State of Software Monetization 2022
The software and software-driven device industry is evolving at breakneck speed, and the stakes have never been higher for software and device vendors entering 2022. In the year ahead, successful companies will focus on integrating new technologies and addressing long-standing challenges.
At Thales Sentinel, we've worked with software and device vendors for over 30 years, and we understand how changing landscapes impact business evolution. That's why we’re bringing you our latest report, "Embracing Change with Software Licensing: State of Software Monetization 2022". In it, we survey over 500 independent software and device vendors to discover how organizations are navigating digital transformation, evolving customer expectations, business intelligence, and more. Our goal is to help you understand upcoming trends and changes, so you can make strategic decisions that will propel your business forward.
To gain the most value,download the full report now.
Short on time? Here are the highlights:
SaaS Is the Destination, but Hybrid Gets You There
In early 2014, when we commissioned one of our early reports about the state of software monetization, connectivity was already assumed and cloud computing was just beginning to dominate the industry. Still, the world didn’t quite understand the power of the as-a-service economy. At the time, the number of independent software and device vendors delivering software as-a-service via the cloud was just 33%.
Fast forward to today and that figure has nearly doubled to 65%. Cloud has proven to be a stable alternative to on-premises applications, and by now, the advantages of the cloud are clearer. And yet, not everyone is ready or able to make this leap. For those still journeying towards the cloud, hybrid is a game-changer.
Create SaaS-like customer experience from on-premises software
Hybrid cloud licensing is a way to link existing on-premises software with a cloud licensing and entitlement platform. The result is a customer experience that users are familiar with from SaaS software. Interestingly, hybrid software delivery developed into a central theme in our report, with many organizations identifying it as a” best of both worlds” choice.
Today's customers want things to be easy. So software and device vendors that still operate on-premises are in a race against the clock, trying to figure out how to keep their customers happy. Implementing a hybrid cloud licensing platform can help create SaaS-like experiences without the cost, complexity, and risk of a complete transformation. For more in-depth information about the benefits of using hybrid cloud licensing within on-premises software applications, take a look at this hybrid cloud licensing whitepaper.
Compliance vs. Churn— the Tension Heats Up
An increasing number of companies are debating the merits of keeping customers compliant vs. creating an unbeatable customer experience. If your business is hyper-focused on growth, you're probably wary of anything that could inconvenience your customers. On the other hand, you run a business. To be profitable, you need more than users. You need paying customers, and minimal revenue leaks.
The subscription economy requires a well-thought-out process, complete with rules and workflows that balance the need for compliance with ease of use.
Design workflows that plug revenue leakage without affecting customer experience
Consider this common scenario. A customer subscribes to your service and pays monthly via credit card. One month, the charge does not go through. Technically, your business should not allow your product to be accessed by non-paying users. But turning off that access to your software as a result of their failed payment will alienate your hard-earned customer.
What do you do?
Send a warning email, and allow them to continue to access your software?
Cut off access instantly?
Or find a middle ground, that will keep your customer happy—and keep them paying.
You might decide to send off a warning email, asking your customer to resubmit their payment details. In the background, you have conditions set up allowing uninterrupted access for one month. When the customer gets your email, they can quickly change their payment details. The payment failure was just a glitch in an ongoing customer relationship. You retain the customer and generate goodwill for your excellent service.
As-a-service business models require a delicate balance between software licensing enforcement and customer experience. Software and device vendors can position themselves to grow software revenue by finding creative solutions like this one to keep payments, renewals, and upgrades easy and hassle-free.
Software Usage Data Will Drive Decision Making
Software usage data is information you collect about how your customers interact in-product, post-sale. It’s one of the most actionable types of data software and device vendors can gather.
Types of usage data
Usage data gives you a view into your customer’s in-product experience.
You can identify:
- Which products your customers engage with
- How long customers use a particular feature
- Features customers aren’t using
- Where your customers are located
- Patterns, highlighting periods of high versus low utilization
- Trial conversion metrics, such as how long customers evaluate before purchasing add-ons
- Customer in-product searches
Software usage data and consumption pricing
Data is also the cornerstone of increasingly popular consumption-based pricing. Usage data records can be collected daily and then used to generate weekly or monthly reports. These reports are the raw materials needed for usage-based billing, which is the foundation for a consumption-based pricing model. Integrating usage data into a billing solution enables an end-to-end offering covering the complete sequence from data collection to invoice production.
While no one argues about the potential benefits of usage data, we found that putting usage information to practical use is a challenge for many. In the years to come, vendors not only need to access usage data more consistently, but they also need to put the data to work for consumption-based pricing or business intelligence.
The New Normal Requires New Licensing Solutions
It’s clear that consumer expectations from software have changed forever. Agility, flexibility, and mobility are now part of how the world functions--and your software will either keep up or be left behind.
Our research showed that a number of companies are still struggling in this new reality. On-premises software still plays a significant role in the software industry. But customers demand software delivery that is flexible and mobile.
Connect and automate licensing and entitlements
When the office lights first went off at the beginning of the pandemic, companies that were connected to the cloud were able to pivot and enable remote access to their platform. The pioneering research tool manufacture Oxford Instruments is one example of a company that was able to do just that. Thanks to flexible software licensing capabilities, Oxford Instruments was able seamlessly enable remote software accesses at a critical juncture. The result was a delightful customer experience that far exceeded expectations. Read the case study to learn more about how Oxford enabled remote software accesses.
business leaders are now actively planning for future disruptions. In almost all industries, it's now clear that software must be connected to the cloud or hybrid cloud. A cloud-centric approach to licensing allows on-premises applications to be used and consumed in a cloud-centric manner. Both cloud licensing and hybrid cloud licensing can follow the user, rather than being bound to a specific single device— the keystone of remote working.
At the same time, software and device vendors are also addressing the complexity that comes with flexibility. The more flexible you become— with multiple deployments, packages, and price points— the more complex your software operations become. Moving forward, automation will be necessary to simplify and streamline increasing complex operations.
Map Your Next Steps in Software Delivery and Monetization
In the ever-evolving world of software, bold decisions make resilient businesses. Before finalizing your annual business strategy, make sure that you are on top of industry trends by reading the full State of Software Monetization Report 2022.