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The Software Revolution Calls for New Business Models

By Blaise McNamee, Web Editor

Software is increasingly infiltrating every part of our daily lives. From cell phones and cars to appliances and televisions, it seems that every product has some sort of underlying software running underneath.  Thus, in an age of “smart” everything, every company is slowly but surely becoming a software company.  This goes for service-based industries as well, such as the financial, entertainment, and healthcare verticals, whose operations are increasingly being run and delivered via software or over the Web.

However, the model for success in the software industry is far different than in, say, the steel or agriculture industry.  If these businesses hope to survive the transition, they must be prepared to employee drastically different business models, ones that serve to effectively monetize their software.

According to Ann Reist, group manager of product marketing at Flexera Software, there are three keys to success in the software space.

First, a company must take efforts to protect their intellectual property.  Software lacks the tangible quality that blenders and apples have, which means the value of a software product is not derived from the cost of a compact disk, for example, but rather the concepts, ideas, and brain-power put into developing a sophisticated application.  This is your “stock,” so to speak, so you must protect this property from theft and misuse through a variety of legal and technological measures.

Image via Shutterstock

Second, Reist writes, companies need to re-think their monetization models.  That is, they must adjust their pricing and bundling models to meet the way their customers want to use and pay for software.

“The software business has enormous flexibility here ranging from try-before-you-buy, subscription models, freemium models, pay-per-use, perpetual licenses and so on,” she notes.

Finally, for maximum success, a software company must automate the entire software, device, and entitlement lifecycle.  The entire process, from installation and activation to updates and upgrades, must be carried out automatically to avoid inconsistent entitlement policies and disjointed versioning.

These three objectives are attainable with the help of software licensing and entitlement compliance management solutions.  Those businesses that take advantage of these services during their software transformation are far more likely to succeed in the long run.

As Reist says, “There are unique processes around software monetization, recurring revenue, up-sell and cross-sell given the unique ‘mobility’ and ‘fluid nature’ of software and entitlements that needs to be planned for.”

Make the adjustments before your competitors do.