Will Subscriptions Free Us From Software Licensing Hell? No, But There Is Hope

Joshua Cliff

By Joshua Cliff, Director, Product Operations, Cloud/XaaS, Carousel Industries

There are a lot of reasons that, by 2020, more than 80 percent of software vendors will change their business models from traditional license and maintenance to subscription, according to Gartner. For ISVs, usage-based subscription models provide flexible options for software monetization, such as pay-as-you-go and concurrent licenses, support a more agile deployment cycle and deliver faster time to value while ensuring uniformity of software versions across all users. Additionally, subscription-based pricing gives customers the flexibility to scale up and down according to their actual usage with minimal upfront risk and cost.

As the world moves toward consumption-based models for all IT products and services, channel and IT leaders are facing questions about how these differences affect their businesses. A slightly complex, two-part question I get often is, “How are we supposed to manage an ever-growing portfolio of subscriptions, and what does ‘managing’ subscriptions mean anyway?”

To begin, let’s consider part one, about managing an ever-growing portfolio of subscriptions. For your customers, this brings up the “multiples” challenge:

While this list might seem “business as usual” for IT and partners, it’s important to think about these elements in relation to the ebb-and-flow nature of the consumption model. A blessing and a curse of subscription-based delivery is the potential for month-to-month fluctuations as product features are added or activated, seats go up and down, and suppliers adjust pricing and billing amounts. Unlike the old practice of “truing up” with a software provider once or twice a year, the bill can change every time a product is updated, a seat is purchased or dropped, or a data limit is hit.

This creates a dynamic environment that requires more than traditional technology management. There are daily, monthly and annual administration requirements, all of which typically require vendor-specific awareness, cross-vendor or technology-area coordination, and an operations management skill set. In fact, for many customers, just tracking and managing the transactional elements of a subscription or annuity life cycle could be a full-time job. For partners, it probably already is. And remember, this is before vendors migrate even more products and services to subscription based models — products that are both cloud and non-cloud in nature.

That brings us to the second part of the question: “What does subscription management mean?” Is it only about the software vendors, changes, support, entitlements, billing and contracts?

Well, probably not. As an IT leader in this ever-changing world, your CIO customers need …

… transparency: Do they know that they’re buying only what – and how much – they need? That they’re paying what they should be paying and using what they’ve bought? That they’re getting the expected ROI?

Managing subscriptions is more than just the transactional flip side of subscription life-cycle management. It’s about managing the success of those subscriptions — maximizing the value of the investments you’ve chosen in alignment with the business’ goals and desired outcomes.

An Emerging Answer

Today, vendors and partners alike are becoming more focused on ensuring long-term customer success — not just initial sales. They have to, because without a big capital investment, it’s easy for a customer to move from product to product.

As a result, more vendors are enabling – and service providers are delivering – brokerage-model-based, life-cycle management and value-based success management services to aid customers in their annuity/subscription-based journey. In my experience, life-cycle management services are quickly becoming the norm. They’re part of every annuity and subscription-based transaction. I’m including simple product purchases with a focus on subscription-level activities, like on-boarding, subscription change management and entitlements management, as well as broker-style, aggregate-level activities, such as multivendor billing management, vendor contract management and more.

And, where applicable, success-management services, which focus on value maximization and outcomes management through adoption, consumption and cost-management activities, have popped up and are becoming active in addition to traditional implementation and technology management services. In both cases, I’m seeing a need for new professional positions, often called “customer success managers” or “life-cycle advisers.” These are people with a focus on client-based, aggregate management of annuity/subscription business and the skills to support these new types of life-cycle management and subscription-management services. These individuals work directly with clients, in conjunction with their own organization’s traditional sales, delivery and operations team members. The most successful also oversee the business life cycle to enable client success at multiple levels and across a variety of functions.

Today, when customers are faced with software challenges, they expect to be able to connect with a partner who can act as a broker, someone with the skills to help choose from a wide array of subscription-based services. For partners, the broker model makes managing multiple subscriptions easier by aggregating purchases and providing a central service point for ease of management, billing and more.

It also lets IT serve as a true service partner and aids in eliminating shadow IT. With the partner’s help, CIOs can provide nearly any solution to their internal customers, while still managing access and costs.

My advice is, you as a partner need to be set up to help both IT and the lines of business get the most from the subscription portfolio. Ensure they have access to a customer-success team as a point of contact for all inquiries about the annuity subscription portfolio, This team needs to be a single point of contact for assisting customers in managing consumption, cost, access and more through available or bundled life-cycle management and/or success-management services.

Joshua Cliff, director, product operations, cloud/XaaS, is responsible for defining and driving Carousel Industries’ operational strategy for its Cloud/XaaS business, enhancing customer experience and maximizing profitability, retention and growth.