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The Software Industry is Changing: Time to Future-Proof Your Software Business Model

In the 2017 report Disruption in Software Business Models Creates New Opportunities for Monetization, Gartner analysts say it all, in just one sentence: “Technology strategic planners will find next-generation software monetization is not about protection, limited to IP licensing, but about growth from enabling new models with repeatable revenue streams.”

Software Buyers want transparency, and they want it immediately

No-one wants to pay for shelfware. No-one ever wanted to. But in the past software buyers were often left in the dark about what they used. They figured it out themselves. They leveraged Software Asset Management (SAM) tools, and they will continue to do so. But they are also looking towards their suppliers and ask for more help, transparency and ease of use. Producers should show back what buyers are allowed to use and what they are actually using. This builds trust and strengthens the customer relationship. Suppliers should embrace this data as well and grow customers that are not yet using what they paid for. 

The move to SaaS is happening - it should be managed in a smart way

Most software suppliers move to SaaS and bring new offerings to market. The reality is that on-premises applications won't go away immediately and hybrid models will exists for a long time. Don’t let the deployment model drive your customer's experience. Make sure that customers are provided with self-service, ease of use and a seamless software experience for all of your products. Even if you are using different deployment models, your software products should be managed centrally and connect to the same back office, rather than being operated in silos.

OpEx on the rise - everyone’s thinking about subscription

The move to OpEx models is here. ISVs and device manufacturers alike move to recurring revenue models. Subscription models are widely adopted already. Suppliers should proactively increase the number of subscribers and automate subscription and renewal management processes. Manage the customer journey continuously and start thinking about the renewal when the subscription period starts. Make sure that customers get value from your software and the renewal will happen almost automatically. 

There’s no one-size-fits-all – for products and for monetization

Software buyers expect individualized products and there’s only little acceptance to pay for a feature set that’s not being used. Modular products and features that can be switched on and off meet these expectations.

The same is true for monetization and pricing. In the past you just defined the one model that worked best for your product and customer base. Today, monetization is more agile. According to Gartner, 80 percent of ISVs will use multiple licensing models by 2019. And many do so already – a well-known example are SaaS apps that a priced per user with additional cost for online data storage. More of these hybrid models are on the rise, and software suppliers should get their back office ready for it today.

Software business models are changing in many ways.

About the Author

Eric Free is responsible for defining Flexera's corporate vision and strategy, overseeing mergers and acquisitions and strategic transactions, managing the company's product and solutions portfolio, and driving the company's marketing activities. He has more than two decades of experience in the technology industry, with a strong focus on growth and new businesses and on connecting the edge to the cloud.

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