Coffee Break: Why Sell Software as a Subscription or Software as a Service (SaaS)

June 26, 2017//Ellen Neveux

Last Updated: November 18, 2020

This is the third installment of our coffee break series with Jeff Swearingen, co-founder & CEO of SecureLink. Previous interviews asked ‘Why remote support?’ and ‘Why a remote access office in Costa Rica?’ Today’s question is ‘Why does SecureLink sell its software as a subscription?’

What is a software subscription, or Software as a Service?

There are two main components of Software as a Service–where is the software and how is it paid for? Salesforce.com was the real pioneer in moving their applications to a hosted environment. This was called an Application Service Provider for awhile and now is generally called SaaS or Cloud.  As big of an innovation as hosted applications were, I believe that a change in how software is paid for is just as big of an evolution.  Customers now have the ability to license software on a monthly or annual basis without making a huge investment to purchase a license outright. SecureLink is hardware agnostic–some clients prefer having the hardware or VM in-house, others want it hosted. However, 100% of our software is licensed via a recurring subscription.

Has software always been sold this way?

No, traditionally desktop software was sold in a box on a disk or CD and enterprise software was purchased from a company for a large upfront license and then a recurring payment of 15-20% for annual maintenance and upkeep.  Today, most desktop software is downloaded from the internet and more and more enterprise software is being sold as a recurring subscription, even if the software sits on-site at the customer location.

What are the benefits of a subscription license to a customer?

Buying a subscription really puts the responsibility on the vendor to deliver ongoing value. If a customer bought a $200,000 license for software and it didn’t work, the vendor was already paid and their interests were not directly aligned with the customer over the long run. The balance of power and accountability has really shifted and I think it’s great for any software buyer.  If that same software package is now sold for $5,000 per month, the vendor is very motivated to make the implementation successful quickly and to work hard to maintain that customer’s business and minimize customer churn.  There are varying statistics about the success rate of enterprise software license sales, but I believe that more than half of old-school enterprise software deployments failed. SecureLink is very proud of its customer retention rates.Our customer churn is actually a negative number, meaning our customer base spends 114% of the previous year’s subscription with us. We do this by making sure we are a good fit for any prospect and taking a long-term view on customer service, account management, and ongoing product development.

Are there any benefits to the software vendor?

Yes. There are three huge benefits for software vendors selling as a recurring subscription.  First, it aligns our outcome with the customer.  If the customer isn’t successful, we aren’t successful. It’s not in our best interest to sell a subscription unless we’re certain the customer can get value.  This wasn’t always the case with a license sale. Second, it keeps us motivated to continually improve our products and processes. There are lots of software companies out there and if you don’t keep serving your customers and improving your products, someone will eat your lunch. Finally, it allows us to take a long-term view of our finances and planning. With our 114% retention rate, we don’t have to wake up on January 1st every year and figure out where the sales are coming from. This helps us to make growth investments without any sales-performance risks and we’re never in a position to need to push software on a customer that isn’t a great long-term fit. My belief is that all enterprise software will eventually be sold as a recurring subscription. It’s a healthy evolution of the market and one that’s not likely to change course.

Read Part 2 of the coffee break series: Why a remote access office in Costa Rica?

About SecureLink

Our sole focus is secure third-party remote access. For highly regulated enterprise organizations, SecureLink Enterprise has pioneered a secure remote access platform. SecureLink for enterprise allows an organization to identify, control, and audit third-party vendors. For vendors, SecureLink is the gold standard remote access support platform because it is easy, efficient, and ensures compliance and reduces liability when supporting customers.

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