By Courtney Saba
Software providers increasingly look to software as a service (SaaS) as a deployment method. While cloud-based implementations grow in popularity, it is important for ISVs to carefully determine if it makes sense to deploy in the cloud, and if so, which customers most benefit from cloud deployment.
“Customers want to consume software in a way that is customized to their needs, on the device of their choice, and for the price that matches their use,” suggests Ariella Shoham, senior director of marketing, software monetization, Gemalto.
Before offering an SaaS solution, ISVs should consider the benefits of the cloud and determine how software monetization and entitlement solutions help leverage these benefits and help ISVs profit from cloud-based licensing models.
This article discusses the benefits of the cloud—for both the ISV and client, outlines the ideal ISV candidate for cloud deployment, and highlights the role of software monetization and entitlement management solutions developed to help ISVs maximize revenue through cloud deployment models.
Cloud for the Client
There are several benefits of cloud deployments that software producers can tout to customers, including lower up-front implementation costs, simplified deployment, scalability and agility, and flexibility in pricing models.
From a user perspective, Shoham points out that the cloud moves the location of and responsibility for software to the ISV. It also enables organizations to implement applications with fewer overall IT skills in house. Pricing for users can be fine-grained, depending upon services and agreements with the suppliers.
Mathieu Baissac, VP product management, Flexera Software, adds that in comparison to on premise deployments with perpetual licensing models, subscription-based cloud licensing carries a lower upfront cost, as it is considered an operating expense. “More of our customers buy SaaS versus on-premises applications for a number of reasons,” he states.
For one, rapid evolution and increased reliance on technology puts a lot of burden on IT teams, leading to more outsourcing. SaaS-based solutions eliminate the burden of upgrading to the latest software all the time and promise 24/7 anytime software.
Additionally, hosted applications are generally known to result in lower enterprise IT costs for hardware, software, and the support staff—even as the user base grows.
Terry Gaul, VP sales, Wibu-Systems USA, explains that the cloud offers simplified deployment. With cloud solutions, network administrators gain platform independency, which is particularly important in organizations maintaining complex heterogeneous network environments. Infrastructure requirements are also greatly reduced. End users will always have access to current versions of applications deployed in the cloud, and if licenses are stored in the cloud they can be used on any PC.
From an ISV perspective, delivering as-a-service applications offers the ability to reach more potential customers and provide more flexibility and visibility into the use of the software. “Because the application is managed by the ISV and accessed through the cloud, version control and maintenance can be tailored to the customer, strengthening the relationship,” offers Shoham.
Additionally, cloud-based deployments tend to provide a higher degree of scalability than on premises applications as a true multi-tenant architecture allows the solution to easily scale up to meet capacity requirements for diverse customer needs. Especially with consumption/usage models, SaaS applications may be able to introduce new monetization models that are closer to the value that customers are actually receiving from using their product.
Shoham says cloud adoption presents a new opportunity to give customers what they want while ensuring recurring revenue streams and exploring new markets. Cloud adoption makes it quick and easy for ISVs to authorize user access at the feature level, measure service usage for billing and business intelligence purposes, and instantly adapt service catalogs to embrace new and evolving market opportunities.
The ability to offer flexible pricing is also appealing to an ISV, as cloud deployments allow a move away from traditional on premises software pricing of the past. “In the distributed-computing client-server days, on premises software was sold through a perpetual license with an added maintenance contract. With a perpetual license model, customers are encouraged to buy a lot of seats up front and then pay an ongoing maintenance fee on top that each year. For many reasons, this does not work in every customer scenario. The fastest growing portion of today’s software industry is associated with subscription revenues, whether a SaaS or an on premises solution. If the ISV has such customers, they can benefit from cloud deployment,” adds Shoham.
Determining whether or not to offer a SaaS requires careful consideration on the part of the ISV. Along with the benefits, certain challenges must also be considered. For one, some applications are difficult to convert to cloud deployment models effectively, such as those with high graphics performance needs. Concerns of intellectual property theft is a mindset hurdle that must be overcome by buyers.
Gaul finds that there are certain factors that determine whether their audience is ideal for cloud adoption or not, while Baissac argues that ISVs should assume that all customers are ready to move to SaaS applications. Baissac suggests that only a subset of CIOs and IT organizations will not move to SaaS. “Individuals that have been previously hurt by moving to SaaS, customers with significant investments in existing data centers, customers with strong data protection, or data privacy requirements—such as hospitals, banks, or customers that prefer CAPEX,” he lists as those not moving to the cloud.
Gaul says an organization’s computing environment, end user application requirements, and mobility requirements also factor into the decision of whether or not to offer SaaS. Enterprises that may benefit most from cloud-based software adoption are those looking to reduce their infrastructure maintenance costs while enabling the flexibility to scale availability up and down on demand.
“Data-rich businesses requiring fast access to information and sharing are good candidates to benefit from cloud adoption. Comprehensive, power-intensive applications may not be suitable as a pure cloud solution, however, office applications like Microsoft Office are successfully using the cloud for licensing combined with locally installed applications,” says Gaul.
