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SafeNet (News - Alert) is a company that has nearly 30 years of experience in the area of software monetization. In that time, SafeNet has seen the industry morph from one that was focused first on the distribution of physical CDs, then to the enablement of electronic delivery, and now, delivery of software applications as cloud services. Over the years, the company has identified four key factors that companies must consider when putting together a software monetization strategy: packaging, controlling, managing and monitoring. These factors hold true no matter how one chooses to develop and deliver their product portfolio.

When I asked Michelle Nerlinger, product marketing director for software monetization solutions at SafeNet, to identify the one area of these four that was most overlooked by independent software vendors, she said that companies that are new to the space frequently underestimate the negative impact that packaging inflexibility will inevitably have on a business.

“Contrary to popular belief, software packaging is not a onetime event and despite the hopes of product managers around the world, ‘one size’ is never going to ‘fit all’. You can have the most sophisticated, feature-rich offering on the market, but if you can’t offer flexible pricing and licensing models you will never reach your maximum potential,” Michelle commented. “And just when you thought the work was done, you will need the ability to change all of your pricing and packaging schemes on the fly to satisfy the constantly evolving demands of enterprise and consumer end-users alike.”

So what does it take to be successful in the software packaging? According to Michelle, there are three keys to software packaging success:

Product versatility – WHAT customers want to pay for

License model flexibility – HOW customer want to pay for it

Business model agility – ADAPTING to new customer requirements

Effective software monetization is dependent on an offerings ability to support feature-level packaging, as well as, innovative and often complex pricing models. Furthermore, the ability to truly maximize revenues over an extended period of time is hugely dependent on how quickly and cost effectively a software publisher is able to adapt their feature bundling and pricing strategies. A sophisticated software licensing platform provides ISVs with all the tools necessary to flexibly package, license, track, and re-package their offerings.

It is important, of course, to note that there is not a single software packaging formula that works in every case. ISVs must be careful to consider predictability, setup fees, minimums and differential pricing. If you take all of these factors into consideration, while at the same time considering your own business objectives, you will be able to address packaging and pricing in a way that is beneficial to your company, optimizing revenue while at the same time building a customer base.

When you determine your objectives, you must then consider which model you wish to use. With a “freemium” model, you provide your core functionality for free, creating a pay-for-upgrade path for customers who wish to increase functionality. If the value of your offering comes from collaborative capabilities, this might be the right choice for you. On the other hand, if you have an offering with an established market value, you could use a feature-limited model, where you provide a low-cost version of your software to encourage growth and adoption, but limit features to stimulate sales of upgrades.  Another option is a pay-as-you-go model, in which customers pay for what they use. This model has fewer up-front risks for customers and pricing on a per-unit basis can be higher than other plans.

Ultimately, it is important to consider all the factors above, plus other options, like hybrid models, and factors like culture, when developing the strategy to maximize profitability. In a space that is as complex as this one, with so many factors and options, it can be daunting for small or independent software vendors. That is why SafeNet, with its three decades of experience, has put together Sentinel Cloud, a software monetization and SaaS (News - Alert) licensing solution that can make this process easier and more efficient for ISVs looking to dip their toes in the cloud.

To educate customers on the importance of packaging flexibility, SafeNet released “Lucrative Pricing and Packaging Strategies for the Cloud Today, Tomorrow, and Beyond,” a white paper that discusses how pricing and packaging are both an art and a science, breaking down the proper steps to achieve packaging flexibility for SaaS licensing.