The subscription economy has arrived and is here to stay. One of the key components of a subscription pricing model is the ability to charge against usage or essentially a pay as you go model. In the last couple of years, there has been a clear rise in the roll out of consumption based pricing models among ISV’s and SaaS providers. However, the interesting emerging trend is the adoption by OEMs, medical devices and classical hardware manufacturers who want to monetize on the software to gain a competitive advantage.
The rise of Software-as-a-Service (SaaS) over the past several years has led to an increase in the popularity of subscription software licenses. Subscription licensing pre-dates SaaS, but the cloud delivered nature of SaaS has naturally led to this increase in subscriptions.
At SafeNet we’ve seen this evolve in the past year where both enterprise buyers and software publishers are increasingly moving beyond subscription to a pay-per-use model for licensing software. We’ve seen this increasing demand for pay-per-use from our ISV customers who are delivering their software in the cloud, and from those that are providing on-premise software but who want to charge based on usage.
The IT industry is in the midst of a massive shift toward what IDC calls the 3rd Platform. The 3rd Platform is characterized by a proliferation of always-connected smart mobile devices coupled with the widespread usage of social networking, and layered over a cloud-based server infrastructure supporting important new workloads such as big data analytics.
The 3rd Platform is not just a technology revolution; it’s also a customer revolution. Unlike the previous generation of software, 3rd Platform applications will be designed for the consumer and enhanced for the enterprise. Consumer-like expectations for ease of acquisition and access as well as simplicity and transparency will dictate pricing models and payment terms. In addition, expectations for ease of use and interoperability will also be gleaned from consumer experiences.
At a recent conference our CEO asked: “What’s the average price of software?”
An interesting question. I started thinking about the mix of consumer vs enterprise, the uptake of subscription based and usage based pricing, and a host of other factors that left me spinning to the point I concocted a number way off the mark. I’ll preserve a little dignity and not share my answer, but ask that for a moment that you ponder the same.
I suppose the title of this article may provide a clue. So do you have your guess?
I can tell you with first-hand experience that being a product manager is a tricky and thankless role! On paper, your task is to understand customer needs and translate them into product requirements. You must then work closely with your R&D team to realize those requirements into a product that hits the market at the right time and at the right price.
Sounds simple, right? The reality is that its way more complex than that, with a myriad of decisions and trade-offs to make along the way. Product managers have to react to the realities of what is possible in the time and budget available, and constantly adapt to changing market conditions and competitive moves.
Recently, Adobe announced that it is moving the Creative Suite (which includes Photoshop and other graphic design applications) to Cloud-based licensing. The company will no longer distribute boxed versions with perpetual licenses. This move demonstrates a growing transition to Cloud-based subscription licensing, which SafeNet pioneered in 2010 with the introduction of the first Cloud-based software licensing service – Sentinel Cloud.
Adobe is positioning this announcement as very beneficial to its users, providing the customer with immediate access to the latest features and upgrades, enhanced collaboration, cloud based storage, and more.
SafeNet, working with SIIA, has released the results of a survey in which software producers openly admit that they are currently losing nearly 50% of their potential revenues. To what you ask? History may tempt you to say piracy – and the latest stories of organized attacks to steal IP of several US companies only further fuels that belief. But is that the real reason? Not according to the 620 software publishers who responded to the State of Software Monetization survey.
The software protection business has matured at a slow pace over the past decade. The industry has gotten better at developing improved customer experiences through more sophisticated web portals and web services, but ultimately the model’s foundation relies on license file transfer between the vendor and the end customer.
The improvements in the area of cleaner customer experiences through web services has allowed some vendors to minimize a fair amount of the friction this style of license enforcement has introduced into the traditional delivery and deployment model.
What is so magical about the clock ticking over from December 31st to January 1st? What really changes? Your business doesn’t. Your customers don’t. Your action items roll over (unfortunately). But yet, for most corporations, there is one magical change that happens on January 1: your goals, financial or otherwise, reset! Yes, out with the old, in with the new, just like that. Like magic, starting every January 1st, you get the opportunity to be measured differently, to convince your boss why the bad things from last year can be forgotten, and to build on the good things that happened.
I’ve noticed several economic and industry trends heading into the new year, and each one presents unique opportunities for all of us. These trends will greatly influence the software industry in 2013, and as such, we all should consider how they integrate to our goals:
Guest blog post by Amy Konary, Vice President, IDC
For decades, success in the software business required executing on the following:
1. Make a Killer Product
2. Drive down Marginal Costs
3. Sell as many Units as Possible
4. Repeat Steps 1-3
Traditional software monetization models have been built to support this approach. However, today’s software customers are focused on using what they have, rather than buying more.