A new house is being built in my neighborhood.
The builder, who is the owner, is an electrician and has construction skills and experience. He seems to take every element into consideration to make the process as efficient as possible, from preparing the ground, pouring the foundations, getting the building up quickly and under the roof, with wise design choices to accommodate the weather conditions of this climate. The progress is faster than anything we’ve seen coming up close. I can’t wait to see the finished build.
For some people, this process would be nothing but headaches and overload. Perhaps, as most homeowners probably do, they lack the skills to build a house. Even those with construction skills and experience may be so busy with work and family commitments that they cannot undertake a project like this, even if they would hire a general contractor to oversee the logistics. Instead of building a house, they buy one.
Build or buy is a common consideration. It applies to personal situations large and small. This also applies to software vendors, where a business must assess how best to meet its operational needs. For software vendors, build vs buy evaluation is especially important when it comes to software monetization systems that manage and track the rights, licenses, and usage of their products. Knowing what to evaluate can help ensure that a software vendor implements the solution most likely to support its overall goals.
Build versus buy
Developing an in-house solution is appealing; it gives you control over your IP address, lets you develop that system further, and can save you on third-party expenses. The ongoing investment of time and resources, the challenges of managing different types of licenses, the complexity of integrations with other back-office systems, and limited scalability may be less appealing. Buying (licensing) a commercial software monetization system is often appealing from another angle. It can support business and technology needs, freeing up internal resources to focus on product roadmap decisions, streamlining complexity.
Whether one approach or the other is best suited for a particular software vendor depends on a variety of considerations. Answer four questions to assess whether building or buying a software monetization system is the most appropriate path for your software vendor.
- What are the capacities and resources of the staff in place?
Whether to build or buy is a question of profitability. Developer talent is a finite resource. Consider how often you will need to provide updates and features requested by your customers; the ability to meet customer expectations is increasingly important as subscription models gain popularity. Spending time building an internal system may not be the best solution compared to investing your engineering resources in revenue-generating products.
Carefully assess your internal development capabilities to help you determine if an in-house solution is worthwhile or if your development team’s time and labor can be more effectively applied elsewhere. Commercial solutions often offer a higher degree of automation, scalability, and coverage, allowing internal resources to focus on their core competencies as well as your defined product roadmaps and product development priorities. software.
- What is the best long-term use of resources?
Every software company has certain core competencies, which are channeled into efforts to sustain the long-term commitment to building revenue-generating products and bringing them to market. Innovative, feature-rich products are the cornerstone of a software manufacturer’s competitive advantage in the marketplace. Rapid launch cycles help retain customers and attract new ones.
Tracking licenses associated with commodities is clearly critical to maximizing revenue and minimizing leakage. This is especially important as many software vendors are moving towards software-as-a-service (SaaS) deployments and subscription-based monetization models that support annual recurring revenue (ARR). However, license tracking is not a source of competitive differentiation. The process of creating and maintaining a licensing and rights management system can end up diverting other goals.
- How will the system work?
In order to effectively track rights, licenses, and usage, a software monetization system must consider several factors. To avoid complications, determine to what extent the system built or purchased can:
– Works with all devices. Not all devices are networked, which means they cannot be discovered on a network. A software monetization system should not only work with networked devices, but also those that are offline or isolated.
– Integration with other business systems. To better support the full sales cycle – the quote-to-pay (QTC or Q2C) process – a software monetization platform works well with other business systems. These include CRM (which can track license renewals by account) and financial and accounting systems (used for invoicing). Without integration, processes such as billing must be completed by manually re-entering data from licensing and usage management systems into the billing system.
– Accept hybrid deployment and monetization models. At the same time, a single customer can have perpetual on-premises licenses, device-locked licenses, cloud virtual machine (VM) licenses, and subscription licenses. The software monetization system must accommodate this increasingly common type of hybrid usage, with a mix of deployment models (e.g., SaaS, on-premises, and embedded) and monetization models (e.g., perpetual, subscription, usage-based or results-based). ).
- What is the business case for building or buying?
The decision between a homemade or commercial software monetization system is not just a technical question. It’s a business decision. When looking for comprehensive rights, licensing and usage management, financial considerations and potential return on investment (ROI) must be evaluated.
To accurately compare the cost of building a solution to buying it, pay close attention to the total financial investment in the solution. Carefully assess costs and revenues as well. Determining this precisely can be difficult, but accurate estimates are possible. Consider:
Time employed, on the basis of a “full allocation”. Calculate this expense not strictly on salary, but on salary, benefits (paid time off, insurance, etc.), facility costs, and liabilities.
Opportunity costs. This often includes other projects developers might be working on to add revenue-boosting features to products. Use a growth estimate to help model the revenue impact of adding a desired new feature set to a product that would help drive sales of that product, instead of investing in the same time. creation of a complete new system for the management of rights, licenses and use.
Client experience. Consult with your account team to help you assess factors such as how your customers are consuming your software and whether or not customers can switch to a competitor if they can’t get certain features from you. Also assess whether the license and usage confirmation process is a cumbersome task that negatively impacts the customer experience.
Mergers and Acquisitions (M&A). Many software vendors are looking to make acquisitions. The process of buying another software company adds products to the company’s portfolio. These products should be included in the software publisher’s license and usage tracking system. Assess the complexity and expense of adding the built or purchased software monetization system to products added through M&A.
As you aim to reach new markets, make sure your software rights, licensing, and usage management program can keep up with and support your software monetization initiatives. Whether you ultimately choose to build or buy a software monetization system, make sure it works efficiently and meets the interrelated needs of your business.
About the Author:
Michael Goff is Director of Product Marketing at Revenera, specializing in software monetization and usage analytics solutions. Revenera helps product managers create better products, accelerate time to value, and monetize what matters. Revenera’s industry-leading solutions help software and technology companies drive revenue through modern software monetization, understand usage and compliance with software usage analytics, authorize usage open source with software composition analysis and to deliver excellent user experience – for embedded applications, on-premises, cloud products and SaaS.
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