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August 16, 2005

Tibco plans rental model

Integration software vendor Tibco Software Inc is planning a move to a rental pricing model, with an official announcement expected any day.

By CBR Staff Writer

Tibco chairman and CEO Vivek Ranadive confirmed the plans in an interview with ComputerWire. While he would not reveal the exact details of the new pricing model, he said: It will be a variation on the monthly rental model – a new kind of ‘time-based revenue’ model.

Unlike monthly rental sales models from the likes of CRM player, Tibco does not intend to begin offering its software in an on-demand fashion because it is not suitable for that kind of hosted deployment. But it does intend to take some of the ideas from monthly software rental models, which have proved attractive to some CIOs who prefer that approach to the commitment and risk associated with a large up-front fee followed by ongoing maintenance payments.

Asked when the change may happen, Ranadive said: We have a window of opportunity to do this now. Having a sales miss helps to get people back to reality, and it also helps you to bring in some changes that you might not be able to do otherwise.

Tibco missed its analyst expectations in its latest quarter and saw a slight decline in new license revenue, though it still saw total revenue grow by 25% to $101.4m year-on-year. It also added 83 new customers and achieved net income of $21.7m. However, analysts are watching Tibco’s sales closely for signs of trouble with the integration of its acquired Staffware business.

Ranadive said the advantage of a monthly rental-style revenue model is increased predictability of sales. And right now more predictable revenue is good news, he said. He said the company is putting the finishing touches on how the model will be rolled out. We’re working out how you package up license revenue, maintenance and ongoing services, and then to sell that over time, he said.

Ranadive said customers will still have the option of paying license fees up-front if they wish. Some customers will want to be hands-on, he said, and own the software with a more traditional up-front licensing fee. He said it is too early to say whether the new monthly rental-style revenue model will be rolled out across the company’s entire product portfolio or just some of its offerings.

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