Software pricing and packaging is an art form and perfecting it is an ongoing battle. Add cloud services to the mix along with your on-premise offerings and you have a recipe for disaster. I have spent the last two years working with ISVs who are in the midst of planning and migrating all or a portion of their product portfolio to the cloud. A significant obstacle is how to price and package their offerings to build a customer base, prevent cannibalization, and ultimately increase profitability. I have decided that their stories and the successful approaches are certainly worth sharing!
In speaking with our larger global customers I’ve noticed a troubling and difficult conundrum when it comes to software licensing trends. Firstly, ISV customers in established, advanced economies are demanding greater granularity and flexibility than ever before when it comes to how they implement and use software. In most cases the ISV’s are more than happy to oblige. Closer alignment of pricing and value creates happier customers, less discounting and more achievable up sell opportunities for the future.
It came from out of nowhere. One day you woke up and the world was tweeting. Tweeting, really? You thought to yourself…”This is one fad that I’m passing on, a tweeter, I’m not.” You even made a pact not to fall victim to a Facebook page. As friends and family buzzed about their latest Farmville conquest, you proudly stated the fact that you were a non-conformist.
There is no question that SaaS as a business model is becoming more and more attractive. According to Saugatauk Technology, Inc., 45% or more of new enterprise IT spend will be devoted to cloud-based applications by 2014.
Even today, SaaS revenue growth remains much higher than on-premise software growth rates. So it’s no surprise that most organizations are beginning or at least thinking about transitioning current business models to include SaaS. Chances are, YOUR ORGANIZATION IS ONE OF THEM.
Most of us see ‘software entitlement’ and think it’s just a ‘nice to have’ option. You know what else is ‘nice to have’ and ‘keep’ – customers. And we all know retaining customers is much more cost-effective than continually having to acquire them.
Just like a customer loyalty program, software entitlement provides data to better understand your customers. In turn, allowing you to offer customers targeted, high interest, high value packages that are easy to obtain and consume.
Brace yourself – we are leaving the world of perpetuity and moving into a constant state of evolution! End-users are in the driver seat now and what they want they are going to get – if not from you, then from one of your largest competitors or a small start up that is willing to sell them the services they need, for the price they think is fair. You can have the most sophisticated, feature-rich offering on the market, but if you can’t offer flexible pricing and licensing models you will never reach your maximum potential! So what does it take to be agile?
“The revolution will not be televised”, the singer Gil Scott-Heron once famously sang. I think he was trying to say that information and truth, cannot be packaged up in a nice “made for TV” special. In fact, by the time it’s happened, it’s probably already passed you by. I can’t help but feel this way about virtualization. We’ve been hearing the hype for years. No one denies the unbelievable impact it has had, and the value it continues to promise. This is not one of those technologies where you think “if”, it’s really more of “when” and “how”.