(Bloomberg) -- When Adam Selipsky took over as head of data-visualization company Tableau Inc. in September, the first thing he did was visit some of his biggest customers. None was clamoring for new features or fixes. They only wanted one thing: greater flexibility in buying the product, starting with a subscription plan.
So Tableau, which makes software that helps companies turn complex databases into graphics and maps, is rolling out exactly that starting Thursday. Prices range from $35 to $70 a month. Customers can still buy the old way — pay once to own it outright — but Tableau will promote the subscription offer on its website and encourage customers to go that route.
Beside making clients happy and enabling Tableau to catch up to rivals, the move is intended to please shareholders. Subscriptions make revenue more predictable and should help smooth out unexpected shortfalls, like those that sent the company’s shares tumbling 55 percent in February 2016. At the same time, the shift will lower revenue and profit in the short term, because these deals get recognized over the duration of the subscription instead of entirely up front.
Having a consistent revenue stream means ``you're not waiting to see what deals close at the end of the quarter," Selipsky, a former Amazon Web Services executive, said in an interview at Tableau's Seattle headquarters. With fewer initial costs, the subscription model also helps win customers with tight budgets, he said. "If they are saying `Hey, we'd really like to enable 1,000 users on Tableau,' in a tight budget environment it's a lot easier to do that if you are paying a fraction of the fee" each month.
In offering a subscription service, Tableau is trying to get up to speed with the rest of the industry. Companies like Adobe Systems Inc. and Tableau rival Microsoft Corp. started making the move years ago. About 65 to 70 percent of software vendors have changed to subscriptions either in the cloud or in the customer's own data center, said Jim Hare, an analyst at Gartner Inc. Gartner predicts that number will reach 80 percent by 2020 -- it may be even sooner, Hare said.
"Tableau is late to the game," he said. One of the challenges Tableau faced was being viewed as not "very flexible when it came to pricing."
Selipsky expects subscription adoption will expand "significantly." The company forecasts as much as 35 percent of sales will come from subscription sources this year and eventually they will account for the vast majority of revenue.
"This is really a risk-reduction program for customers -- it's like the difference between dating and getting married," Selipsky said.
Tableau's cloud customers already pay this way and certain large customers who asked for it specifically have also been trying out the subscription model, Selipsky said.
One of those is Brown-Forman Corp., the maker of Jack Daniel's whiskey. The company had some employees who had been using Tableau for several years. So when it decided to buy one data visualization product for the whole firm, Tableau was one of three under consideration, said Chief Information Officer Tim Nall. But Brown-Forman only wanted a subscription product, he said.
"We'd already gone the subscription route to what we consider more flexibility," with software from companies like Salesforce.com Inc. and Workday Inc., Nall said. He told Tableau that giving Brown-Forman the ability to buy this way before it was rolled out widely might help push the decision in their favor. Currently, around 1,000 of the company's about 4,500 workers are using some form of Tableau, and the flexible model gives Nall the ability to bring more on as needed.
Tableau shares plummeted in February 2016 when the company reported license revenue growth had slowed dramatically. After recovering some losses, the stock steadily declined during the last four months of the year. The company blamed new salespeople for failing to secure deals. Analysts cited more competition from vendors like Microsoft. That rivalry has pushed Tableau to finally focus on subscriptions, said Gartner's Hare.
''People were looking at Microsoft and saying, `if Microsoft is only charging me $10 per user, per month why are you charging me $2,000 to buy it?' even if the products aren't exactly the same,'' Hare said.
This year, the picture is better. Shares are up about 20 percent so far and in February Tableau reported sales that exceeded analysts' estimates.
Still, catching up in the cloud is just part of what Tableau needs to do, said Hare. More vendors are adding some data visualization features to their products, which may eliminate the need for some customers to buy a separate piece of software from Tableau. And rivals are starting to focus on incorporating machine learning into their data products to automatically detect patterns and convey them to users in plain English, he said.
Tableau is also trying to add features in the machine learning area, Selipsky said. It doesn't plan to play catch up again.
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