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Software Monetization Featured Article

What is Software Monetization?

March 15, 2012





The term “software monetization” on its face seems simple. In theory it describes a company’s extraction of the fully-appreciated value from the software it creates and sells. However, theory and reality do not always overlap. In fact, regardless of software type, or how it is delivered into the market for commercial use, the ability to optimize the value of software products and services must address a variety of issues. These include finding solutions for anti-piracy, intellectual property protection, packaging and pricing challenges that yield the best results based on business needs and expectations.


For bottom line optimization, software publishers need a comprehensive strategy that -- while unique to their offerings -- must be based on a customized and flexible approach that addresses the four key elements of software monetization: packaging, control, management, and monitoring.

Packaging

Software packaging is a dynamic activity. The most sophisticated, feature-rich offering on the market in the nicest packaging does not automatically translate into robust sales. Adaptability in pricing and licensing models is key. The four “Ps” of marketing — putting the right product in the right place, at the right price, at the right time with the best promotion — have never been more important. 

We live in a real-time world. The competition is a click away and buyers armed with comparative information are increasingly fickle with their loyalty. That is why success in software packaging sits upon a three-legged stool. Each leg shares a common attribute, the ability to accommodate change and to do so quickly, decisively and with the ability to demonstrate differentiated value.  The legs are:  

Product Versatility – What customers want to pay for.  This is about feature bundling and strategic pricing. The lesson is that the lack of versatility limits the addressable market and the chance to create premium pricing alternatives. Both represent lost revenue opportunities.

License Model Flexibility – How customers want to pay for it. This is a success requirement because every customer has definite preferences and if a licensing model cannot accommodate it they are likely to go elsewhere, especially when it comes to business-to-business (B2B) sales where compliance with customer purchasing guidelines is critical. 

Business Model Agility – Adapting to new customer requirements. Customers’ needs change as do the needs of ecosystem partners, and they do so at seemingly ever increasing speed, which is why no approach to optimization of the value-chain should be seen as etched in stone. 

Control

Optimized software monetization cannot occur if there is not a way to: a) ensure payment for products or services rendered, and b) protect intellectual property from theft or manipulation. What this means is that publishers need to effectively manage licensing compliance in a way that obtains full value for the total consumption of their products and services – i.e., no money is left on the table. It also means this must be done with a process that tracks compliance in a customer friendly manner. 

The importance of the latter should not be underestimated.   An angry customer can not only become a lost one, but the multiplier effect amplified on social networks almost instantaneously can result in irreparable damage. This is why crafting a tracking system that is context-aware of how users experience such a system is critical.

Control also relates to having systems, policies, rules and analytics (see Monitor below) in place to protect software publisher intellectual property (IP). Everyone knows how valuable IP is and how costly the theft of it can be. For software publishers, along with the threat of unauthorized use of a product or service, the failure to properly protect the code of an application can lead to tampering. This can result in reverse engineering where a seemingly identical product suddenly appears at a fraction of the cost for obvious reasons.    

Manage

Profitability is as much about cost control/reduction as it is about revenue. Therefore, failure to integrate all systems that are part of pricing, packaging, billing and collections, and manage products from shipment to end-of-life (entitlement management) can cost software publishers not just money related to transactions but also related to employee time on process and practices.

Monitor

As noted above, without monitoring and good analytics, having good packaging, control and management of the software publishing life-cycle will not yield optimal results. The ability to effectively track and easily report on what end-users are entitled to and what they have consumed – when, and to what extent – is that last core aspect of a comprehensive software monetization strategy. Product usage monitoring provides the business insight required to report on things every software publisher must know to obtain optimal results. This includes data and analytics on:

  • Licensing agreement compliance — Helpsensure payment of the maximum value from every customer every time.
  • Product roadmap investment – Insight into how products are being used serves as the foundation for product development planning and investment mapping.
  • Packaging impacts — Understanding the ways customers use products enables decision-makers to make smarter packaging decisions.

As stated at the top, there is a critical need for software publishers to take a holistic strategic approach to software monetization if they are to achieve optimal results. However, it also needs to be re-iterated that every strategy is unique. In order to maximize the value of a software product or service offering, the strategy should take into consideration each aspect of software monetization: packaging, control, management, and monitoring.




Edited by Carrie Schmelkin
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