Aveva Sheds Light on ‘Huge Transformation’ to Recurring Revenue

AVEVA WORLD 2023 — Aveva is steering its channel partners away from selling perpetual software licenses to subscriptions-based, recurring revenues.

“Commercially, the business model transition is to subscription, recurring revenues,” said Rob McGreevy, chief product officer at Aveva (pictured above, onstage at  Aveva World.)

He was speaking to Channel Futures at the company’s flagship event, Aveva World 2023, in San Francisco this week.

McGreevy said Aveva would end the year with 80% recurring revenues from partners. This is up from 60% as per its last financial statement, prior to its acquisition by Schneider Electric.

“It’s going a lot faster than we thought, which is good,” said McGreevy. “But it also introduces different metrics for us that are shifting over a five year business plan.”

The industrial software vendor is pushing the transition to recurring revenues through its Flex subscription model, which is being rolled out globally.

“That’s been going very well. We’re on track to accelerate our movement to subscription. Our engineering design business is the most mature; it’s almost 100% recurring. The next largest piece of our business is Pi [from its acquisition of OSIsoft in 2021]. That is being progressively moved to subscription. And the third is the HMI/SCADA business … and that’s moving along quite well.”

Recurring Revenue: Winning Hearts and Minds

McGreevy indicated its channel is on board with the changes. However, he did acknowledge the shift to recurring revenues has on partners’ cash flow and profitability, describing it as a “huge transformation for the channel.”

“There are commercial business challenges around cash flow, revenue recognition, paying your sales team, but also hearts and minds. Because some of the industry used to buying perpetual licenses. It’s a different pitch.

“The good news is that we had a lot of companies go ahead of us in this regard. Adobe famously made the subscription transition to Creative Cloud, Microsoft 365, Autodesk. So, the good news is that there’s precedent in the market.

“So, we’ve been helping our partners, educating them. I think that’s been good, but it’s hearts and minds. It’s a different sales promotion, a different conversation with the buyers. To finance this transition can be challenging for some partners.”

Support from Schneider Electric

Former Aveva channel leader Kerry Grimes had previously said the acquisition by Schneider Electric would accelerate the switch to a subscription-only model. However, McGreevy contended that Aveva was already on its way at the time of the acquisition. But becoming privately-owned did enable the company to be more agile, “without having to worry about appeasing outside investors.”

“As far as the mechanics go, Schneider has been a great parent,” he said. “It’s very supportive of us. In terms of changes to our plans, they’re allowing us to essentially continue to do our own thing.”

Aveva has around 5000 partners globally, comprising VARs, SIs, ISVs and OEMs.