Speaker 3

© WIBU-SYSTEMS AG 2016 - A Cash Machine for your Software 2

Basic Foundations ofSubscription Models

01.06.2016

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License Subscription

The user leases the software The right to use the software ends when the subscription expires In technical terms

Time-limited license with Expiration Time

Examples: Anti-virus software

Office applications like Office 365

Game portals like Sony Entertainment Network

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Maintenance Subscription

The user purchases the software The user signs up for a maintenance contract The right to use the software does not expire The right to receive updates expires with the end of the maintenance In technical terms:

Perpetual license with a Maintenance Period

Example: Microsoft Software Assurance

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Paying by Installments

The user pays for the software in installments The user get the timely unlimited right to use the software after the last

payment In technical terms

Time-limited license with Expiration Time until last payment,

Converted into a perpetual license after last payment

Example: Selling software in Latin America

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Pricing of Subscription Models

Purchasing software only Full price 100%

Payment by installments 1 to 2 years, 5% - 20% annual interest rate

Price of the update 50% - 100%, depending on the last purchase

Maintenance Subscription Annual maintenance fee 12% - 25% of license fee

License Subscription Monthly fees 2% - 5% of license fee

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Software Revenues per Customer

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0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 600%

50%

100%

150%

200%

250%

300%

Purchase

Payment by Installments

Purchase / Updates

Purchase / Maintenance Subscription



Business Analysis – Example 1

New customers per year 100

Price of the software application (license fee) $5,000.00

Selling software update 50% of the customers purchase an update

Update priced at 50% of the software

Purchase after 3 years

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Business Analysis – Example 2

Maintenance Subscription 75% of the customers sign up for a maintenance contract

Maintenance fee is priced at 20% of license fee

Churn rate: 10% per year

License Subscription Price: 4% of license fee

25% more customers thanks to an enticing offer

Churn rate: 5% per year

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Annual Software Revenues

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1 2 3 4 5$0.00 Mio

$0.25 Mio

$0.50 Mio

$0.75 Mio

$1.00 Mio

$1.25 Mio

$1.50 Mio

Purchase / Updates

Purchase / Maintenance Subcription



Conclusions of the Business Analysis

Selling maintenance contracts via subscriptions is risk-free A license subscription model generates more revenues in the long term,

but represents a risk in the early years Introducing a new license model attracts more customers

For a successful outcome, the selection of the right subscription price is essential: its relation to the full software price and certain psychological barriers at $50 / $100 / $200 / $500 come into play

It is recommended to proceed in stages, i.e. for individual products or markets

The math and the business analysis are different for each software!

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Workflow

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CodeMeter User

Signing up for a Subscription

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License (next billing date + overtime)

4

Ticket + Context

3

TicketABCDE-FGHIJ-KLMNO-PQRST-UVWXY

2

Subscription Agreement (Original PurchaseID)

1e-commerce

Software


CodeMeter User

Next Billing - Renewal of the License

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Updated Licenses (next billing date + overtime)

3

Ticket + Current License

2

Renewal (Original PurchaseID + PurchaseID)

1e-commerce

Software


The User’s Experience

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User’s Experience

Signing up (purchase) for a subscription on an e-commerce platform Ticket as an activation code

Activation of the subscription license Enter the ticket

Automatic billing during the subscription on the e-commerce platform Automatic renewal of the license Automatic notification when credit card expires

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