I had the scoop on integration vendor Tibco’s plans to roll out a rental-style pricing model last week: so well done me. Seriously though, the news came as quite a shock to Wall Street, and I had several analysts and bankers on the phone trying to find out as much as they could about the switch.
Then on Friday I was granted an exclusive interview with Tibco’s CEO Vivek Ranadive, who had decided he needed to further explain the proposed change as it had caused such a stir when I broke the news. He started by telling me that it applies to all products and will be made available to all customers – both new and existing.
He said that the company is already incrementally rolling out what it is calling its "Time-Based" pricing model, which enables customers to pay for a bundle of software, services and maintenance over time. He insisted that it in no way replaces its more traditional license sales model, but rather is complementary.
Pointing out that the company already makes 55% of its revenue from a combination of ongoing maintenance revenue and services, Ranadive said that: "This is not in place of [Tibco’s traditional] software sales, but in addition to. This is not a wholesale move to subscriptions – we are saying that for some customers who may prefer to consume software packaged with services on a more utility-style basis, they now have that option."
Ranadive said that the Time-Based pricing model is likely to appeal most to new customers in Asia Pacific – where monthly pricing is very popular – or smaller enterprises for whom an up-front payment may be less attractive than paying over time. It may be a useful new tool for its system integrator partners like EDS and Siemens, Ranadive said, because, "It expands the range of companies they want to develop relationships with that they have not been able to in the past. It gives them more flexibility."
Existing customers wishing to expand their use of Tibco’s software may also find the deal attractive, Ranadive said, for example those that wish to put Tibco’s General Interface Rich Internet Application (RIA) framework on all of their users’ desktops. "In the past that would cost millions, but now they could consider doing that," Ranadive said.
Ranadive insisted that the roll-out of the Time-Based pricing would not have a sudden, downward effect on Tibco’s sales as customers suddenly swap to paying lower amounts more often: "The only impact we believe this will have is a positive impact on revenue," he said. "We do not expect it to reduce license revenue in the short term, and we hope over time it will have a positive impact."
Ranadive said the new model will enable it to engage with customers that previously it would not have been able to. The model is being rolled out incrementally, but being made available to new customers as well as existing customers who are expanding their use of products within Tibco’s portfolio. "I haven’t had a single customer say they want to switch, if they have already paid an up-front licensing fee," said Ranadive. "But we have had some new opportunities thanks to the new model."