Any type of change can be daunting, let alone an entire overhaul of an enterprise organization’s culture and business model.
Wendy Caputo is PTC’s Lead to Revenue Process Director. In this podcast, she shares her experience as a key player in the organization’s move from a perpetual license model to a subscription model. She explains how PTC has learned to monitor competitors, retain customers, and manage salespeople despite the massive transition.
Discover how this enterprise company navigated disruptive change and came out better than ever!
Listen to this episode for answers to questions like:
- What is the concept of 4 “zones” that helped PTC achieve success through some big shifts?
- What does industrial IoT actually mean?
- How do you move from a licensing to a subscription model related to sales strategy? (In just 3 years. In an ENT organization. NBD.)
- What retraining within the sales organization needed to happen position a new subscription model?
- What does PTC do to ensure acquisition integrations go smoothly?
Moving to a Subscription Model
Jeremey: Let’s talk a little bit about a very large transition, which is moving from perpetual software licensing to subscription-based licensing. If you think about sales strategy and operations, I would assume that those were absolutely massive shifts. What were some of the considerations that you had to work through as you made that transition?
Wendy: As of January, we are 100% new business subscription model globally. We had to take a lot into consideration over the last three years as we did this. About a year ago was when we started to really morph internationally to push people into renewals and subscription model.
We had to think about it geographically. What does that mean? How can we do it? What are the contracts that people are under? How do we transform those perpetual contracts and convert them into a subscription model? What percentage of customers are we willing to sacrifice when we do this model change? How is it going to be received for the much smaller companies that use our product through resellers?
Jeremey: As opposed to a single large sale and then smaller maintenance type of contract.
Wendy: Exactly. One of the biggest things we had to get a handle on is that we’re selling licenses into our software. However, we have no control over the license. We don’t know if one person is using it, or, if they bought one seat of CAD, we don’t know if 100 people are logging into that one seat.
We had to develop a whole license compliance team to find those violators and get them to where they need to be. They needed to be able to say, “Historically, you’ve been having five people use this one license. That’s not how it works. That’s a violation of contracts. So you can either get five licenses, or you can give us back all your stuff.”
Changing with Competitors
Jeremey: With all sorts of products right now shifting over from perpetual licenses like Office 365 or Quicken, I would assume you guys have competition even for these more transformational and innovative products that you produce as you move over to IoT and augmented reality.
Wendy: Definitely. I think what’s helping us is that most of our competitors are doing the same transformation. They’re moving from a perpetual to a subscription model. Some of them started this transformation a year or two before we did, which was great because then we could see what went well and what didn’t go well for other publicly-traded companies. Still, more are behind us doing the same thing with what we did.
There’s more of a shift than people realize. I can’t even imagine buying something that’s not a subscription anymore. Whether I’m the one consuming it or the company’s consuming it, I can’t imagine someone saying in this day and age, “No, I want to host the server. I don’t want to be multi-tenant. I want to do bug fixes. I want all that overhead. I want to give you all this money upfront to make it happen.”
That’s the shift.
Jeremey: I also appreciate that subscription models share the risk. The company has an obligation to continue development, optimization, and fixing the software at a faster pace because customers can opt-out. If not, you will not realize the same total lifetime value as a customer.
Wendy: Exactly. Your annual run rate is very dependent on the success of you being a successful subscription company. You’re not going to get those renewals if you’re not successful with customer support and all that good stuff.
There’s a lot of focus that has to happen on making sure that the productivity zone is ready. It’s not just sales, not just a product, and not just if we are hosting it. Our whole productivity world of it – finance, HR, etc. – still has to be part of this shift.
Everybody and every team in the company plays a part in this shift from perpetual to subscription.
Integrate Best Practices
Jeremey: There’s all this research that says that most acquisitions are actually value-destructive. When you put the combined value together, what do you do to integrate sales teams and CRMs and so forth? How do you do ensure that those integrations go smoothly?
Wendy: I’ve been on many of those acquisition teams, and I have merged many of the systems. A lot of people think since we acquired them, they have to adopt everything that we do. But if that were the case, then why did we spend money to buy them? They obviously bring something to the table – whether it’s their product, their process, or their engineering.
It’s a matter of going into these acquisition meetings thinking, “I own the lead-to-revenue process. What are they doing that can make my process better for my end users?”
Maybe they’re using different software or they’re using the software on top of another software. That’s an energy driver. It’s looking at things like that and not having your heels dug into thinking that your way is the right way.
Nothing is static. Nothing is in concrete. Everything is iterative and changing and morphing with technologies, with people, and with attitudes.
You have to be open to the fact that my way two years ago may not be the best practice anymore. I can morph. In two years, what I’m morphing into may not be the best practice. That’s okay. As long as you’re using the best practice at the time in which you’re doing it. But you can’t wait until the best practice shows up before you do anything. Otherwise, you’re going to get lost. You’re just going to get left behind.
THERE’S A LOT MORE TO HEAR! Listen to the full podcast for more on driving strategy.
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