Software Monetization Featured Article

The Nuts & Bolts of Transitioning to a Recurring Revenue Model

February 25, 2017

Changing an existing revenue model can be a challenge for any business, particularly in the midst of the large-scale digital transformation happening in today’s technology landscape. Organizations are under pressure to glean more value from their offerings while moving toward a software and cloud-centric delivery model, which invariably means making the move to a recurring revenue model.

We covered the unique challenges and benefits of this transition as well as how the move is working out for positioning technology specialists Trimble Navigation in the first two parts of a three-article series. The discussion stems from a recent LicensingLive! event, “Crossing the Licensing Chasm – How to Transition to a Recurring Revenue Model Today.”

Our final installment will focus on the nuts and bolts of the transition to a recurring revenue model, from customer management and entitlement management to security and privacy. According to Andres Botero, senior vice president of marketing at Aria Systems (News - Alert), a number of components must be taken into consideration when migrating to a new revenue model, and they all must work in cooperation with each other. Aria offers a cloud-based monetization platform designed specifically for subscription- and usage-based business models.

“Entitlement management is a critical piece for a recurring revenue model,” said Botero. “If you think about scenarios where customers are renewing subscriptions and you could have a customer in Tokyo renewing a subscription at nine in the morning and then someone in Berlin renewing at 10 in the morning, this is happening all over the world. This can get incredibly complex and very difficult to manage unless you have the right tools in place.” 

Entitlement management systems remove those complexities, tracking global subscription-based customers automatically. These solutions can also help with usage tracking, another important factor in recurring revenue models. Pulling usage data from disparate customers using a variety of back-office solutions and then trying to bill for it can be tricky, so centralized monitoring and management are key to success. And according to Botero, licensing is ultimately a policy in the renewable subscription-based model, and terms should be bound to a policy, making security and binding of licenses to applications critical to success.

“I think one real takeaway from here is that the recurring revenue model really can work for everybody,” said Botero. “The transition starts with packaging. Get packaging right, tailor it specifically for a recurring revenue approach.  The subscriptions are really where you should start this. With today’s tools, subscription licensing, subscription models are very, very easy to implement.”

He emphasized that businesses need to leverage technology as well, automating as much as possible to offer more value to customers while gleaning more value and revenue from software and solutions. And finally, customers need to understand the importance and value of the recurring revenue model so that both sides reap maximum benefits. By offering flexible pricing and keeping the lines of communication open, businesses can ensure success when transitioning to a recurring revenue model.

For more information, view the full presentation on Gemalto’s LicensingLive! site.

Edited by Alicia Young