A key goal of businesses today is to drive recurring revenue. The trend toward subscription monetization of software highlights the ability of companies to strengthen their customer relationship, while making revenue recognition an ongoing event, rather than a one-time sale.
For software producers and IoT device manufacturers, the rise of Software-as-a-Service (SaaS) has helped strengthen the move to subscriptions and annual recurring revenue (ARR). Yet barriers remain. Two of the biggest hurdles to growing ARR are customer churn rate and the inability to implement new monetization models.
As sales and marketing teams are tasked with the responsibility to drive revenue recognition, they can benefit by collaborating with teams from across the organization – product management, software engineering, sales, customer success, support, licensing and compliance, and senior management – to support new approaches to monetization that best meet the needs of their customers. Elastic Access is one such approach that provides users with cross-portfolio access to a company’s full suite of offerings, enabling them to try new products and solidify their ongoing relationship with the brand.
Why a New Approach to Licensing?
Being able to give customers easy access to technologies that they might not have specifically purchased can lower barriers to entry into a portfolio. This approach allows access to products they might not otherwise consider because of the complexities of a sales cycle and the need to plan for that financial outlay. Elastic Access makes this possible.
Elastic Access is a dynamic, flexible approach to software licensing and monetization. In contrast to more traditional models, in which purchases are of specific products or technologies, Elastic Access provides metered tokens to users. Users can then exchange tokens for access to anything within a software supplier’s portfolio. Usage of each item within the portfolio (including not only applications, but specific capabilities and features) is charged from the tokens via a specified rate table.
Because of its flexibility, Elastic Access helps software companies expand how their users try and experience their full portfolio of software offerings. Users’ needs can be met by trying a new application or a new feature within an existing application, perhaps for a particular project-based or seasonal need, without having to buy a specific product license. By experimenting within a portfolio, customers learn about the full range of a producers’ offerings and can become more engaged with the brand.
Today, even some of the most ubiquitous software providers are re-evaluating how to package their offerings. The goal is often to address customer frustrations with the complexity of licensing. (For example, Microsoft is currently reconsidering how to sell their 365 software bundles as it develops the artificial intelligence functionality within its Copilot AI assistant.)
Agile Licensing Supports Revenue Goals
Too commonly, software companies lack the data centricity that can support business decisions. Without clear insights to product usage, companies often miss opportunities for growth or face long lead-times for product packaging changes.
With Elastic Access, the supplier gets real-time insights, reflected in the data warehouse, about how customers are using the products, features, and services of their software; how customers are trying new components; and levels of longer-term adoption. Did a long-term user of your flagship product try a recently launched feature or a new offering in your software suite? Did a new user initially need access to a particular feature, but switch to using a different one of your offerings? All of this can help with the renewals process and sales forecasts, facilitating the agile development, deployment, and monetization of new offerings in response to customers’ use patterns and needs.
With insights into how users actually use a software portfolio, teams are better able to identify and act upon cross-sell and upsell opportunities. For example, Ansys, a supplier of simulation software, has deployed an elastic licensing solution that empowers customers with sufficient usage-rights to access applications across portfolio product lines and on-demand.
Benefits of Facilitating Cross-Portfolio Access
Providing customers with flexible access to an entire portfolio or suite of software promotes interaction between software producers and their customers. Meeting users’ needs with sensible options – for experimentation with a full portfolio and/or for access for seasonal or project needs – delivers multiple benefits for the producer:
- Reduced friction in the sales process by simplifying the commonly time- and capital-intensive software purchasing evaluations and processes
- The ability to tailor flexible offerings to diverse customer segments, budgets, and preferences, including those of small- and medium-sized enterprises
- Cost optimization, allowing customers only to pay for what they use
- Detailed usage reporting, allowing cost allocation to business units
- The ability to match capacity with demand
- An eased procurement process
- Reduced barriers to upsell opportunities
- Rapid delivery of new pricing and packaging options
- Improved renewals forecasting due to increased visibility into engagement and adoption
- Expansion into new markets via increased flexibility, resulting in increased profitability and company valuation
- Happier, more engaged, more loyal customers
Elastic Access allows software producers and device manufacturers to update their approaches to licensing in order to improve customer satisfaction, customer retention, and recurring revenue. This approach is suitable for companies of all sizes, whether fairly new to the game and offering just a single deployment model (such as embedded, SaaS, or public cloud), or with a mature hybrid offering, with different products spread across different divisions offered through different monetization models.
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