The mass migration of software developers from perpetual licensing to subscription licensing models has allowed quite a few CFOs to enrich their strategy credentials in recent years. It’s a movement that has allowed finance chiefs to rebrand themselves as champions of change, and one that has helped to dismiss the image of CFOs being the C-suite’s most dependable naysayers.
Nevertheless, saying “no” to a migratory deadline is what CFO William Edmondson counts as one of his career’s most memorable finance strategic moments.
As CFO of 1E—a UK-based IT software and services company—and like other top officers, Edmondson nurtured a sense of urgency for the adoption of the new licensing model but at the same time remained wary of mandatory deadlines.
“Just as I had finally gotten reasonably comfortable with the fact that we were ready to do it—just as we were going to go ‘live’—there was a bit of a downturn in the business and I actually said ‘No, we have to pull it.’ Even though it was the right strategic thing to do, I said, ‘No’—there was just too much risk.”
Having spent the previous six months helping reset the mind-set of the organization, Edmondson recalibrated his approach and briefed the company’s board—this time as not only as a champion of change, but also as a regulator of risk.
“Typically, under a subscription license, in year one you would get between 30 percent and 50 percent of the value that you would get under a perpetual license, whereas over a period of three to five years, a business can earn a lot more than it would under perpetual—but when you make this transition, there is always a working capital crunch,” explains Edmondson, who says that 1E ultimately pulled the trigger on the adoption nine months later, after the company had put in place a “standby” credit facility.
“That way, if things didn’t pan out in the way that we expected them to, we would have the additional line of credit as insurance,” recalls Edmondson, who gives kudos to 1E for completing the migration within only two years—a journey that he says takes most organizations three to five years. –Jack Sweeney
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