This article originally appeared in Cloud Computing Magazine Q4 2012
A transformation is taking place in the software industry. Experts agree that the number of traditional on-premise-only software vendors will continue to decrease at a rapid rate and most new software vendors coming to market will focus on building their solutions as SaaS (News - Alert) (Software-as-a-Service) offerings. Despite this fundamental shift in the delivery of software, developers still need to pay close attention to maximizing the value of their software from both a revenue and cost perspective.
Independent software vendors (ISVs) that don’t or can’t monetize their applications effectively leave excessive amounts of revenue on the table, which limits their profitability potential and ultimately leaves them exposed to more nimble competitors. Savvy developers and product management teams know that addressing all aspects of monetization is the key to maximizing their investment in development, and for many of them, it’s the only way to stay in business.
No matter what type of software application has been developed or how that application is being delivered to end-users, a successful comprehensive software monetization strategy hinges on four key factors: how effectively software publishers can package, control, manage, and monitor their offerings. Understanding the basics – including managing, measuring and controlling users’ rights – is only the first step.
Below is a series of SaaS monetization pitfalls that readers need to be aware of in order to save themselves from incurring pain in the future:
Failing to Automate – Automation improves internal operations to achieve the core objectives of cost reduction and positive customer experience. Manual user provisioning, management, and usage tracking are not only painful processes for administrators, but they create a negative customer experience more often than not. In an instant-gratification world, customers will turn to competitive solutions if they don’t get the level of service they expect. An automated system will not only grant access quickly, delivering a positive, consistent and predictable user experience, it can easily transition information to back-end billing systems and enforce contracts. Automated provisioning cuts costs, eliminates headaches, provides fast access for new users, and denies access when contracts expire – all helping make the most of the software.
Failing to Control Usage – It is the developer’s responsibility to make sure the users are sticking to what the contract says. Making sure that people aren’t using the service in a way they’re not authorized to and making sure that only authorized users have access to the service are software monetization fundamentals. Not only will basic enforcement help monetize the solution, it will create more positive user experiences by eliminating the dreaded audit “true-up,” which enforces compliance after the fact, often surprising customers with balloon bills.
Failing to Measure Usage – Understanding who customers are and how they use SaaS offerings is critical to monetizing the solution. By monitoring usage and adjusting service offerings, SaaS providers can drive incremental revenue, initially by customizing offerings and service plans to better meet customers’ immediate needs. Usage analysis can also help SaaS providers avoid customer churn by providing early warning signs that usage has dropped off, prompting salespeople to engage with customers to inquire about the cause of the change and attempt to address it before the customer turns to an alternative solution.
Failing to Adapt the Offering – The market is always changing, but not all SaaS providers evolve with the change that’s taking place around them. The key to surviving the turbulent market is adapting offerings to address the emerging demands of the customer. Gleaning data from usage analysis and using it to align product roadmaps with customer needs cannot only create a better product; it can save precious engineering cycles by avoiding the wrong development path. This time-to-adaptation can deliver a huge competitive edge. Beyond addressing the needs of existing customers, SaaS developers need to evaluate the appeal of their solutions to overlooked market segments in order to drive incremental revenue. Solution flexibility and adaptability “on the fly” is an important element of software monetization in a real-time world.
Maximizing revenue and profitability from SaaS solutions is a key to survival in turbulent competitive markets. When every tactic counts, making the most from your existing investments by understanding the basics of available monetization tools and processes is the first step. Avoiding the pitfalls is step two.
Edited by Brooke Neuman