As the economy slows down, software vendors must re-think business as usual. This post contains Software Licensing ideas that improve revenues when the economy slows down.
Every software vendor eventually encounters a slowdown at some point. When overall capital expenditures are declining it’s almost inevitable that software vendors will feel the pinch too. In addition to redoubling your efforts to improve your core products, the key to successfully riding out a recession is to adopt new software licensing programs.
Regular readers of this blog already know that the best way to stay agile in this changing world is to integrate a license manager within your software. Here are some specific Software Licensing ideas that improve revenues for your marketing/sales teams to help you grow in a softening economy.
1. New Pricing/Payment Models
Slowing sales mean that it’s time to get creative with licensing. If you are now selling only permanent licenses, consider going to time-limited licenses, both to add recurring revenue and to avoid “giving away” too much value. Try selling annual licenses to reduce the upfront cost of your licenses. Price the annual licenses at a level that will increase your revenue over time. Also consider a pay-per-use scheme for those customers who prefer to be billed that way.
2. License High-Value Components Separately
Some software vendors use an economic dip to decouple some of their high-worth software modules from their basic product so that prices can be reduced on the basic product while still capturing higher revenue from those customers who are will to pay for the more expensive options. The lower cost of the basic version can open up new accounts and increase your market share as well.
3. “Productize” what you used to give away for free
A lot of companies who use a license manager are not, strictly speaking, software companies at all. Many technology companies often “throw in” software as a kind of “enabler” or loss-leader, focusing instead on collecting revenue from hardware sales or consulting fees. Wherever there is perceived value in software, there is also potentially untapped incremental revenue.
4. Increase your Maintenance Subscription Rate
License Managers are very useful tools to ensure that your customers use only the software versions for which they have paid support fees. Try using the version number field in your licenses to encode a support-expiration date in the form yyyy.mmdd (2015.0531). Let a license manager compare it to the “release date” of each version so that your customers must remain current with their maintenance payments in order to access newest releases.
5. Scale your Licenses by Geographical Scope
Use a license manager to restrict licenses by time zone or region to penetrate new markets at a much lower cost. Sales gains can be realized by charging a premium for licenses that allow use across wider geographies. Sell higher priced licenses to organizations whose software usage needs to span wide geographies. Allow these customers to use your licenses as their teams “follow the sun.”
6. Deepen Penetration within your Existing Customers
Often the best source of new license revenue is found within your existing customers. Not all users within a customer are the same. So try creating license classes that are specific to each user type. A license manager makes it easy to build one release image of your product that takes on different functional behaviors (“lite”, “basic”, “advanced” etc.), each one determined by the specific license key you issue. You can later sell upgrades by supplying an additional license key to turn on greater functionality. The pricing of these various classes of licenses should match the value that different user types ascribe to your software. Examine software usage patterns to create a balanced set of licensing options that appeal to the widest audience within your best customers.
7. Lower customer cost by Hosting License Servers in the Cloud
Sales increases can also result by lowering your customers cost of ownership. In cases where your customers prefer not to install on-premises license servers, offer them license servers in the cloud. This may remove barriers that IT groups sometimes erect when they are asked to manage licensed software, speeding product evaluation and deployment. Once licenses are served in the cloud, customers can then expand their usage by simply adding extra licenses to their cloud-managed pool, including new releases and options.
8. Find a lower-cost Software Licensing Vendor
While you are looking for new revenue sources, you might also consider making changes on the other side of the ledger. If you are tired of paying ever higher fees to use your old third party license manager, maybe it’s time to consider a lower cost alternative. Reprise Software is in the sweet-spot in this regard – providing a world-class license management system at a much more affordable price.