By Nicole Segerer, Revenera
Each year brings the opportunity for a fresh start. The coming year, perhaps more than most, offers an opportunity for a fresh start. And 2020, for all of its challenges, served to home in on the best practices that can help software companies thrive. Software and technology companies can focus on four areas to strengthen their offerings and enhance their success in 2021.
Act On Data
Well-run software companies make decisions based on insights, not anecdotes. That’s why data and analytics, already important, are more important than ever for business development, management, and strategy. Aggregated insights and analytics about customers, their purchases, usage, and journey—integrated with additional data sources available to the company—will enable technology companies to strengthen their competitive position and to meet the needs of their customers.
The focus on data requires not just collection, but action on insights. Top areas where software companies will be well served to act on data analytics include:
- Understanding product usage. Usage data reveals far more than simply if a product is being used. It reveals to the software producer how that software is used, indicating trends and future usage. Today, accurate reporting and understanding of product usage is an absolute necessity for software companies. Collecting it, however, can be cumbersome if done through legacy approaches, including manual extraction of usage data and point-in-time analyses. Today, only 32% of companies feel that they’re able to gather product usage data well, as reported in the Revenera Monetization Monitor: Software Usage Analytics 2020; almost as many (28%) require manual interventions. Fully automated usage data collection, continuous tracking of telemetry and user behavior data, and analysis and visualization of trending data are all must-haves in the current market.
- Compliance initiatives. One major result of the challenges prompted by the COVID-19 pandemic was the tightening of budgets. With this comes the need to refocus efforts on compliance initiatives to identify and close the gaps that lead to revenue leakage, through software overuse. Causes that are intentional (i.e., piracy) and unintentional (i.e., unauthorized credential sharing, unintentional overuse in user or usage-based monetization models, etc.) can both contribute to revenue loss. Accurate data collection processes can identify sources of loss and drive active compliance initiatives. Stopping the losses takes on increasing importance as companies look to solidify their positions in response to the challenges of 2020. (These initiatives should be blended with the flexible licensing considerations, addressed below.)
- Device data. 2021 will be the year in which companies invest to make devices a platform. These initiatives will take embedded and control software to the next level. Extracting and analyzing device data, aided by artificial intelligence (AI) and machine learning (ML), will convert dumb devices to a smart platform. This increases the value for buyers/owners of these devices while offering valuable data that can drive recurring revenue from digital services for the devices.
Prioritize Customers’ Usage Behaviors
The customer experience extends far beyond interactions with sales or customer success teams. Healthy, lasting customer relationships are solidified by anticipating and meeting users’ needs at all points of interaction. Software companies should integrate this approach into pricing and licensing decisions, such as:
- Software trials and freemium offers. As software buyers judge the supplier on ease of access and time to onboard, suppliers that offer trials demonstrate their commitment to making it easy for customers to get the software they need and shortening time to value. Freemium offerings, which provide customers a limited edition of the product for free, offer a taste of what’s available at the paid, premium level. When offering the freemium model, software companies must ensure that different editions and activation processes don’t end up being an operational headache. By offering features that are activated electronically and by confirming that software usage rights are easily transferred from one edition to the other, the freemium model can function smoothly, with benefits to both the supplier and end user.
- Consumption-based pricing. Enterprise software companies and device manufacturers have been slow to move toward consumption-based pricing, often citing difficulties in revenue forecasting. But the days when customers will pay for software that they don’t use as much as anticipated are numbered, particularly in light of the budgetary squeeze of the pandemic. Software buyers look for the flexibility to scale usage up or down, based on needs; usage-based components, added to subscription models, can meet this need.
- Flexible licensing. Talking about licensing often meant talking about strict enforcement of terms. Customers were granted exactly as much usage as they paid for. The tide is turning in 2021 when the new normal is a flexible, gentle, approach. This customer-friendly licensing strategy makes allowances for paying customers, such as offering overages to accommodate peaks and grace periods to guarantee functionality, even when a renewal is overdue (and expected).
Consider How—And Where—Software Is Built, Delivered, And Maintained
As cloud has matured, so have software companies’ approaches to cloud initiatives. On-premises solutions are giving way to cloud-native offerings. This changes not just how software is built, but how it is delivered to customers. Docker images and Helm charts now replace traditional software packages. Entitlement-based delivery systems are replacing suppliers’ registries. What else is changing? What’s (perhaps surprisingly) not?
- Electronic updates and maintenance. On-site maintenance, a struggle in the past, became an impossibility during a global health crisis when field engineers could not make visits to update devices. Companies must now invest in the ability to update devices and activate features electronically. This approach’s advantages include saving time, saving money, reducing the need for on-site service, improving the uptime of those devices, and meeting regulatory requirements for electronic updates for devices in certain industries (e.g., to meet FDA guidelines). It also enables device companies to know exactly what software is running on what device, particularly useful when a support call comes in. Customers benefit from reduced service time and the ability to get new features and updates in security patches in hours, not days or weeks.
- Device connectivity. Perhaps it seemed that as the Internet of Things (IoT) matured and as use cases became standardized, most or all devices would connect to the internet. But that won’t be the case in the coming year or even in the coming decade. Driven by security reasons and the requirement of a 100% controlled environment, many devices aren’t connected to the internet; that won’t be changing soon. Software companies must plan for this. Data extracts from the devices, updates, and monitoring functions must all work with offline proxies and servers.
Finally, a few trends are securing the software development and delivery processes. The following may require software suppliers to refocus work to ensure compliance with industry best practices for:
- Software supply chain. Within the software supply chain, many companies are hard-pressed to identify the third-party software included in a product or to identify their obligations related to their source components. Software suppliers are addressing these concerns to prevent liabilities, revenue loss, and reputational damage that may result from license violations and security issues. A growing number of industry associations require a parts list known as a software bill of materials (SBoM) and open standards for SBoM; SPDX (Software Package Data Exchange) and OpenChain are about to get ISO certifications. These international standards will drive companies, whether they sell or buy software, to insist on an SBoM to be delivered with any component to ensure well-structured and secure software.
- DevSecOps. As the concept of DevSecOps gains ground, engineering teams are taking full responsibility for the code they build. This includes ownership of functionality, testing, security, deployment, and operation. To track components used and to reduce the risks presented by license obligations, developer security training, threat modeling, secure software development life cycle (SDLC), and emphasis on coding practices will all become more important for engineering teams. will grow as a focus for engineering teams. Engineers also will join legal and security teams in focusing on Software Composition Analysis (SCA), integrating it into their continuous integration and continuous delivery (CI/CD) streams.
About The Author
Nicole Segerer is vice president of product management & marketing at Revenera. Nicole drives growth and awareness of Revenera’s solutions for software suppliers, guiding product vision, strategy, and roadmap plans, along with go-to-market planning, positioning, and marketing for Revenera’s solutions.