Blog Entry

Jul 27
2011 

When Does Software Monetization End for SaaS?

Great companies consider and plan for the whole user experience – the product, its price, how its purchased, updates through its life and the service and support provided.

In the days when products were purchased up front – and the monetary relationship came to a close – all the burden was on the buyer to research, plan and hope that, after parting with their money (monetization ends), the product will have met and continued to meet or exceed their expectations.  Because the customer experience often falls below this mark – and yes, sometimes with enterprise software – the dynamics of the buyer/vendor relationship are changing.

I don’t need to re-hash the emergence of the subscription economy.  Much has been written about the benefits of the shift from opex to capex and the benefits of elasticity of supply.  What hasn’t been talked about so much is how the fundamental relationship changes between buyer and seller.

With a pure subscription, your customer has the option of dropping you at any moment.  With an open and standards based service, that option is a technical and operational reality.  Making a pure and open standards-based service is akin to instantly commoditizing yourself.  By saying that all my API calls are standards based (and so anyone else can interface the same way), I am instantly replaceable.  Oh, and any data I have that’s yours, you can get back out too).  It’s not enough to say that in this shift more emphasis has to be placed on service and support;  it’s the other way around.  You need to be a service and support-based company, and products and technologies are the secondary things to service.

Organizations used to be able to get away with great products and mediocre service.  In the service economy – you can only get away with great service and mediocre product.  Of course – you should have great everything – who wants to just “get away with it”?

Every day you have to strive to excel in order to retain next month’s subscription dollar.  If you come from the SaaP world (I just made that up – Software as a Product), it is frighteningly hard to consider the switch – but it is unavoidable.  It’s not the software that gets monetized – it’s the service.  And it’s not just putting a web front end on your software – its performance, availability, ease of use and integration, regular updates (I mean at least quarterly and definitely not annually or worse), aggressive pricing, painless billing, subscriber management, SLA compliance, continual competitive edge.

So, then where does software monetization end for SaaS?  Simply, it never ends.