Gary is right. I have a few more thoughts on this regarding Sage 100.
1. When Sage first introduced subscriptions for Sage 100, they offered discounts and a promise not to increase the subscription by more than 10%/yr. They made no such promise for perpetual maintenance. For quite a while, they kept subscription increases to 3%. For those on maintenance, the difference became obvious quickly.
2. After getting a large majority of customers to convert, they began dropping those incentives. Why? Well, most alternatives to Sage 100 customers were significantly more expensive, and all those are subscription-based.
3. Except for MS compatibility issues, perpetual customers got now improvements in an upgrade. But, if you're a customer who wasn't on maintenance or never upgraded, this was not a feature with any value.
4. I've referred to Sage's renewal fees as "the Sage tax" for more than a few years after customers ask, "Why?" It's just unavoidable if you have anything more than a simple GLAPR system with a small number of customers and vendors. So the question for the customer should be, "How can I make the most of this required annual cost and turn it into an investment instead?" As you know, there are now many, many more ways to get more from the Sage base than there were 15 years ago.
5. If the customer had dropped maintenance long ago, this expense is a shock. Well, if you sold your house 15 years ago, moved from CA to OK to live with your aging parents, and then moved back to CA now,
housing would be a shock, right? But what are you going to do if you want to live there? The same choices are on the table as with their Sage situation: stay in OK (keep your Sage 100 as it is now), move to a location in CA with the right environment for you to make the most of living there (start a subscription and actively investigate the ways to make Sage 100 work harder for you), or move on to a state better suited to your needs (move from Sage 100 to something else),
Other 90 Minders have laid this out for us here before. Basically, the software publishers have been doing what they thought they needed to survive. Many Sage 100 customers were not paying attention, and now something has changed for them, so they must deal with today's reality. The reality is that Sage 100 costs more than it did,
and major alternatives (Acumatica, Intacct, Microsoft, SAP B1) all cost *more.* Usually significantly more.
You should pitch a prepaid project to them to manage their search and analysis for the right way forward from here. They probably won't bite because that thinking is also what got them in this ditch. You have more profitable (financially and psychically) customers to spend time on.
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Jerry Norman
Smartbridge Partners
(512) 653-7498
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Original Message:
Sent: 02-02-2023 08:10
From: Gary Feldman
Subject: Subscription vs. Pepetual Question - Comparing Total Costs
Wow!
The breakeven point has been a moving target since the inception of subscription. When it first started 2-3 years was common and it crept up to 7 years as the VC's were willing to wait longer for the company to breakeven and were more focused on YOY growth.
The software companies are smart and
- Initial subscription contracts rarely go beyond a 3 years
- ROI comparisons are typically 3-5 year analysis
- Economic changes and conditions have created more pressure from VC and PE firms to shorten payback
- Perpetual license options have been decreasing
- Popularity of cloud subscriptions leads to expectations of subscription
- Less deep discounting by publishers on initial subscriptions
I sense (without hard evidence) that over the past few years the breakeven crept down closer to 5.
In your situation,
- Do you know who the competition is and their approximate subscription costs?
- In the past, the Sage 100 alternative used to have a price advantage which overcame "legacy" concerns. I hate to compete on price, but cost is always a factor. For this client are you competing on price?
- Did you provide the original lower quote to the prospect? Do they know of the price increase?
In other words, do you have the ammunition to go to the rep and say "Come on man!", or do you have the ability to "take the money and run"?
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Gary Feldman
I-Business Network, LLC
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