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IT-startup challenges the norm: Why should all software be on subscription?

@Adam

This post is also available in: Danish

Workfeed walks down a different path

Aarhus-based Workfeed has launched a new product for the mandatory whistleblower-scheme, for companies with 50 or more employees. They make software for scheduling and time-tracking, but have decided to explore something new.

“There was a time when you bought software on a CD and then you owned it afterwards. You didn’t have to pay for it forever. You only had to pay for it once. Of course, we’ve come a long way since the CD, but the business model itself is sound. Today, you only rent software, if you stop paying for it, you no longer have access to it. It’s almost become a law of nature in software, which there should be no reason for,” says Jimmy Engelbrecht Sørensen, co-founder of Workfeed.

With this statement, Jimmy questions “best practice“ in the IT-industry and tries to lead the way in thinking differently, when it comes to software-ownership and access to software.

Read also: Aarhus entrepreneur turns down 20 million: A dilemma between freedom or finances – TechSavvy

Jimmy would also like to explain in more depth why they have chosen a different pricing model for their whistleblowing system:

“Our initial thought was to launch our whistleblowing product as a subscription solution like ‘normal’. But based on our users feedback, it was clear that it’s something very few people will use very often. So requiring ongoing payment, for customers to tick the box, seemed like a foolish idea. That’s why we think it’s pretty cool to offer customers one product, at one price, once, and then solve the challenge once and for all,” says Jimmy Engelbrecht Sørensen.

It’s not just about being different

Going against the flow is not just about trying something new, but it’s very much about acting on feedback, which is why it may become a strong competitive advantage for the Aarhus company. Jimmy points out that competitors who have received venture capital may find it difficult to follow suit:

“Those of our competitors who have raised venture capital may find it very difficult to create a similar pricing model. This is largely because the recurring revenue, i.e. what comes from subscriptions, creates a higher enterprise value. This value is important to companies because it must be used to raise more money for a higher valuation next time. If that doesn’t happen, the key is typically turned,” explains Jimmy Engelbrecht Sørensen.

But how do Workfeed’s own investors feel about the company challenging the status quo, which can result in uncertain revenue?

“It’s time to rethink the way we think about web software. Customers are tired of seven hundred and twenty different subscriptions for even the smallest problems. So while it may not be as profitable in the short term to sell once, we believe that when you adapt the payment method to the size of the problem, you will still win in the long term,” concludes David Heinemeier Hansson, investor and board member of Workfeed

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