Case Study: Learning from Software - Leading Global SaaS Company
Annual revenues: $20–50 billion
Issue: A leading software company had built its name on selling software directly to companies for their ownership and use on premise, making money with yearly upgrades adding new features. However, the company faced decreasing sales of its on-premise software portfolio, and executives saw the existing business model as running out of steam: Customers would no longer want to pay for incremental upgrades, and the products were thought to be “good enough” already. One approach for the company would have been to admit that the business was low- to no-growth and accept a small, steady revenue stream. Another was to transform it into a growth business.
Solution: The company looked to test whether the business could be turned into a high-growth venture and decided to transition to a flexible consumption model to ride the tide of business model innovation already present in the market. The company thus rolled out cloud-based versions for the majority of its portfolio and set up a subscription model under which to sell these versions. Rather than selling a stand-alone box of software to a customer, the company was able to offer continuing subscriptions to an ever-changing catalog of software. This gave customers the benefit of always having the most up-to-date software, and the company the benefit of having a growing source of new revenue.
Impact: With the majority of the portfolio transitioning to subscription and the growth of the new subscription business, the company has since become one of the most successful SaaS providers in the space.