Guest Author: Mark Seery, Founder and Pricinpal, bohcay LLC
Businesses cannot afford to underestimate the impact large cloud titans such as Amazon, Dropbox, SalesForce, and others have had on customer experience expectations for software users. Everyone is a cloud service consumer today, and everyone has had their standards raised.
Regardless of how software is being deployed, whether SaaS or on-premise, today’s B2B software users have expectations of a SaaS-like experience, complete with the advantages and conveniences that come along with it.
What Does This Mean For Software Licensing?
To begin with, it means that software licensing companies need to put a stronger focus on creating a great experience for software users; create a SaaS like experience.
Software users have always had a love/hate relationship with software licensing technology. On the one hand, businesses understand that suppliers have an interest in controlling software usage. In addition, CFOs of companies using software don’t want nasty billing surprises at the end of the quarter or year from extra users, or unplanned consumption.
On the other hand, those responsible for the agility and flexibility of their operations, another new reality in the age of the cloud, have always found software licensing technology gets in the way of their mission. That’s especially true when usage spikes lead to a shortage of licenses, product breakdowns, or unexpected billing.
This tension can no longer persist. The new reality of SaaS experiences requires a fundamental rethinking of software licensing approaches. Software suppliers must move away from an attitude of non-trust approach, to a trust-but-verify approach that deploys a measurement and reporting approach to software usage.
The integration of software licensing technology should focus on measuring software usage, not on preventing software usage. Ultimately, software suppliers want their customers to use software as much as possible. Limiting software usage reduces the scope of software exposure within a company, reduces the long-term value of a customer, and hurts the customer relationship by adding unnecessary operational friction.
Usage Reporting Benefits Everyone
Combined with an approach to measurement, there must be an increased focus on customer experience and commercial strategies. From a customer experience, both the software supplier and the software user must have accurate and timely access to usage reporting. Usage reporting is optimally extended to software selling channels, and managed software providers. Those with a commercial interest in software usage shouldn’t be surprised by the usage measurements at the end of a financial period; they need to be able to monitor usage on an ongoing basis.
Commercial relationships also play a role in customer experience. Are customers going to be charged retroactively for every instance of software usage? Or are software suppliers going to encourage as much software usage as possible and focus commercial terms for agreements moving forward?
One way of achieving these kinds of flexible arrangements is through Enterprise License Agreement approaches, but software suppliers can achieve similar experiences with subscription licenses. Both approaches are worth considering for companies providing similar capabilities through both on-premise and cloud offerings, especially if they are enabling license transferability between the two.
Customer Experience as a Business Model
For many businesses, the customer experience is not just a manifestation of the approach to software licensing technology, but the overall business model. For example, some businesses make the mistake of assuming the change from perpetual to subscription is just a billing model change. It certainly is a billing model change, and there are significant operations and accounting implications from that alone.
However, the businesses that are going to be most successful are those that move from a product mindset to a service mindset; a service mindset where the frequency of software releases dramatically increases and/or the software supplier is providing ongoing value improvements during the period of a subscription.
Businesses that focus on a narrow definition of what subscription means will see a narrow return. The businesses that understand that subscription implies an end-to-end value chain and business model change, will have the biggest mountain to climb, but will also have the biggest return.
Along with the change in business models and flexible licensing possibilities, SaaS has changed customer experience expectations for all consumers of software, whether on-premise or from the cloud. Software suppliers need to focus on business model, value chain, and licensing strategies that, at the very least, facilitate survival, and optimally, accelerate thriving.
Learn how Casio was able to increase customer satisfaction and gain revenue opportunities by partnering with Sentinel, by downloading our recent case study.
Mark Seery is a Founder and Principal at bohcay LLC, a research and consulting company, specializing in technology industry strategy and business models.
Before founding bohcay LLC, Mark worked for 10 years at Juniper Networks in Corporate Strategy, Operations, and Business Strategy roles, leading Business Model Strategy, Business Model Transformation, and Industry Intelligence.