Understanding how to optimize every step of the software supply chain is a key to your software’s success. While the term “supply chain” often refers to how a physical good gets from producer to customer, it applies to the software development and delivery process as well. More and more research is being done about how software is delivered, what best practices are in pricing and licensing, and more. To help you understand and master this complex process, we’ve broken it down for you.
What Makes Software Different?
In more traditional industries, the supply chain usually begins with the materials used to create the product, and continues with supplier management, delivery and more. But it can be hard to pin down the exact resources you need when you’re not providing a tangible product or service. What are your resources? Your trustworthy laptops, and ergonomic keyboards? Your servers? A team of developers? What about the software or cloud services you use to create your product?
Now that most software isn’t sold on a CD or even a floppy disk as it once was, your problems have probably shifted form, too.
How do you distribute your software to your customer? How many different ways do you package and price your software? How do you manage open source components? And how best can you meet your customers’ shifting needs? These problems are unique to software’s particular nature.
The Steps on the Software Supply Chain
Fortunately, there are still clear steps on the software supply chain. Some of them may overlap or be in a different order than a manufacturing supply chain, but in reality they’re not that different than if you were manufacturing, for example, a hammer.
First Step in the Software Supply Chain: Research and Development
Let’s imagine you’ve made an amazing discovery: you can exert more force on an object by using extra weight. Now it’s up to your research department to turn that into a marketable idea. You’ll have to figure out what people need to exert force on, what shape the weight should be, and how much weight will make your product too heavy for your customers to pick up. Eventually, you’ll invent a hammer.
It’s a bit more complicated with technology. Between the different development teams you bring on board, the server design, the programming languages, the back end, the front end, the DevOps team and more, the development process can give you a headache. Developing your software is, however, a critical stage in your software supply chain, since without it, you have nothing to supply.
Even during development, you’ll want to consider the full lifecycle of your product, including how you’re going to license and price it. If your developers are too busy worrying about product features, business implications become an afterthought. That can lead to other problems as you move through your software supply chain.
Licensing of Outside Resources
Once you know what you’re creating, you may need to source materials. Of course, when you’re developing software, you won’t be shipping steel into your factory. Instead, you’ll need to license media and source code, possibly make deals for third-party components, or collect outside data.
You do need to manage the constantly-changing nature of technology development and make sure you are maintaining a focus on end-to-end product development through the process. Can your ERP do what you need—enabling trials, and flexible license options? Or do you need to look for a separate solution that will enable your software to take off?
Today’s hot development tool is tomorrow’s has-been. You need to be gathering feedback from across your company to know how best to move your development process forward. What new tools do you need? How will they improve your work? How will you gain the business insight you need to prioritize your features, and how you will get your product to its target market?
Integrate Flexible Software Pricing Models
Once you develop your product, that’s where the software supply chain really veers away from the traditional supply chain. You’ve figured out how to apply the technology but now you have to figure out how it’s going to get out into the world. There are a lot of different aspects to this but one of the first will be how you manage your flexible software pricing options.
When you pick a selling price for a hammer, you know exactly what that price gets the customer: a hammer. You probably won’t rent out your hammer on an hourly basis, or charge more if your customer wants to lend their hammer to a neighbor.
But when you pick a pricing strategy for your software, you’ll have to decide among many options. Will you charge your customers a one-time payment, or an ongoing subscription? Will your price be consumption-based or time-based? And how many users can your customers share the software with?
Allowing yourself the flexibility to offer various software license models can give you a crucial advantage over your competition, who may only offer a single, perpetual license, without the flexibility that today’s customers demand.
Software Distribution and Delivery
Once you’ve decided on the right pricing model for your software, you’ll have to figure out how to distribute your software in a way that makes sense for that specific model. Hammers and other physical goods can be bought in person or delivered to their new owner. Software delivery can be delivered either manually or automatically, through an Electronic Software Delivery (ESD) system.
ESD solutions enable software publishers to deliver applications digitally, faster and more reliably than ever. As opposed to the old days of on-premise software delivery, digitally delivering your software lets you offer remote activation, tracking of your activations and more.
Electronic or cloud software delivery also gives you the opportunity to offer some variation of a free trial model. 61% of SaaS businesses now offer some variation of a free trial - including time-based trials, freemium models, try and buy and other free models.
Where Does the Software Supply Chain End?
As opposed to most tangible products or services, the software supply chain doesn’t quite end where you might expect it to, at the point of sale.
You may still issue software updates, release new versions, or collect data. You may be responsible for some amount of ongoing maintenance. And it will be up to you to make sure the customer is paying ongoing subscription fees and using the software in a manner that complies with the licensing agreement you worked out.
The continued relationship between software vendor, customer, and product, gives you the opportunity to grow your revenue through cross-and up-selling to a customer you already know. By understanding your customers’ behavior, you can anticipate customer attrition, identify potential revenue loss and take steps to ensure the health of your business.
Software Supply Chain for the Digital Business Era
For years, companies in traditional industries have continuously worked on perfecting and optimizing their supply chains. As business becomes increasingly digital, you’ll need to begin doing the same for your software supply chains.
Staying on top of the game and your customers’ needs is just as important in the post-sale stages as it is when you’re just taking the first steps of software development.
Optimizing every stage of your software supply chain is crucial to increasing operational efficiency, generating revenue, gaining business insights and improving customer satisfaction.
To speak to a Sentinel expert about how our solutions can help you automate your supply chain, click here.