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Image: Software Monetization Models and Strategies – 2023 Report

Revenera’s annual report on software monetization models and strategies is essential reading for business leaders looking to navigate the complexities of SaaS, cloud, on-premises, and hybrid product line evolution.

By surveying more than 450 senior executives at global technology companies, we’ve compiled a rich dataset that sheds light on industry trends, best practices, and common roadblocks to revenue growth.

Big talking points from this year’s Monetization Monitor include:

  • 82% of respondents now use subscription/term strategies at least moderately across their portfolio. This is a 14% uplift from 2022.
  • Overall, only 32% say pricing and value are “totally aligned,” but this jumps to 65% for those using commercial entitlement management solutions.
  • Hybrid software monetization models are on the rise, with consumption (59%) and metered (48%) expected to grow by 2025, while 45% also expect traditional perpetual licensing to increase.
  • 54% suggest delayed time-to-market is a major barrier to growing Annual Recurring Revenue (ARR), while 41% state customer churn.

You can read the full report for in-depth analysis, but outlined below are some of the key takeaways you should be aware of.

Leading Software Monetization Models

While the continued rise of subscription licensing will come as little surprise to most industry players, the sharp uptick in consumption and metered software monetization models is a noteworthy development.

Bar charts showing the extent to which different software monetization models are used today.

With concepts such as elastic access and token-based licensing gaining traction, 72% of companies now report at least moderate use of consumption models, which is up from 45% last year – a substantial 27% hike.

Similarly, metered models have also risen 30% year-on-year, and these trends look set to continue over the next 12-18 months, with outcome-based monetization also predicted to increase by 48%.

Bar charts showing the expected growth and decline of different software monetization models.

In the digital world, consumers have become accustomed to easy, on-demand access to the products and services they desire, and this appetite has extended to enterprise technology, with users steadily pushing for more flexible pricing, packaging and payment options.

Diversification is the direction of travel, with producers rapidly adopting modern software monetization models to meet market demands. The pace of change suggests those who fail to modify will be left behind, so it’s imperative to listen to customer feedback and adapt accordingly.

However, while new and exciting approaches surge in popularity, the established order remains strong, as 78% still use perpetual licensing at least moderately, and 45% expect perpetual revenues to grow by 2025.

The significance of hybrid strategies is further evidenced when forecasting deployment trends; 57% anticipate SaaS income to grow as a percentage of overall revenue, which is slightly down from 59% last year, while 46% expect on-premises growth – a 21% increase from 2022.

Furthermore, only 15% of respondents believe on-prem deployments will decline over the next 12-18 months, which is notably down from 33% last year.

Monetization Monitor charts showing the biggest areas of growth and decline for deployment models.

Ultimately, the received wisdom that perpetual, on-premises software monetization models will soon cease to exist is being challenged, with some commentators claiming cloud-first thinking is dead as suppliers become ‘cloud smart’ by recognizing the long-term value of hybrid frameworks.

Unifying Hybrid Monetization

The emergence of new commercial strategies coupled with a need to maintain multiple deployments and offer various types of software licensing models has signaled a shift in back-office processes, with 47% of companies now reporting to have consolidated their monetization infrastructure across all product lines, up from 32% in 2022.

By streamlining operations with a centralized entitlement management system, producers are able to support all deployment and software monetization models while also measuring usage, monitoring compliance, and identifying upsell opportunities via a ‘single pane of glass’ that provides complete visibility.

In fact, among those using purpose-built entitlement management technology, 66% are confident in their ability to collect product usage data “very well,” compared to just 40% overall.

Additionally, it seems commercial systems can ease the transition to SaaS, with 93% of users having moved at least some of their on-premises products to SaaS, compared to only 55% who rely on homegrown solutions.

Build vs. Buy: A Product Manager’s Guide to Software Monetization Systems

Aside from customer acquisition, a specialized software monetization platform can also help overcome the most common barriers to ARR growth:

Bar charts showing the most common barriers to revenue growth, including inabilities to optimize Quote-to-Cash process and adopt/implement new software monetization models.

By centralizing operations, you can significantly reduce time-to-market for new features and enhancements, while also having the ability to introduce new software monetization models without additional help from engineering teams.

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Advanced usage insights can also help you monitor risk to tackle churn rates, while a streamlined approach can expedite the quote-to-cash process as part of a fully-formed revenue optimization strategy.

Evolving Software Monetization Strategies

According to Greek philosophy, ‘Change is the only constant in life,’ and this outlook will surely ring true when it comes to evaluating your software monetization strategy.

Customer demands continually drive innovation, and producers are rapidly embracing more flexible, pay-per-use software monetization models to stay ahead, while also rationalizing back-end infrastructure to simplify processes and optimize hybrid support – all with the ultimate aim of growing profitability.

For deeper insights, be sure to read the full Monetization Monitor report and please contact us if you’d like to schedule a call to see how Revernera’s state-of-the-art solutions can accelerate your goals.