The shift to software and subscription models is underway, and it’s critical that partners secure this profitable revenue opportunity. The bottom line? It makes sense financially.
Migrating your business from an up-front to a recurring-revenue model can be daunting. A transformation that could take years to deliver tangible benefits.
By focusing only on the short term, partners miss out on the opportunity to adapt their business model quickly to the new way end customers like to purchase software and hardware: flexibly, without big up-front investments, and with costs reflecting the business value they derive.
Satisfying demand for flexible subscription pricing not only allows partners to capture significant additional lifetime value from existing customers, but also unlocks previously untapped customer segments.
These can include organisations or business units that prefer operating rather than capital expenses, or companies whose cash constraints prevent them from making big advance investments.
What’s more, companies that aren’t willing to make a full commitment but do value flexibility might be open to experimenting on a subscription basis.
And subscription pricing helps partners and vendors reduce the end-of-quarter “fire sales” that characterise up-front models.
With Cisco investing heavily in SaaS, partners that don’t adapt to this new market reality will see their traditional models come under increasing pressure.
The demand for discounts on large up-front deals is rising as end customers shift their software and hardware purchases from capital to operating expenses, and as expectations for lower year-one costs for high-tech purchases rise.
There are various compelling reasons to move to a recurring offer business model – but protecting your bottom line and the financial rewards are impossible to ignore.
Next up: how recurring offers can help strengthen customer relationships