Software as a Service (Saas) and subscription models are going to continue to grow in importance, according to an assessment from technology firm Revenera. The 2021 edition of their Monetization Monitor: Software Monetization Models and Strategies report polled more than 400 top-level executives at software and device firms to gain an understanding of the industry’s future.
main takeaways was the high degree that recurring revenue subscription models are driving transition within the software industry. Subscriptions, which already account for 36 percent of monetization models, will account for the largest growth category, alongside the similar usage-based model. Over the past two years, 62 percent of firms reported switching monetization models to implement a recurring revenue model.
Moving Beyond a One-Size-Fits-All-Approach
As technology develops, competition will remain fierce, with 72 percent of product managers indicating that they are actively pursuing new vertical markets. In order to keep pace with varied customer needs, companies are deploying mixed models and monetization strategies. SaaS, on-premise and embedded software deployments are all utilized by more than 20 percent of companies surveyed. Ultimately, these complex and hybrid monetization strategies can’t be considered a net good or bad to the industry’s existing models, but are only an improvement on a case-by-case basis if it enhances customer value.
“Most software producers today offer many products, some of them SaaS solutions, some cloud, some installed on-premises at their customers, or running on devices. It is neither practical nor realistic to deploy or monetize all those products in the same way,” said Vice President of Products and Marketing at Revenera Nicole Segerer.
At the same time, wholesale change is not always possible or even desired at every firm: 65 percent of suppliers noted that they plan to continue or increase their use of the perpetual license models. Optimizing the mix between the two is ultimately the most effective way to streamline internal operations and meet customer needs.
Driving Change that Aligns Price and Value
On the supplier side, one of the biggest challenges firms face when moving towards a subscription model is balancing the price expense for the customer with the perceived value and utility of the product. Of the firms surveyed, only 30 percent described their pricing and value as “totally aligned,” which indicates a low level of confidence in the industry’s ability to price products as the market allows. One way some companies have bypassed this issue is with monetization models that are tied to usage and engagement. Of these companies that can gather usage information, 61 percent agree their pricing is “aligned” with perceived value.
Overall, Revenera’s survey indicates that companies must take the time to evaluate their pricing and product strategies and consider how they might adapt to serve sizable and growing markets. When it comes to the subscription business, this requires firms to shift their mindset from product return on investment (ROI) to customer ROI as the most important renewal and growth factor.
To learn more, download the full Revenera report at this link.