Vembu's Subscription Based Pricing Model: Perfectly tuned for the MSP's dynamic business model

Subscription based pricing
It was back in 2005, when we first launched our flagship backup product – StoreGrid for the Service Provider Industry, there was a huge thought process internally within the company on the licensing model we should go with. As a company, we strongly believed that our products and services should align with our channel partners (MSPs and VARs). If that is the case, our licensing model should also synchronize itself with the way our channel partners grow. Hence we adopted and firmly believed in subscription licensing since 2005. You know what?, we got it right.

When reading a recent news article about Kaseya, one of the prominent MSP focused vendors, adopting subscription based licensing, it was no surprise to us that they have adopted the subscription based license model after all these years. We firmly believe that any vendor serving the MSP community should align their licensing model to the business model of the MSPs. The MSPs follow a subscription based model for their clients where the clients pay monthly based on the services provided by the MSPs. Given this, it is a surprise to us how a prominent vendor like Kaseya took so long to figure this out.

Perpetual licensing model in the MSP industry is becoming a legacy nowadays where MSPs express discomfort using that model. The perpetual licensing model enables MSPs to acquire license rights to permanently use a particular version of the software by paying a large upfront payment. And then the customers continue to pay a recurring annual maintenance cost for maintenance and support. When the customer needs to upgrade to the next major version, they will have to purchase license for the new version again by paying the full license cost. While on paper, this model might sound good, ‘IF’ you assume that you can continue to use the same software for lifetime without ever requiring an upgrade. But the reality is different. Technology is advancing rapidly and businesses require constant and frequent upgrades with new features etc. History has shown that most software will become obsolete in three years or less and hence there is always a need for vendors to release major version upgrades with new features. And the customers will always have to pay and upgrade at some point of time. Hence in reality the perpetual license model wherein you could use a version of the software in perpetuity is just a myth.

On the other hand, the subscription based pricing model would provide a predictable and a consistent level of opex without any of the capex investment required for the software licenses. The simplicity of pricing can also be viewed from a value-for-money perspective, which gives an organization the freedom to continue its adoption of the subscribed service over time without any additional costs. Our subscription licensing allows MSPs to get free upgrades to all major and minor versions including standard support as long as the subscription is active. MSPs simply deploy our backup software in their datacenter and pay us a predictable monthly software license fee and grow as their customer demand increases. Since MSPs themselves charge their customers on a subscription basis our license model aligns perfectly with the MSPs business model. We have been the pioneers of this model since 2005 and know for sure that this works both for us and our channel partners. It’s no wonder why other software vendors focusing on the MSP segment are beginning to follow this model.

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