On-premise software vendors are incorporating cloud-like business models and subscription-based pricing that make them more competitive and best meet the needs of their customers. Adobe, Autodesk, and Microsoft have all adopted hybrid (on-premise and SaaS) deployment models to adapt, compete, and succeed. And while the cloud computing market is expected to grow at a compounded annual growth rate (CAGR) of 22.3 percent between 2018 and 2023 and cloud computing revenues are predicted to see revenues soon exceed $250 billion, on-premise software will continue to represent a significant opportunity, as customers adopting a mix of web-based and on-premise applications.
Challenges for Desktop Software Vendors
Competition in the software industry has never been greater. Software market revenue worldwide is expected to be $507.2 billion by 2021 – representing 26% growth since 2016. As vendors of “traditional” on-premise applications have seen the booming and disruptive growth of SaaS vendors, they are mapping a dramatic change to the way they do business.
But this transition is more than just the adoption of subscription pricing and cloud deployment models. Successful vendors need “best-in-class user features, an intuitive web interface and a product offering that meets what customers have come to expect from SaaS offerings. Customers expect automatic updates that do not interfere with use or product customizations. Customers also expect new features and capabilities to be added often. Any time there is a disruption in service, customers expect prompt notifications and ongoing status updates.”
Significant business transformation is required to achieve success. “Companies evaluating SaaS transition strategies must consider the customer and competitive dynamics of their market and determine what the right speed and degree of change is for their business.”
Properly defining a product innovation strategy that brings on-premise and cloud capabilities together in the optimal mix is central to desktop software vendors’ digital transformation. Understanding user behavior is critical to achieving engagement and long-term customer lifetime value. Software vendors can use product usage analytics to support their product and strategic goals.
Analytics to Drive Decisions
Gartner has predicted that by 2021, 75% of software providers will rely on insights from embedded software usage analytics to inform product management decisions and measure customer health. Software usage analytics enable vendors to understand customer behavior in order to build better products, package, price, and deploy appropriately, and communicate with users throughout the customer and product lifecycles.
There is an increased urgency for software vendors to leverage detailed usage analytics as they are shifting from a product focus to a feature focus with new pricing and delivery models accelerating user adoption. The ability to understand their true differentiation to acquire and retain customers is central to their success.
Product usage analytics will yield insights to inform your move to the cloud and adoption of cloud-like business models including:
- Moving to subscription-based licensing models
- Building a product portfolio with functionality that resides in the cloud and on the desktop
- Optimizing product decisions in a hybrid environment
- Getting closer to the customer with account-based insight