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Anyone tried selling both perpetual and subscription (yearly) desktop licenses?


#1

I am considering selling both 1 year subscription and perpetual licenses of the same desktop software (the perpetual licenses being priced 3 times the yearly subscription) as well as Site/Company perpetual licenses.

Does anyone here have experience selling both types of licenses of the same software? Any tips? How does revenue split between the two types of licenses % wise?..


#2

I have nil sales experience with this but it is my pricing model for both apps I am launching in May. Ask me again in 6 months. One app is an AutoCAD plugin so my licensing needs to replicate all of those available in AutoCAD and its competitors. Notably AutoCAD are moving away from perpetual licensing but their competitors continue to offer it. AutoCAD’s move has caused a lot of anger from a vocal group of customers. The lesson there: give the customer all the choices you can and don’t piss them off.

With perpetual licenses it is also a standard practice to charge around 20% of the purchase price for maintenance / support / updates, with the first year included in the initial purchase. Many B2B clients really want this - a lot - they don’t want to be stuck with unsupported software but they do want to “own” it, not lease it. They also like the idea of being able to lease extra seats to cater for short-term needs.

I don’t think generic revenue splits etc will be of much use to you, I think this will be quite specific to your market segment(s). Do you really care about the split? A sale is a sale is a sale, just let them buy it they way they want to buy it.

Multiple licensing models is a technical challenge, mostly from the sales point of view. I have tried to find a VAT-friendly solution for Stripe & Paypal that caters for these licensing models

  1. Buy Perpetual license + annual support subscription
  2. Annual subscription
  3. Monthly subscription.

Quaderno would be perfect for payments except for one showstopper: they don’t - and won’t - cater for the Perpetual + support model in their checkout, which is a real shame…

Adding extra invoice items to a Stripe invoice is not supported in Quaderno Checkout.

We don’t support your first use case. I’m afraid you’ll have to find another solution or develop a custom solution using the Stripe API and our Taxes API.

@polimorfico - you may want to review this show-stopper, I would be shocked if that use-case is rare.

You can add floating (site, as you mentioned) licenses to that mix if you are talking to enterprise clients. They don’t really need it, they just want it. Consider it more of “a sale is a sale is a sale, just let them buy it they way they want to buy it.” Technically, I make a site license like any other license but it checks with the license server to make sure there are no more instances running for the license than they have paid for. Tech tip: you also need to timebomb any instances running that have authenticated but then been blocked from talking to the licensing server, if the server auto-expires the license lease after a timeout.

I too would love to hear from others about their experiences with this.


#3

Thanks for getting into the discussion.

How would you price a 1 year vs perpetual license (support, updates included)?

I’m thinking about pricing the perpetual license 2.5 to 3 times the 1 year license. However with the long term support costs the perpetual license might be underpriced.


#4

Does perpetual mean that not only software continues to work but you also provide updates and support endlessly for free?


#5

Yes, exactly. Perpetual means -> Updates + Support.
Updates are not problematic as the software is fairly mature. Support can sometimes by time consuming.


#6

No, perpetual usually means the software will work perpetually but updates and support stop when you stop paying for it. Support is included for the first year (usually, I’ve seen shorter) and is the an optional annual payment.

There is no good business reason for you to spend resources supporting people for free, that will send you broke.


#7

tvCAD’s current pricing model is pretty-much a clone of the proportions of AutoCAD’s US pricing. Well, they have departments that work that stuff out and my market is used to that pricing. It’s not final (releasing in May), I’m waiting for @patio11 to tell me at MicroConf to double it. I may, I haven’t had any objections when I reveal the pricing.

Note that AutoCAD’s pricing varies around the world. That is an interesting study in itself. For instance, we in Australia are quite accustomed to the “Antipodes Tax”, things tend to be more expensive here than in the US, UK, Canada etc.

Here are the figures I am using for AutoCAD’s US pricing …

$4,195 Perpetual + yr 1 support 100.00%
$1,680 Annual subscription 40%
$210 Month subscription 5%
$545 Support for perpetual Yr 2 ++ 13%

Hope this helps. I would have a good look at the pricing models of those in your market, not necessarily your competitors but in your market.


#8

If I were starting a B2B software business from scratch today I would be really tempted to keep to a subscription only model except in some very rare cases.

It’s the way that most everything is going and business customers are very used to it by now. It has major advantages for the seller and some less obvious advantages for the buyers as well (better alignment of interests and priorities).

I don’t think you will get the same pushback that companies like AutoCad and Adobe did when they changed models on existing users. (And I also guess the pushback is in the ‘I will make a lot of noise but still carry on being a customer variety’ - something which I myself am guilty of as a customer!)

The alternative of having multiple models is analysis paralysis where they will struggle to decide which option is best for any situations and you will spend a lot of time hand holding them through the options and answering questions about what happens if they want to switch from one to the other yada yada yada.

Keeping things simple brings a lot of benefits.


#9

I agree with this in principle but the client’s money talks. Even before release I have had requests for floating licenses, a technical pain in a$$ but they are going to pay extra for it and they have their reasons for wanting it.

Another issue with many big businesses is they may want perpetual licenses because they may be unsure if they will continue to get the budget to maintain a subscription. They need to know their software will work even if they can no longer pay to maintain it, even if it means they are on their own with it, support-wise. This doesn’t make sense to someone who is in control of their livelihood but people in that position rarely have that level of control. The other issue is an innate conservatism in established firms, “we’ve always bought it that way.” I don’t really want to upset that apple-cart.

I have seen a lot of that around the AutoCAD move to subscription. I’ve love to see some real figures from their competitors on how many people migrated to them because of the perpetual license thing. AutoCAD, like Photoshop, often has a long shelf-life, many firms just stick with the version they know is working for them and avoid the inevitable upgrade headaches.