What the New World of Subscription-Based Software Means for You

It seems like all we talk about these days is Office 365, Adobe Creative Cloud, SaaS this, and subscription that. The software industry is moving towards subscription based licensing. I attended a great indie conference for software publishers years ago. Someone there did an interesting study that showed the vast majority of subscription-based models were designed with revenue streams in mind rather than customer satisfaction. He tied those findings to another study showing very low customer satisfaction with subscription-based models (surprise!). Things have greatly improved since then, but some of the truths of that old study remain. Subscription-based licensing is different, and it requires new thinking about the consumption of software and the management of a software estate.

I recently asked three customers who successfully rolled out Office 365 on a large scale to name the most important lesson they learned. All three said the same thing: “Clean up your AD or you’ll be sorry.” Why is this important? If you want single-sign on for your employees, that means federating the O365 subscription service with your Active Directory. If AD isn’t clean to start, that’s where the pain begins. You’ll have to deal with licenses incorrectly assigned to former employees, and current employees who don’t have access to an account because all the licenses got used up. As you onboard more and more subscription services, the complexity multiplies.

I find two principles emerging from the conversations I’m having with customers:

Subscriptions Mean Strategic

Many customers are used to Adobe as a purely tactical affair. When someone needs a license, they raise their hand and a license is purchased, billed back to the end-user’s business unit, and capitalized by Finance. Under the subscription-based model, when that end-user raises a hand for an upgrade it kicks off something entirely different. No more capital expense and no more “fire and forget” because it’s now an annual payment that goes on forever. Being proactive and thinking strategically is crucial in a software subscription world. It means staying on top of those subscriptions, and that’s not easy for organizations with complex procurement and decentralized infrastructure.

Subscriptions Mean Readiness

Many subscription-based models come with a need for some kind of “readiness” activity requirement. Office 365? Better have a clean AD. Adobe VIP? Better know how you’re going to handle the subscription management for your teams. Proactively getting in front of these requirements before they happen is a lot more important with subscriptions. Make sure that before you buy, you understand both the causes and effects of the publisher’s logistics requirements.

Strategy and Readiness are key principles in the brave new world of subscription-based-software—at least until everything changes again next year. Maybe the next wave will be a post-modern re-invention of the box product because licensing has become far too complicated!