For many years I sold a Software as a Service (SaaS) only application. When selling to organizations there was kind of an unwritten rule. Small to medium size businesses would be resourced strapped and culturally more open to the idea of a SaaS application. Larger organizations would have dedicated IT resources and potentially feel threatened by outsourced applications. The conclusion was simple – the SMB market was much more fertile while when selling to larger organizations never forecast above 50% no matter what unless you heard from the CIO him/herself that they would be ok with a SaaS application.
Frequently I have the opportunity to discuss “software licensing costs” with ISV’s and device manufacturers in our industry. I always find it to be an intriguing discussion, and almost universally it seems that these companies view licensing as a necessary evil, not as an investment (let alone a strategic investment!). While there are multiple reasons why this could be (think of purchasing organizations and how they are measured), part of the equation undoubtedly has to do with the lack of concrete ROI metrics that are available around this technology, and the management of licenses and entitlements.
How do you know how much you are losing? How much is due to piracy? How much is due to unintentional piracy by organizations that want to be compliant, but aren’t due to a lack of enforcement? All of these metrics seem to be based in the psychology of perceived loss, as opposed to perceived opportunity.
Story time. Some time ago I worked with a software company who was mostly convinced switching software licensing technologies would be in their best interest. One problem though: their hesitation was not around cost (financial investment, development effort, support impact, external and internal impact) but instead revolved around the thought of to giving their customers “double entitlements”. The concern was that each customer would already hold a set of license keys that would run the current and prior versions of the software and would *then* be given an additional full set of keys for the new version sitting on new technology, thereby doubling the number of software licenses their customers could potentially run. Sidebar: switching licensing technologies does not automatically result in double entitlements.
One of the inherent dichotomies for software vendors exploring new pricing models is: Who do you talk to? The common response is “Discuss this with your existing customers – they know best” There’s only one problem with that. Your existing customers have already most likely validated your current licensing processes – via the act of purchasing your software. To put it another way, when they looked at your pricing and licensing models they most likely found them to be agreeable enough (or at least not a big enough impediment) to moving forward.
The risk then as you explore new software licensing and pricing models is that you poll your existing customers only. While they’re an important constituent they should not be the only constituent. You need to look at the potential customers who did not buy your solution. Find out why they decided to go in another direction.
I have spent the last couple of decades working for (not just with) major ISVs as the person responsible for “making it all work”. I was the guy the executive team tasked with putting a plan together that showed how we could protect our revenue stream, how we could give customers tools to keep themselves compliant, how we could get better insight into understanding our customers’ product deployment patterns, selecting the right licensing models and policies, selecting the right licensing technology and vendor… all while somehow engineering a good customer experience without upsetting the apple cart. Sound familiar?
There are many virtualization related debates underway right now (even as you read this!), but one that I recently came across seemed to stand out above the others. It was all about who should be dictating the direction software companies should take to tackle software licensing and virtualization. Treating that topic independently, there are essentially 3 players involved:
I stumbled across an interesting Gartner blog this morning that features a series of posts “SaaS vs Software” — all very interesting. In one of his more recent posts SaaS vs Software: Their Licensing Needs to be Integrated, Guy Creese (the blog’s sole contributor) begins to explore licensing. He starts by acknowledging that while everyone is talking about the need for a single platform that can run in-house or in the cloud, not a lot has been written about the growing need for a single licensing model as well. Definitely an interesting read, I recommend checking it out!
First of all, I’d promised myself I would not write about Apple just based on how popular the topic is. Obviously, I’ve broken that promise. What strikes me most though about Apple’s current success is how it seems to go against the currently espoused play-book for success. Secondly, does Apple’s focus on hardware actually result in better software development practices?
In my role I meet with many hardware and device manufacturers. One theme is very consistent: Historically, we ignored our software as it was only really there to facilitate or drive our high value hardware sales. Now though we are looking to monetize our software as we find hardware is becoming commoditized. They want help from us to help them protect, manage and deliver their software. As I mentioned, this driver is one of the most prevalent trends in our overall industry today.
A few weeks ago I tried to download a trial version of a software package from a pretty well known ISV’s website. It wasn’t a huge file and should have been a relatively quick download. Unfortunately, that wasn’t the case. After numerous attempts and spending a frustrating hour trying to download the trial, I decided to forgo the whole thing.
I’m not the first or the last person that has had this type of experience. Yet, it continues to surprise me at how little thought it seems some ISV’s put into their Electronic Software Delivery (ESD) solution. The software download process is part of the customer experience and should be treated as such by the ISV. A good experience could be the first step in a long lasting customer relationship; a bad experience may turn away the customer completely.
Let me start of by apologizing to both Apple enthusiasts, and those on the other end of the spectrum who expected this to be an discussion about the much debated iPad. It is not. While passions run high about iPad’s place in today’s market one thing is clear. Whether its time is now later is a moot point. What it does is shine yet another spotlight on the changing face of technology. The iPad builds on momentum created by the iPhone that is dramatically effecting how we consume technology.
So what does all this have to do with licensing. The new workforce is comprised of a generation that cannot live within the strict boundaries traditionally defined by IT. They also see the unprecedented access afforded by applications like iTunes as something expected, rather than their predecessors, that still struggle with the piracy implications. They expect their software to be consumed in the manner most convenient to them, be it the home laptop, iPhone or iPad. Ask yourself how often you’ve wanted to access your favorite on-line service and just assumed that there must be “an app for that”. I have iPhone apps for most of the web applications for which I used to use my laptop (hurry up United, you’re lagging).