The software industry is witnessing a significant shift towards Software as a Service (SaaS) deployment model, with nearly 1 in 5 respondents transitioning all their products from on-premises to SaaS. While SaaS gains popularity, on-premises deployments continue to demonstrate their resilience, as 46% of respondents plan to increase their use of on-premises deployments in the next 12-18 months.
In terms of monetization, subscription/term models are widely adopted, with over 4 out of 5 respondents (82%) utilizing them to some extent in 2023, marking an increase from 68% the previous year. Both subscription/term and consumption models are expected to grow, as reported by 59% of respondents, who anticipate these models to contribute a larger percentage of overall software license revenue in the next 18 months.
Product managers are particularly optimistic about the future growth of these models, with 66% anticipating a surge in subscription/term models and 69% expecting an increase in consumption models. This reflects the industry's recognition of the effectiveness and potential of these monetization strategies.
The widespread adoption of SaaS and the continued relevance of on-premises deployments highlight the diverse needs and preferences of businesses. Meanwhile, the increasing utilization of subscription/term and consumption models underscores the industry's focus on flexible and scalable monetization approaches.
As the software landscape evolves, companies providing software license and network technology services must adapt to these changing dynamics, embracing SaaS, exploring hybrid deployment options, and leveraging innovative monetization models to stay competitive and meet the evolving demands of customers.
- The consistent trend of SaaS deployments and subscription/term monetization models persists, showcasing software suppliers' preference for hybrid approaches.
- Subscription/term and consumption models are expected to grow in the next 12-18 months, as reported by 59% of respondents, contributing to overall software license revenue. However, perpetual models remain relevant, with 78% utilizing them moderately.
- SaaS remains the dominant deployment model, with 80% of respondents using it to some extent, including 28% extensively.
- Notably, 93% of users with purpose-built commercial entitlement management solutions have transitioned software products from on-premises to SaaS, compared to 55% of those using homegrown solutions.
As software suppliers strive to optimize their revenue streams and streamline operations, a notable trend towards centralization is emerging. The percentage of respondents using the same software monetization technology across all product lines has increased from 32% to 47% in the past year, indicating a desire for enhanced visibility and management of licensing and entitlement/subscription processes through a unified platform.
However, challenges such as delayed time-to-market for new features/enhancements (54%) and customer churn (41%) pose significant barriers to revenue growth. This underscores the importance of improving back-office processes and leveraging usage insights more effectively.
This report provides valuable insights into the current practices of software producers, offering benchmarks to guide technology companies in effectively managing hybrid monetization and deployment models. It emphasizes the significance of utilizing usage data and analytics to gain clarity on software usage patterns, support innovative licensing strategies, and mitigate potential risks to revenue.
Furthermore, the report highlights that 97% of respondents either collect or plan to collect product usage data, indicating a growing recognition of the value of usage analytics. The upcoming reports in the Revenera Monetization Monitor 2023 series will delve into additional trends in software usage analytics and evaluate software piracy and compliance.
- A majority of respondents (54%) plan to change their licensing strategies in the next 12-18 months to better support pricing and packaging changes.
- However, delayed time-to-market is identified as the biggest barrier to growing Annual Recurring Revenue (ARR) by 54% of respondents.
- Customer churn is another significant obstacle to revenue growth, reported by 41% of respondents. Surprisingly, 10% of respondents do not monitor churn risk at all.
- Among users of purpose-built systems, 65% believe that price and value are "totally aligned," compared to only 32% overall.
- Additionally, nearly two-thirds (66%) of users of purpose-built systems report being able to collect product usage data "very well," compared to 40% overall.