Industry executives and experts share their predictions for 2018. Read them in this 10th annual VMblog.com series exclusive.
Contributed by Eric Free, Senior Vice President of Strategic Growth at Flexera
The Next Generation of Software Business Models
The software industry is changing at a startling pace. From virtualization 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, software suppliers are eager to grasp monetization opportunities and tackle new software business models. In a report released earlier this year, Disruption in Software Business Models Creates New Opportunities for Monetization, Gartner analysts commented that “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.”
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:
1. 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.
2. 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 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.
3. 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.
4. Increased demand for individualized products and monetization strategies
There’s no one-size-fits-all – for products and for monetization. Software buyers expect individualized 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 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% 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 monetization 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.
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About the Author
As Senior Vice President of Strategic Growth, 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.
Prior to joining Flexera, Eric served as a Vice President of Intel, where he was a senior executive and general manager in the company’s IoT Group. There, he developed Intel’s consumer IoT strategy and spearheaded Intel’s entry into new consumer and enterprise markets. Before that, he co-founded and drove products and services for Intel’s digital home division.
Prior to Intel, Eric served as Executive Vice President, Product Development for Rovi (formerly Macrovision), where he was responsible for designing and building the company’s software and services. Also during his tenure at Macrovision, he led the company into the embedded software market, architected the company’s turnaround strategy, drove global business development and strategic partnerships, and oversaw the company’s mergers and acquisitions and venture investment activities.
Earlier in his career, Eric worked for several startups and early-stage venture capital funds, managed policy issues for a major trade association, and served in a variety of engineering and technical management roles at a leading project delivery firm, CH2M HILL. Eric earned a bachelor’s of science degree in engineering from Duke University, a master’s of science degree in engineering from Stanford University, a master’s of art degree, concentrating in International Affairs, from Georgetown University, and a master’s of business administration degree from Duke University’s Fuqua School of Business.
