In 2015, Intuit (NASDAQ: INTU) made a big push to get its customers to move from its QuickBooks desktop software to its cloud-based SaaS, QuickBooks Online (QBO). To encourage users to make the switch, QuickBooks raised its prices on the software, thinking a monthly subscription of $10 to $25 would be more attractive to customers than an upfront investment of a few hundred dollars. Not so much, says Motley Fool.
The plan backfired. Instead of transitioning to SaaS as Intuit had hoped, customers opted to keep their existing software and not upgrade to a newer, more expensive version. In its February earnings call, Intuit CEO Brad Smith admitted to this mistake.
“…one of the things we learned last year is by raising the price [of QuickBooks desktop] to $249, we basically had customers staying but not renewing on their desktop, and they weren’t moving to QBO, and that was actually a loss for us,” Smith said.
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In the call, Smith said the company anticipated that some users prefer the desktop version of their product, and for the foreseeable future, Intuit will continue to provide newer desktop versions to its customers while also growing its QBO audience.
As of the end of its fiscal second quarter ended January 31, QBO subscribers had increased by 49 percent. It added 100,000 new subscribers during that quarter, bringing its total number of subscribers to 1,257,000 worldwide. It is projecting growth to 1.38 million in its second fiscal quarter. Intuit will report actual results on May 24.
As more companies like Intuit and Microsoft move their software products online, end users will have to make choices – subscription-based SaaS or desktop software. There are advantages to both sides of the coin, but from a company perspective, the subscription products are more sustainable. Not only do they provide the opportunity for long-term recurring revenue, but updating and supporting SaaS in the cloud is far easier than providing regular updates and support to software users.
The key for a successful transition is for subscription companies to know their customers and their needs. Don’t force their hand before they are ready to transition to an online product. Instead, offer choices that are financially and technologically viable for the company, while also providing loyal customers with options.