The Situation
Cisco’s Identity Services Engine (ISE) had grown from $65M to over $200M in annual bookings on a model that was becoming a liability. The bulk of revenue came from hardware and perpetual licenses. Customers paid once, renewed maintenance at thin margins, and had little structural reason to expand. Revenue depended almost entirely on new customer acquisition. Pricing hadn’t been revisited in years. The product’s high-value capabilities were bundled into the perpetual license, effectively free to customers who would have paid more for them.
The deepest problem wasn’t pricing, though. It was visibility. ISE had little to no license enforcement mechanism. Neither Cisco nor its customers had meaningful insight into how the product was actually being consumed. A strategic audit I conducted revealed that 65–75% of engineering capacity was concentrated on features with no measurable impact on renewals; resources that could be reallocated better.
With the industry moving towards a subscription model, the business faced two simultaneous problems: restructure its monetization model for the long term, and do it without disrupting the installed base of thousands of enterprise customers that was funding current growth.
The Decisions That Mattered
Pricing: Build it from evidence, not intuition
Rather than designing subscription tiers based on internal assumptions, I ran a formal conjoint analysis, surveying customers on willingness to pay across feature bundles and price points. This answered the questions that matter most in pricing design: which capabilities customers actually valued versus which they had taken for granted, where the ceiling on premium pricing was, and which differentiators competitors couldn’t replicate.
That last finding was decisive. One capability had no competitive equivalent. I moved it into the premium tier and structured the entire architecture around it, giving customers a clear reason to upgrade rather than simply a higher price for the same thing.
Conjoint analysis told me what customers would pay. A full financial model I built against the installed base told me what the business could sustain — mapping pricing scenarios against margin, forecast accuracy, and deal economics across thousands of existing accounts. The two models together formed the internal business case. Engineering capacity was reallocated in parallel: the 65–75% pointed at low-impact features shifted toward the capabilities driving differentiated value at each subscription tier.
Migration: Structure the path so customers choose it
The harder strategic problem wasn’t pricing, it was the transition. Forcing thousands of enterprise customers off perpetual licenses would have triggered churn and channel conflict. The migration had to be designed so that moving was the financially rational choice, not a mandate.
I built a three-lever migration ladder, with each lever targeting a different customer behavior:
| Level | Lever | Strategic Purpose & Outcome |
|---|---|---|
| 01 | Economic lock-ins | Multi-year pricing advantages that make the long-term economics of subscription unambiguously superior to staying on perpetual — not marginally better, but clearly better when modeled over a contract term. |
| 02 | Sunset timelines | Defined end-of-support dates for perpetual licenses create a natural migration window without forced action. Customers plan around a deadline they can see rather than hitting a wall without warning. |
| 03 | Early incentives | Discounts that reward early movers front-load ARR conversion in the first 12–18 months and stabilize revenue predictability while the transition is still underway. |
The design logic was deliberate: early movers were rewarded, late movers had clear deadlines, and no customer was left without a path forward that made financial sense. The levers were calibrated so that customers self-selected their timing rather than being pushed.
“The migration couldn’t be forced — it had to be structured so that moving was the financially rational choice. That required designing three levers that worked together, not three policies that happened to coexist.”
The hard call: Building enforcement capability
The most consequential decision I made wasn’t about pricing or migration. It was recommending we build consumption visibility infrastructure before we had a compelling business case on paper for doing so and convincing business and engineering leadership to prioritize it against a full roadmap of competing feature work.
A number of customers were operating beyond their licensed usage, using features they hadn’t purchased, or running on expired licenses, not through any bad intent, but because the product had never enforced or guided anything. It had simply never told them.
That gap became a revenue discovery engine. It also made the renewal and upsell conversation fundamentally different: instead of asking customers to pay more for the same thing, we could show them precisely what they were using and price accordingly. The enforcement framework I designed included in-product guidance and defined grace periods specifically to keep that conversation from becoming adversarial.
Execution: Four workstreams, one coherent story
A licensing transformation of this scope touches every function that touches revenue. I drove four workstreams simultaneously, keeping them coordinated around a single narrative the field could use in every customer conversation:
New talk tracks, ROI calculators, and competitive positioning tools so the field could make the subscription case persuasively and defend it when challenged.
New ARR models to replace the lump-sum perpetual bookings, giving Finance and Sales the forecast visibility that lumpy historical revenue had never provided.
Scoping and championing the consumption visibility infrastructure, and rebalancing capacity toward the features driving value at each subscription tier.
Updated contract structures for subscription terms, multi-year agreements, and the new enforcement framework.
What It Produced
Over four years, ISE completed a full conversion with every customer moved to pure software subscription licensing. Gross margin improved as the product’s highest-value capabilities moved out of the base bundle and into premium tiers where they could be priced to their actual value. ARR replaced lumpy perpetual bookings, and forecast accuracy improved accordingly across Sales and Finance.
The consumption visibility infrastructure unlocked renewal and upsell opportunities that had been structurally invisible before. The licensing framework was used as a model by multiple other Cisco product groups.
Why This Matters Now
The Cisco ISE monetization transformation took multiple years and required rebuilding pricing architecture, migration design, enforcement infrastructure, and go-to-market motion simultaneously. The window to do that work proactively, before external pressure forces a reactive version of it, is shorter than most companies think.
Three questions worth sitting with honestly:
Consumption data is the foundation of any sound monetization decision. Without it, you are pricing against assumptions, and there is almost certainly revenue you cannot see.
If your most defensible capability is effectively free, you are leaving revenue on the table and undermining your own competitive positioning.
Per-seat and per-user models designed for human workflows will face structural erosion as AI agents become primary consumers of enterprise software. The companies redesigning their monetization now will be years ahead of the ones waiting for renewal pressure to force the decision.
Let’s talk about whether I can help.
Ameet Kulkarni led this transformation as Senior Product Manager on Cisco ISE. If your monetization model needs to evolve, reach out for a direct conversation about your specific situation.