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Show me the money!

Article Type: Strategy          Published: 09-2014         Views: 1762   



Jamie Longmuir of SafeNet describes how different approaches to software monetization can drive incremental revenue for ISVs via the Cloud.

The cloud is changing the way independent software vendors (ISVs) are monetizing their offerings. An increasing amount of workload is now moving from on-premise to cloud. This transition is driven by two factors: what customers and/or competition are dictating, and the need for ISVs to expand their reach to new segments. As a result, more and more ISVs are considering adding a cloud-based element to their offering.

However, for software vendors, success in the cloud is reliant on a lot more than just building a useful service in the cloud; it also depends on the organisation's ability to effectively monetize that solution. Only those ISVs that employ a strong software monetization strategy, consisting of software packaging, control, tracking and management techniques, will reap the real revenue benefits of the cloud.

With IDC's prediction that cloud software will grow to US$76.1 billion by 2017, it's no surprise that ISVs are moving software and application development and delivery into the cloud. You only have to run a quick Google search and you'll find pages of results linking to articles explaining why every software vendor needs to become a software-as-a-service (SaaS) provider, or run the risk of going out of business in a couple of years.

Historically, software was delivered on-premise (usually on a server or desktop with no virtualisation) and the most common licensing methodology was to secure the application with a hardware key or dongle. Then the next evolution was a software-based license key, where software companies would deploy a license server in the client landscape to secure its software.

Now many software companies use a hybrid approach to deliver software - running a SaaS service and delivering the same application on-premise, such as Microsoft Office 365. Next-generation licensing solutions need to be able to handle these multiple delivery methods as well as multiple license models, with one back-end and one enforcement technology.

We're seeing a fundamental shift in how applications are delivered and maintained. Licensed on-premise solutions are being complemented by SaaS applications. As a result, in addition to their on-premise offering, ISVs are now faced with the challenge of adapting offerings to run in the cloud and in a virtual environment, including not only resources and technology, but licensing models that appropriately monetize SaaS applications.

Many ISVs are struggling to figure out how they can manage and license both on-premise and cloud-centric packages. Typically they have made long term investments in applications that are deployed on-premise and therefore were not originally developed to be offered as a service. Furthermore, many ISVs are realising that they are losing business, not because of the quality of their product, but because they aren't selling their product the way customers want to buy it.

Today, end-users/enterprise IT departments want the flexibility of consuming software on any device, regardless of whether it is a desktop, or increasingly, a mobile device. In addition, just as they utilise elastic cloud services from providers like Amazon Web Services, they want to be able to consume software on a pay-as-you go or pay-as-you-grow model. In other words, they want the convenience they are accustomed to in other aspects of their lives.

With a lot of options to choose from, customers can easily pick another product if the software publisher doesn't suit their needs. So it has become strategically and operationally important for software vendors to provide their software in the many ways that customers prefer to purchase - subscription, freemium, use-based, feature-based, or any combination of these and more.

In order to constantly adapt to the changing needs of customers, ISVs need to ensure they are utilising software usage tracking and analytics to enable them to develop and price software in line with customers' needs. The cloud can provide ISVs with real-time access to information and data and, given the right tools, can enable them to update user preferences immediately.

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