What can we expect from the next generation of software business models?

The software industry is changing at a startling pace. From virtualisation to the cloud to the Internet of Things (IoT), what software buyers expect and demand from their software investment is drastically different than it was in years past.

On the other side of the table, says Eric Free, senior vice president of Strategic Growth at Flexera, software suppliers are eager to grasp monetisation opportunities and tackle new software business models. In a report released earlier this year, Disruption in Software Business Models Creates New Opportunities for Monetisation, Gartner analysts commented that “Technology strategic planners will find next-generation software monetisation is not about protection, limited to IP licensing, but about growth from enabling new models with repeatable revenue streams.”

I expect that in 2018 we’ll see software suppliers embrace this next generation of software business models, and the following shifts in the software industry take place:

  • Software buyers will demand increased transparency

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’re also looking towards their suppliers and asking for more help, transparency and ease of use. Producers should show what buyers are allowed to use and what they’re actually using. This builds trust and strengthens the customer relationship. Suppliers should embrace this data as well and grow customers that aren’t yet using what they paid for.

  • SaaS will be managed in a smarter way

As more software suppliers move to SaaS, they’ll bring new offerings to market. The reality is that on-premises applications won’t go away immediately and hybrid models will exist 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 will rise as more people focus on subscription

The move to opex models is imminent. ISVs and device manufacturers alike are moving 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.

  • Increased demand for individualised products and monetisation strategies

There’s no one-size-fits-all – for products and for monetisation. Software buyers expect individualised products and few are willing 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 monetisation and pricing. In the past you just defined the one model that worked best for your product and customer base.

Today, monetisation is more agile. According to Gartner, 80% of ISVs will use multiple licensing models by 2019. And many do so already – a well-known example are SaaS apps 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.

The change we’re experiencing in the software industry is driven by major technology disruptions, like the move to the cloud and the IoT, which are finally driving the agility and transparency that buyers have long been looking for. With professional software monetisation platforms that enable sophisticated feature management and support all pricing models as well as usage tracking, suppliers can now deliver on these expectations and meet the demands of the next generation of software business models.

Flexera’s Monetisation and Security solutions aim to help software sellers transform their business models, grow recurring revenues and minimise open source risk. Its Vulnerability and Software Asset Management (SAM) solutions are designed to strip waste and unpredictability out of buying applications.

The author of this blog is Eric Free, senior vice president of Strategic Growth at Flexera

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