Last week Seattle-based SaaS provider Tableau (NYSE: DATA) announced it was changing its subscription pricing model for its products for new and existing customers. In an April 6 announcement, Dan Miller, Tableau’s new leader of worldwide sales, services and support, says the new model “signifies our ongoing commitment to help people more easily adopt and scale Tableau with greater flexibility.” The new model is effective immediately, and applies to all of its products – Tableau Desktop, Tableau Server and Tableau Online. This recurring revenue model:
- Lowers the cost of entry, making Tableau more accessible
- Will allow clients to scale up as their needs change
- Won’t have any hidden costs with transparent pricing
Why the change? In a press release, president and CEO Adam Selipsky says that customers wanted a subscription model to more easily access their products, to reduce up front costs and increase flexibility.
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“We have always been driven by the success of our customers, and with subscription pricing, we’ll be even more aligned with our customer’s needs and further committed to earning their business ever year,” Selipsky says.
“Subscription pricing is a way of paying a lower price to use software for a specific period of time, rather than paying a higher up-front price to own it perpetually. So, yes, it’s very similar to your cell phone plan, Netflix account, or gym membership. We are enabling you to gain the benefits of subscriptions, whether you run Tableau on your own premises, in the public cloud, or via Tableau Online (our fully managed SaaS offering in the cloud),” says Miller. “With subscription, it will be even easier to modify Tableau deployments without impacting product performance or your productivity.”
“Finally, one of the things about subscription-based pricing we are most excited about is that it sharpens our commitment to earning your business over and over. Like other subscriptions, you’ll have the choice to renew your Tableau investment every year. This lowers your risk, because you can leave us if you don’t feel we are performing. We’ll happily make that bet, because we intend to delight you. That means everything we do here at Tableau is, as always, focused on our customer’s success and delivering value every day of the year. Our subscription model is based on this core principle,” Miller adds.
Pricing ranges from $35 to $70 per user per month, billed annually, except for enterprise licensing which is customized and priced to fit each client’s specific needs. Tableau offers a free 14-day trial.
Tableau first announced the pricing shift in its November 2016 earnings call. During that call, Selipsky said the shift would initially put more pressure on the company’s bottom line, but long-term, the new model would help stabilize revenue for the company while also diversifying its customer base. For the third quarter of 2016, despite growing total revenue and license revenue, Tableau reported a GAAP operating loss of $29.4 million, compared to a GAAP operating loss of $13.2 million year-over-year, and a diluted GAAP net loss per share of $0.40.
In February 2017, Tableau reported its financials for the fourth quarter and the full year 2016. For the full year, total revenue grew to $826.9 million, a 27 percent increase year-over-year, but a diluted GAAP net loss per share of $1.92. Tableau will report its first quarter 2017 financials on May 3.
Investors have not had a significant reaction to the change thus far. On April 5, the day before the announcement, stock was valued at $49.86 per share. After the announcement, stock moved up to $50.83 per share. At 1:30 PM EDT on April 12, stock was valued at $50.84. By comparison, this time last year – April 12, 2016 – Tableau’s stock price was $44.01 per share.
Tableau’s move to a new subscription pricing model was a smart move, and it seems to have been a necessary one. While it was continuing to experience growth, Tableau was deeply in the red. Adapting a recurring revenue model will help it to dig out of that financial hole. It will take some time to grow that revenue significantly enough to reverse its losses, but the new subscription pricing model is a step in the right direction.