Subscription Pricing will Revolutionise BI

Back in April, Tableau finally switched to a subscription pricing model. A single professional desktop licence which previously cost $1,999 is now $70 per month. This move brings Tableau in line with the other two industry ‘leaders’ in the Gartner Magic Quadrant – Microsoft Power BI and Qlik. The shift marks a fundamental turning point for the industry and is fantastic news for businesses and for progressive vendors alike.

So what caused the shift? In my view, the strongest factor was the competition with Power BI. Tableau remains my favourite BI product but Power BI is close in many areas – and it’s far cheaper. Under the new pricing, Tableau is still more expensive, but they are no longer pricing themselves out of entire segments of the market.

We have also seen a technology-enabled shift towards SaaS across all sectors, and Gartner predict that by 2020, over 80% of vendors will have shifted to subscription pricing models. Finally, I have no doubt that the threat of Amazon was also on Tableau’s mind. AWS QuickSight is still primitive but it will likely become a serious competitor within a year or two.

Low Barriers to Entry

Amongst small and medium organisations, the high upfront cost of BI products has prevented many from using serious BI products at all. High up-front costs are a business risk. The problem isn’t that these businesses can’t afford the service over the long term – many can. Rather it’s a tough sell to convince many managers in small organisations to part with £10k+ upfront for a few licenses or a server.

BI products provide most value at scale, yet they take time to reach their full potential – both from a design and development perspective, and a business culture and training angle. A 30-day trial, or proof of concept with a couple of users just isn’t enough. For many non-technical managers, it’s often too big a risk to justify.

Under subscription pricing, such barriers are immediately removed. Products can be tested for several months, across a few or many users, for relatively little investment. Multiple products can even feasibly be tested and compared at scale. Getting long term buy-in is then almost a given as the business begins to see the value delivered.

Large Organisations Also Benefit

Big businesses didn’t suffer so much from the barriers to entry above, as they could already take advantage of the economies of scale that come with server editions. Getting signoff for five- or six-figure sums is a doddle in some places. But I am still amazed by how many large companies are running on rather antiquated BI platforms.

The first problem faced is a purely psychological barrier which is nonetheless very powerful – the sunk cost fallacy. Having invested tens or hundreds of thousands of pounds in a BI product, organisations are reticent to switch to a new one even if it will deliver better value over the long run, or even immediately! Yet the fact is that BI products are evolving very quickly. What’s best for an organisation today may well not be ideal in 2 years time – this shouldn’t be viewed as a failure to predict the future, merely an inevitability. Subscription pricing neatly removes this barrier by allowing smooth transitions to a new product. There is, of course, significant work involved for the BI teams, and a certain amount of learning time for the wider business users, but large organisations can afford to hire experts or bring in consultants to focus on delivering and upskilling the teams.

The second issue is more basic: large organisations are often siloed and fragmented. Some departments may be using cutting edge technology while others have a team of analysts cutting and pasting Excel pivot tables all day. Subscription pricing allows low-risk rollout into these departments in exactly the same way as to a small business. It also allows for an organisation to cheaply use multiple solutions with minimal efficiency loss; one department may benefit from amazing visualisation while another merely requires tabular aggregation of vast datasets.

So Who Loses Out?

On the consumer side, in my view, there will be no losers. For example, although Tableau’s main model is now subscription pricing they still offer the old fixed price models for users who know they want to stick with the product long-term, thereby making is cheaper; they also still offer bespoke pricing for servers. Power BI meanwhile is so cheap that it would take 17 years of use to exceed the previous upfront cost of Tableau!

The only losers will be the vendors who fail innovate. It’s always frustrated me to see some vendors raking in huge sums while barely bothering to develop their product; falling further behind the curve while spending all their revenue on marketing and new sales. Such business strategies worked in the past, as once customers were hooked it was too costly to leave. Now, vendors will be forced to continually innovate, or exit the market.

The Future

I don’t believe the change will happen overnight. Organisations still need to free up or bring in the resource to implement new systems, and not all managers even in the BI space have the will to switch products.

However, great BI solutions are contagious. Users begin to see just how much easier their lives are made. We also see the emergence of what’s been coined ‘citizen data scientists’, i.e. semi-technical, data-driven individuals who use what’s available to draw new insights without the help of analysts or IT. As more individuals gain exposure to quality systems they will campaign for them wherever they go on to work, and the change (or at least the business case) needn’t even then be led by IT. When the cost barriers are removed, all that’s needed is a proactive BI team and a little persuasion.

The market has evolved – small business can now begin to enjoy the value that great BI products deliver, and large organisations can insist on top quality products for life.

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