I got a little insight recently into why the quarterly revenue of one well-known mid-market software vendor has been increasing lately, for no apparent reason. My source says that the vendor has been putting the squeeze on its existing clients for additional license revenue.
Here's how it's done. Several years ago, this vendor introduced a license audit program into its software distribution and began phasing out support for previous versions of its package. Now, according to the terms of its license agreements, it is ordering clients to run the audit program and report back usage statistics. Invariably, the vendor can find a few unpaid user seats here and there as grounds to declare the client in violation of its agreed terms and condition and demanding that they pay for those extra seats.
To be fair, most software vendor license agreements contain a clause giving the vendor the right to audit compliance. As new customers have become more difficult to acquire these past few years, vendors are tempted to enforce such rights in order to squeeze as much marginal revenue as possible from their existing customers. Although this approach will bump revenue in the short run, the strong-arm tactics can't be going over well with customers. And certainly, the revenue lift is not sustainable.
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