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Monetizing SaaS: A Survival of the Fittest, Part 2

July 27, 2012

This is the second in a multi-part series on monetizing SaaS (News - Alert) (News - Alert). For part one, click here. Control

One of the biggest considerations about cloud is the issue of control and visibility – not only for the end user, but also for the vendor offering a cloud-based service.

“When people think of the cloud, they think the concept of license enforcement does not exist. That is actually not the case; the concept just evolves a bit. The concept of control in the cloud really means ‘How do I control user authorization to my service and the features within it,’” explains Nerlinger. “Imagine that you have a service offering with 10 distinct features. In order to make the offering affordable to a few customers you sold them rights to access a basic version of the service, which in the service agreement only includes access to features one, two, three and four. Once those users are logged into the service, without licensing, what keeps those users from accessing and using features five, six, seven, eight, nine or 10? Nothing.”

Another example, she adds: If you decide to offer a customer pricing based on feature executions, what is stopping your customer from using more executions than they purchased?

“A pricing model for an accounting application could charge users in advance for an agreed number of ‘calculations.’ In this instance, let’s say the user purchased 100 calculations. What is keeping that user from performing 150 calculations? Without licensing, nothing. Another example of revenue leakage,” Nerlinger says.

Avoiding this conflict means implementing a proven software licensing solution that will allow software vendors to control user authorization at the feature level so they know that all usage is conducted by paying customers and that they are never consuming more than they have paid for.

Packaging

For both customers and providers, the benefit of a SaaS model is that it allows for an offering that fits customers’ needs. However, contrary to popular belief, software packaging is not a one-time event and despite the hopes of product managers around the world, “one size” is never going to “fit all.”

“You can have the most sophisticated, feature-rich offering on the market, but if you can’t offer flexible pricing and licensing models you will never reach your maximum potential,” says Nerlinger. “And just when you thought the work was done, you are going to need the ability to change all of your pricing and packaging schemes on the fly to satisfy the constantly evolving demands of enterprise and consumer end-users alike.”

Source (News - Alert) (News - Alert) – SafeNet (News - Alert), Inc. 2012

So what does it take to be successful in the world of software packaging? According to Nerlinger, the following three components make up the foundation of a successful SaaS vendor:

1. Product versatility – What the customer wants to pay for.

2. License model flexibility – How customers want to pay for it.

3. Business model agility – The ability to adapt to new customer requirements on the fly.

“Software licensing and entitlement management enables you to separate your engineering processes and your business processes so you can build product- and feature-level bundles, associate any variety of licensing schemes individual features or products, and change both your bundling and licensing schemes on the fly, anytime without ever needing to involve engineering,” adds Nerlinger.

Tracking

The ability to effectively track and easily report on what end-users are: a) entitled to, and b) what they have consumed – when and to what extent – is the last, but certainly not least, major challenge when it comes to achieving success in cloud software monetization.

Source – SafeNet (News - Alert), Inc. 2012

“Product and feature usage monitoring provides the business insight required to report on license agreement compliance, optimize product roadmap investment, and drive future packaging strategies. Insight into how products are being used is key to effective product line management,” she says. “Armed with a full understanding of which features are being used and to what extent provides product managers with an easy way to identify which features they should be investing in, and equally as important, where to disinvest.”

This knowledge can also help with overall use-case prioritization and investment mapping.

“Having an understanding of the various ways that customers use your products lends itself to smarter packaging decisions,” Nerlinger says. “Determining which features to package into a baseline product and which features can be sold as added value allows product management and marketing to more appropriately reach customers who want a low investment in the software all the way up to the larger deployments that want full access at a much grander scale.”Check back for the third part of this series coming soon.Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2012, taking place Oct. 2-5, in Austin, TX. ITEXPO (News - Alert) (News - Alert) offers an educational program to help corporate decision makers select the right IP-based voice, video, fax and unified communications solutions to improve their operations. It's also where service providers learn how to profitably roll out the services their subscribers are clamoring for – and where resellers can learn about new growth opportunities. For more information on registering for ITEXPO click here.

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Edited by Rich Steeves

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