Part 2 of 5 in this series.
SJ: Is there anything specific you want to say about what I have written in my blog?
CC: There are a number of things we can do to put Subscription questions and Simplified Upgrade Pricing into context. I think the first thing we need to recognise is that there is a very small fraction of our revenue that comes from upgrades at this point in time. For the last 8 years or so, our customers have fairly well self-selected to either prefer to be on Subscription and have the latest version and technology available to them, or to not do that, in which case they tend to upgrade 3 years or more after the current release. We’re down to very low single digits of customers who upgrade, and of those only half of those upgrade 1 or 2 years back. So we’re talking about approximately 1.5% of our revenue that comes from customers upgrading 1 and 2 versions back. And so I think there’s clearly been a natural selection, a natural fallout over time of customers choosing; do I prefer to be on Subscription or do I prefer to pay for an upgrade?
If you look at the real impact of upgrade pricing, the real impact is the customers who prefer to upgrade from 1 or 2 versions back, that’s a very very small percentage of our business. For those who are 3 versions back or more, there’s really no change at all. For subscribers, which is the majority of the customer base, there is no change at all either. I just wanted to start by kind of putting that in perspective.
I think the other thing we should look at is that the history of the Subscription program is one of actually creating more value over time. It started out as simply an upgrade path, a cheaper path to upgrade than buying upgrades. Over time we’ve added more value in terms of additional support options, additional licensing benefits that come with Subscription and later on this year you are going to see things like a very enhanced Advantage Pack program, which started last year.
So as I read through a lot of the blogs, I was struck by a kind of lack of perspective on how the program has grown over time and how very few of our customers were actually buying upgrades.
SJ: There are some of your customers that don’t have any option but to be on Subscription, aren’t there? There are some markets and some products where Subscription is compulsory, right?
CC: No, with a few exceptions, I don’t believe we have any compulsory Subscription left. There may be a few in some emerging countries where software piracy is a particular issue, but generally speaking, the vast majority of our customers have the option to either be on Subscription or not.
SJ: For some years here in Australia, if you wanted to upgrade to the latest release, Subscription has been compulsory. Is this unique to Australia or does this happen elsewhere?
In Australia we do have a unique experiment, but that is fairly unusual. No other country comes to the top of my mind.
SJ: Is this experiment going to continue or does the point become moot now that the price of upgrading has been increased?
CC: I don’t think we’re going to be changing the way we do business in Australia.