Hybridization & Innovation: Building Resilience for Software Suppliers

Featured interview with Nicole Segerer

Software licensing trends are always top of mind for Nicole Segerer, vice president of product management and marketing at Revenera. Reflecting on findings from newly-released annual research, she sheds light on how software suppliers use monetization and deployment models, how to support customers’ needs, and the impact of the COVID-19 pandemic.

Q. What are hybrid deployment and monetization models of software licensing? Why are they so important today?

A. Offering products and pricing that resonate with buyers and maximizing revenue is more important than ever. That’s increasingly clear as software companies respond to the rapidly changing business needs driven by the COVID-19 pandemic.

Let’s first look at the components. Deployment models reference where software is running. These include SaaS (which the software supplier hosts in the cloud and manages), on-premises (which the end customer hosts and manages), and embedded (where software is embedded within a machine, such as IoT devices). Monetization models refer to how that software is priced and licensed. This is commonly done through time-based subscriptions; perpetual licenses, which provide ongoing rights to use software; and usage-based and outcome/value-based models, where costs are tied to actual use of an application or specific features.

Hybridization is crucial—and growing in popularity—because there’s no single ideal solution for selling and delivering software. Most software suppliers have multiple product lines and offerings that leverage different deployment and monetization models – a hybrid approach. By offering that flexibility, technology companies can improve their ability to meet customer requirements, while also protecting revenue streams.

Revenera conducts annual research into these trends. The 2020 Revenera Monetization Monitor: Monetization Models and Pricingreport found that subscription and perpetual models are currently the dominant monetization models, while outcome (value-based) are gaining ground, likely while being tested for new applications or markets.
For companies that use a particular deployment model across more than half of software lines, the dominant deployment model is on-premises (reported by 48% of respondents); SaaS (34%) and embedded (32%) follow. Looking ahead to the coming 12–18 months, SaaS is expected to be the fastest growing deployment model (with 67% of respondents indicating an anticipated increase

Q. What factors drive innovation around software licensing strategies?

A. Software suppliers are finding fresh approaches to pricing and licensing in order to achieve a few critical business initiatives. Suppliers can offer prospective customers the opportunity to try a product before purchasing it and lower the barriers to entry. This can ease the software sales process.

Software Usage Analytics helps suppliers understand how their software is really being used. Implementing that opens the door to more innovation because suppliers can specifically build upon the features that customers love and adjust their monetization model accordingly.

Finally, by tightening license controls, via automated enforcement and additional customer audits, suppliers can be certain that software’s being used according to its license.

Q. What impact is the COVID-19 pandemic having on software suppliers?

A. We’re certainly seeing the impact of the pandemic reverberating across industries. Software suppliers are responding to the needs to protect current revenues while building a foundation that will support growth, both now and as the economy rebounds. Perhaps more than ever, this will require that tech companies help customers succeed. Suppliers must be focused on how they bring products to market, while ensuring pricing, delivery and monetization that meet their customers’ specific requirements, even as those customers themselves adapt to the pandemic. Agility truly is key in order to shift between licensing options, capture revenue that may have been missed previously, and to support resilience. This is particularly important as growing use of SaaS, IoT, etc., reflects the rapid innovation taking place today.

Q. How can software suppliers and product managers strengthen their revenue growth?

A. Have a full view into what customers are using and what compensation is owed to your company. Robust end-to-end software monetization solutions (used by 18% of respondents) can support effective licensing strategies. About one third (34%) of respondents, however, rely on homegrown solutions. Homegrown solutions may enforce usage limits, but often aren’t comprehensive enough to provide the kind of monetization model flexibility and usage insights that support the agility necessary to accelerate time to value. Effective, reliable insights may seem more elusive as technology evolves, but they allow suppliers to measure crucial variables, such as how a product is being used.

Recognize that there’s not only one solution. Evaluate what your customers require in terms of deployment and monetization models. These will likely vary, by industry or user profile, from account to account or from product to product. Be prepared to adapt how you sell and deliver software in order to meet your customers’ needs.

Balance price and value. Implementing hybrid models can make it somewhat challenging to align price and value. This is where collecting robust insights into usage, user personas and priorities, is critically important. This data can help ensure alignment between price and value.

About Nicole:

Nicole Segerer is vice president, product management and marketing, at Revenera, a division of Flexera. Nicole drives growth and awareness of Revenera’s solutions for software suppliers. Since joining Flexera in 2014, she contributed to organizational advancements through deep market insights, analyses and strategic development. As leader of Revenera’s Product Management and Marketing teams, she guides product vision, strategy and roadmap plans, along with go-to-market planning, positioning and marketing for Revenera’s solutions. Nicole has more than 15 years of experience in software product strategy and marketing. Prior to her time at Flexera, she led marketing strategy at Acando (now part of the consulting firm CGI). Nicole is keenly attuned to the insights that business systems deliver and how they can propel value and customer experience. Nicole holds a B.A. and an M.A. in multimedia production from the University of Applied Sciences in Kiel, Germany. She is certified as an SAP solution architect.