Software Monetization Featured Article

Transforming Your Business in the Digital Economy

August 03, 2015

It’s no secret that the Internet of Things (IoT) is changing “E”verything in business at an accelerated pace. Businesses are in disruption and transformation mode—all at the same time. This represents both a huge challenge and a huge opportunity.  

Let’s start with how the IoT has changed the relationship between hardware and software, and the way that buyers and sellers engage. Hardware manufacturers must now move with some sense of urgency toward offering software-driven technology and value-added services. To truly embrace the digital economy, they will need to consider the many different processes and efficiencies that make up this transformation. The way in which people interact with technology these days involves not just software, but also the cloud, mobility, and virtualization. This means that new products and business models must be delivered with agility, while allowing for the customization of capabilities throughout the customer buying cycle.

I recently had the opportunity to discuss the new role of software monetization in business transformation with Gemalto’s (News - Alert) Director of Cloud Strategy and Business Development, Omkar Munipalle.

TMCnet: What has changed and why are businesses looking at transformation?

Munipalle: For a start, there’s a huge shift in the way buyers are looking at vendors. Nowadays, 55 percent of the buying process is completed even before the first sales meeting. There isn’t any more small talk about the company and culture. Buyers want to tell vendors about their challenges and they want to hear about solutions. What will fix their problem? The Internet has made it possible for buyers and sellers to research one another’s companies and products prior to their first meeting. Salespeople can go into meetings armed with the knowledge of how their potential customer’s organization functions. 

TMCnet: How does the first sales call typically go?

Munipalle: We start out with a high-level conversation about market trends and best practices in a world that demands companies have e-commerce portals and a strong social media presence. We then discuss how the cloud as a delivery vehicle has forced them to rethink their go-to-market strategy, and suggest ways of safeguarding their brand. 

Product managers are struggling because they are unable to change packaging fast enough to meet customer requirements. The world is now all about instant gratification and companies are generally struggling to accommodate this. By anticipating buyer demands for more options, companies are better able to capture incremental revenue.

TMCnet: What are the pain points when it comes to meeting customer requirements? Are customers demanding more options?

Munipalle: Let’s start with the fact that customers make their decisions from a pricing standpoint. Essentially, they are looking for different ways of paying for software based on consumption. For example, somebody might be able to afford two features but not ten. This impacts software design, packaging, and how it’s marketed. While these can be accomplished by software monetization solutions, any new pricing offer must be simple enough so as not to complicate the sales cycle. In fact, while customers are looking at buying value-added capabilities that are software-based and delivered as services, the role of the salesperson remains central to delivering the solutions and establishing a relationship. However, that it is a very different type of conversation and involves ensuring that all aspects of customer engagement are fully understood.

TMCnet: Can you give us an example of a company that’s transitioning from hardware products to service offerings?

Munipalle: John Deere is an interesting one. The company can now build a tractor with features that are specific to a customer’s business requirements. Changes to the tractor are made during the manufacturing process, with minimal impact on the hardware. This method has enabled the company to achieve significant supply chain savings, while at the same time move from a hardware-only offering to a value-added service model. They have effectively gone from being just a tractor company to a services company. The added value comes from implementing things like GPS, sensors, and a host of Internet of Things (IoT) services that the modern farmer relies on to be more productive.

We are seeing this change across almost every vertical market. Another example is Tesla, which is using software to standardize its operational costs. The real value lies not only in the connectivity of the data being collected, but also the visibility into that data and the roles big data and analytics play in improving operations and customer engagement. The ultimate goal to optimize core products can be achieved using software—namely the information being generated and exchanged—to create added value and incremental revenue opportunities.

For companies like John Deere and Tesla, this is obviously a very different way of doing business. They now have to consider how software should be licensed and how usage information can be tracked. This is quite a departure from their core hardware business, which measured revenue by the number of devices shipped. Now, they are also concerned with protecting their IP and tracking compliance. At the same time, these companies are being forced by many buyers to provide new consumption-based business models. Ideally, this digital disruption will lead to a business transformation opportunity that increases customer satisfaction through the use of customer portals.

TMCnet: What you are describing is a major paradigm shift that seems to be putting a lot of pressure on companies to overhaul the way they operate. What must companies do internally to derive the most benefit from this shift to software?

Munipalle: Companies seeking to capitalize on this shift, as central to their value creation, must move over to consumption-based business models. This is why having complete visibility into software delivery, consumption, and tracking is so critical. Software vendors need to really know as much as possible about their customers.

In a consumption or usage-based environment, visibility is key to providing valuable information to product management, DevOps, marketing, and sales. This information improves a company’s responsiveness, accelerates their time to market, and enables the capturing of value-added services revenue. 

Because the pace of innovation in the software-driven world is exponentially faster than that of the hardware-driven world, on-demand software delivery needs to take place almost instantaneously.

TMCnet: Are there also advantages for the buyers?

Munipalle: Absolutely. Buyers also have access to usage information, so they can decide which features they want to pay for and, more importantly, which ones they don’t. This gives them leverage when negotiating pricing.

TMCnet: Do you have a pulse on how fast the market is changing?

Munipalle: The short answer is that while the change is revolutionary, adoption is evolutionary. This is due to the fact that there is so much that needs to change, however it is picking up a tremendous amount of momentum. I can tell you that last year it was about vision and this year it is about execution. 

TMCnet: Finally, given all the headlines about security in a software-centric world, how safe is our information really? Any closing thoughts?

Munipalle: Security is our raison d'être and this is reflected in our Sentinel line of licensing and entitlement management products. Our innovative technology, such as white box cryptography and AppOnChip, provide the highest level of protection. You could say that’s where it all began.

One of the reasons Gemalto acquired SafeNet  was to put us in a market-leading position to be able to offer the industry’s most complete portfolio of security solutions. We are ready to assure customers that IoT and M2M solutions can be fully trusted as they become fundamental to the digital economy

This means that companies we work with can be sure they’re getting the most secure digital architecture infrastructure. Thanks to state-of-the-art security like strong encryption and authentication, they will have full visibility into their usage data, all the necessary tools for policy enforcement, and the most secure data protection—at rest or in motion.

As we move into the digital economy, user-centric data is constantly in motion and the value of software is at an all-time high. That’s why security is considered to be one of the most important components of a comprehensive software monetization implementation.

This includes the transaction layer where payments are handled, multiple pricing strategies reside, and millions of customers are managed. Software monetization is also about providing the customer with a uniform experience, from activation to payment, via customer portal.

For business transformation to work, deep integration with CRM or ERP systems needs to take place. Back-office integration will improve operational efficiencies and cut down on support costs, as more online transactions are made and less human intervention is required. Being able to go from quote to cash seamlessly, send out automatic renewal notices, and provide a great self-service customer experience, should be key components of your software monetization strategy. This will allow you to transform and future-proof your business, while maintaining product leadership, operational excellence, and customer intimacy.   

Edited by Dominick Sorrentino