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Image: How to Monetize Software and Build Recurring Revenue

The annual Monetization Monitor should be essential reading for technology leaders exploring how to monetize software and build recurring revenue.

The latest report revealed eye-catching insights on the rise of usage-based pricing, the prominence of hybrid strategies, and the biggest barriers to revenue growth, which product leaders should pay close attention to.

Revenera’s Ravi Trivedi, Michael Goff, and Chris Cahill recently hosted a webinar reflecting on the results and offering practical advice on how to future-proof your monetization strategy, which you can watch here:

How to Monetize Software with Usage Data

One of the major takeaways from the latest survey is that usage-based licensing models are broadly expected to grow by around 20% before 2025, as suppliers seek to align price with value, giving customers more choice in how they access and pay for software.

During the webinar, Ravi outlined six key benefits of usage-based monetization from the perspective of both software producers and customers:

BENEFIT FOR PRODUCERS FOR BUYERS
Flexibility Sell how customers want to buy On-demand access and scalability
Reduced Friction Remove barriers for small and mid-size enterprises Streamlined procurement means no project delays
Dynamic Pricing and Packaging Management Ability to make rapid changes Improve user experiences
Lower Risk Reduce potential for piracy and overuse Minimize waste and maintain compliance
Cost Optimization Price directly aligns with value Enable Operational Expense (OpEx) accounting
Detailed Usage Reports Identify upsell and cross-sell opportunities Allocate costs to specific business units

When contemplating how to monetize software, it’s advisable to bear these proposed advantages in mind, especially as the trend toward usage-based approaches shows no sign of slowing.

Failing to adapt could mean you risk falling behind the competition, so embracing concepts such as elastic access – whereby customers can purchase additional credit to increase capacity or use specific applications at any time – may help you stay in line with changing market demands.

Crucially, in order to implement a usage-based strategy, you must be able to accurately measure usage within your monetization platform, while ensuring exact charging and budgetary controls for customer administrators.

Centralized Software Monetization

As discussed in the webinar, SaaS models continue to rise at pace, but on-premises deployments are not falling at the rate many predicted – with only 15% of organizations expecting on-prem revenue to decline by 2025.

Furthermore, while subscription and usage-based models continue to surge, traditional perpetual licensing is also expected to grow by a healthy 17%.

This convergence of modern and traditional strategies has culminated in suppliers seeking fresh guidance on how to license software, as hybrid routes to market become the new normal.

A publisher contemplates how to monetize software via traditional and modern monetization strategies.

Ultimately, if you run a mature business with multiple products or services that span various deployments, standardizing on a centralized system can help you ease the complexity – streamlining operations with a single pane of glass for customer data analysis.

Indeed, according to the Monetization Monitor, several benefits stand out for those who use commercial entitlement management solutions, such as:

  • 93% have migrated at least some of their on-premises applications to SaaS, compared to just 55% of those using homegrown infrastructure.
  • 66% state they gather product usage data “very well,” compared to just 40% overall.
  • 65% say their pricing is “totally aligned” to customer value, compared to just 32% overall.

As you consider how to monetize software in the modern world, these results indicate that consolidating hybrid strategies with a flexible back-office solution that supports a broad range of software licensing models can provide the level of usage insights you need to fuel growth and keep customers happy.

How to Build Recurring Revenue

The ultimate barometer of customer happiness is whether they renew, which is why retention strategies should be top of mind when planning how to build recurring revenue.

Enabling your Customer Success team with embedded analytics can pay dividends, ensuring they can proactively monitor account activity to assess health and deliver long-term value.

For example, the Analytics Dashboard within Revenera’s FlexNet Operations empowers you with:

  • Renewal insights: Evaluate your customer’s renewal status by reviewing entitlement consumption.
  • Fulfillment monitoring: Assess adoption rates by comparing the number of entitlements to realized fulfillments.
  • High-Mater Mark Alerts: Activate custom threshold notifications to track upsell opportunities and help customers avoid surprise overage bills.
Example Analytics Dashboard, which can help you build recurring revenue.

The Analytics Dashboard within FlexNet Operations

Essentially, taking a customer-centric approach to technology will help you accelerate growth, ensuring alignment on priorities as you focus on shared success to boost retention and build recurring revenue.

Meeting Expectations

Delayed releases for new features or enhancements has been identified as the biggest barrier to revenue growth, as noted by 54% of survey respondents.

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It’s crucial to bear this in mind when reflecting on how to monetize software, as failing to deliver on expectations can have severe consequences – potentially playing into the hands of your competitors.

Again, the benefits of centralizing your monetization infrastructure can help, enabling you to reduce time-to-market with a unified platform to support rapid pricing and packaging updates.

Additionally, self-service functionality increases the time-to-value, while accurate software usage tracking ensures your team can be laser-focused on delivering positive business outcomes to build recurring revenue.

If you’d like further advice on how to monetize software with reliable licensing and entitlement technology, please complete the contact form and a Revenera consultant will be in touch.