PTC recently announced that all of its products are now available via subscription licensing. That means you no longer have to buy your software as traditional permanent seats, what we call “perpetual” licenses. Instead, you can “subscribe” to your software and scale as your needs change.
We asked Andrew Miller, CFO at PTC, to tell us more about this new option and what it means to our software users.
Andy Miller, CFO
I’ve heard you say that many customers don’t want to buy perpetual software anymore. Why? What are the disadvantages of the traditional licenses?
Miller: In our research, we found that up to 90% of current and potential PTC customers want more flexible pricing options.
For these companies, the main disadvantage is the large upfront cost of buying a seat of software and the commitment to a specific mix of seats and features. In many industries, business can change pretty dramatically in a short time. Imagine, for example, a small company that wins a large contract and needs to add engineers for a year or so.
Here the value of new licenses for those engineers can seem prohibitive. Nobody wants to make a major fixed software investment today, only to see needs change over time and having some of that software become abandoned shelfware tomorrow. Compare that to a subscription model in which the company only pays for what it needs when it needs it, and the drawbacks of perpetual licenses become more obvious.
You’ve noted that software startups today rarely offer perpetual licenses.
Exactly. The model most new software companies use today provides software as a subscription and over the cloud, where the software vendor manages all the updates, hosting, backups, and other IT maintenance and the user accesses it over the Internet. That’s called software as a service or SaaS. The user simply logs on and uses the software on a “pay as you go” basis.
I think a lot of people get confused about the difference between subscription and SaaS. Will PTC users who want to use subscription pricing then be forced to access their software and data over the cloud?
For all of our products you can subscribe to us in an “on premise” solution installed and backed up, secured, and updated by your own desktop or server in your own IT infrastructure. And for some solutions, you can also choose SaaS plans. PTC PLM Cloud is a good example of a SaaS program that we’ve had in place for several months.
What are the main benefits of subscription pricing?
We’ve already talked about the flexibility of paying for just what you need when you need it and lower upfront costs. Customers get better cost control, too. With subscription you have more flexibility to assign your design software to operating budget, rather than capital, and align the costs with the business initiative as appropriate. From an investment and ROI perspective, you have a faster return, as your payment for the software more closely aligns with the benefit you are getting from the software.
For those choosing the SaaS option, they’ll have lower administration costs, an environment that’s optimized by PTC solution experts, and the ability to respond even quicker to business initiatives. Plus, software upgrades are automatic and seamless. So you no longer have to budget for the next revision or skip versions to save money.
PTC has an extensive catalog. Will customers now subscribe to each application and extension a la carte?
Yes. All of our software is available with subscription pricing. And note that you can remix your software within product families during your subscription period; for example, you could swap out concept design tools for simulation tools.
Will there be opportunities for buying bundles at a discount?
Your sales rep or partner will let you know as these become available. You should see some announcements on the PTC.com site and the PTC Creo blog as well.
What if I work with a reseller?
Resellers are also equipped to offer the subscription and SaaS options.
Can you think of a scenario where an established customer with seats of our perpetual software might add subscription seats?
Sure. We talked earlier about a company that gets a new project and adds temporary engineering staff.
Another example might be an engineer that wants to add extra functionality just for the duration of a single project like PTC Creo Piping and Cabling Extension. A subscription could help out, could be implemented quickly, and wouldn’t break the bank.
Can you think of a scenario where that customer might retire perpetual licenses and opt for subscription pricing instead?
I can think of several. For example, an organization that wants to minimize shelfware and increase flexibility going forward with remix and payment terms inherently built into the subscription. We have special programs for customers who want to transition from their current perpetual licenses with support to subscription. Customers interested in this should contact their PTC sales rep.
If you have more questions about PTC subscription pricing, download the PTC Support Datasheet (.PDF) and the PTC Subscription FAQ (.PDF) for more details. And watch this space as we’ll post more about the new pricing option in coming weeks.