Hey, Maybe There’s Something to this Subscription Thing After All…

While Salesforce.com and other companies (SugarCRM included) were busy growing at triple digit growth rates via a subscription model, a lot of established vendors kept their distance.

And even when companies got into a subscription model, it was closely tied to their SaaS offerings. Some people, sad to say, still feel SaaS and subscription revenue models are inextricably linked. Large companies toyed with both SaaS and subscription models mainly in the SMB space – continuing to rely on big ticket license sales in the enterprise.

So it is a bit of fresh air, and at the same time no surprise to me, that Microsoft has extended its subscription services for even its largest clients. The company has had some sub models, but it seems to be building out a model where – gasp – users can increase or decrease their software scenario over time.

Mind boggling.

I am a firm believer that the tables have turned, and that the software provider MUST prove its value in order to continue receiving a check from those using its software or services. That is where open source will continue to be a winner – even in SaaS scenarios – since companies will be able to clearly identify value and make investments as such. Risk is mitigated – since the company can always try to go it alone without a commercial version or commercial support, etc.

Oracle, Salesforce.com, SAP and Microsoft are not anywhere near this level of a value-based model. But things are moving in that direction. The next 24 months will be an interesting time – as SaaS and open source continue to converge and become a highly disruptive force to any player who is not involved in both sides of that equation.

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