He suggests ISVs ask whether cloud implementation will improve data sharing and business productivity for their customers. Will customers gain value from platform independency? If they have wide fluctuations in computing demand and peak hours when additional power is required, local data storage requirements may be cost prohibitive.
Software Monetization Solutions
ISVs need to make a profit when offering cloud-based software solutions, software monetization solutions can help get them there.
With software monetization solutions, ISVs measure all service and feature usage to aid business processes such as billing and to gain invaluable customer insight to drive strategic decision-making, alter pricing and packaging strategies to quickly meet the needs of an ever-changing market, integrate easily and seamlessly with the service providers’ various back office systems, and enable process automation.
“A versatile licensing system that enables cloud-based entitlements presents an opportunity for the ISV to expand licensing models and generate recurring revenues,” says Gaul. “A flexible licensing solution will facilitate the transition from an on premises license server to a cloud-based or hybrid system,” he adds.
Shoham believes only the most comprehensive software monetization solutions support both a pure cloud-connected experience as well as leverage the value of the cloud for on premises applications. With cloud licensing, ISVs can provide customers with subscription- or usage-based billing models, gain insight into how customers are using their software, and offer users a flexible model to access their software anytime and anywhere—whether the software is delivered in the cloud, on premises, or in a hybrid deployment.
Support software for delivery and management scenarios offer software publishers a means to centrally manage all cloud services and traditional on premises applications.
Entitlement management solutions also offer SaaS providers a way to maximize revenue potential by enabling ISVs to manage user privileges and access rights.
“Entitlement management solutions can help software producers move to cloud-based software licensing models once the offerings are reconfigured,” states Baissac. He says customers are now offered secure 24/7 hosted deployments, Web services for integrating entitlements with enterprise resource planning and customer relationship management systems, as well as licensing and entitlement reports and tracking.
They can also create and package product lines to capitalize on new market opportunities, improve customer service by offering an end-user portal that provides 24/7 self-service, and increase support for channel partners so they can deploy and manage licenses and entitlements for their customers directly without having to get the software producer involved.
Gaul adds that entitlement management solutions help smooth the transition to cloud-based licensing models. “A solution that supports both on premises and cloud models enables the ISVs to start transitioning parts of the customer application systematically to the cloud.”
Shoham notes that an ISV with a significant understanding of its customers will be more successful. “With the advent of cloud, the industry has shifted from selling perpetual licenses, which take a set-it-and-forget-it approach, to subscription and usage-based models, which rely on actual consumption, among other parameters. This shift has led to a greater dependency on customer retention, and businesses are rightfully looking at ways of ensuring a positive customer experience that keeps them coming back.”
She explains the customer experience is determined in part by the usability of the licensing solution and by the ease of working with the ISV as a vendor. Having an intimate knowledge of customers’ businesses not only makes it easier to nurture customer relationships, it also helps ISVs spot growth opportunities and red flags.
Monetization and Entitlement
Software monetization and entitlement management offerings help ISVs benefit financially from cloud-based deployment models. Here we highlight solutions offered by Flexera, Gemalto, and Wibu-Systems.
Flexera Software helps SaaS applications whether they’re deployed on premises or in the cloud. The company provides software monetization solutions to help producers monetize cloud implementations.
Baissac suggests that a pattern noticed by the company, that SaaS vendors initially use simple monetization approaches. These SaaS ISVs typically implement these monetization models themselves. Over time, they are no longer in market acquisition mode and need to introduce more variety to increase profitability. Customers want more flexibility. Simple models often lead to shelf ware and do not always provide meaningful metrics for the use of the SaaS application.
Gemalto’s Sentinel software monetization portfolio provides software companies and intelligent device vendors with software licensing, protection, and entitlement management solutions that help them monetize their software and drive business growth. Whether in the cloud, embedded in hardware, or installed on premises, Gemalto’s Sentinel portfolio helps customers extract the most value from their software.
The company’s entitlement management is a Web-based solution that provides software publishers with a centralized tool for all license and entitlement management functions.
Sentinel’s licensing and usage allows a range of products that ensure compliance and enforce license agreements as well as track, control, and report use of products and features.
Security and protection offerings protect and secure software products, hardware devices, and intellectual property. Benefits include a diverse set of protection technologies from hardware license to software and cloud licensing—all managed from a single management platform.
Wibu-Systems’ CodeMeter and CodeMeter License Central platform is a scalable license management and entitlement management solution for cloud, PC, embedded, and mobile applications. The Web-based License Central service offers ISVs a high level of flexibility for cloud entitlement and management of licenses, electronic software distribution, and user and customer management. License Central also enables ISVs to automate and easily realize the new license models, like pay-per-use and subscription-based licensing, which keep them competitive and more closely aligned with their customer needs.
Implementing SaaS for Profit
Software providers continue to utilize SaaS implementations to elicit profit from cloud-based deployments. With the benefits from cloud-based software deployments and the diligence of ISV’s noting which customers are ideal for cloud adoption, revenue potential is apparent. SW
Apr2016, Software Magazine