UNLOCKING THE COMMERCIAL POTENTIAL IN YOUR CLOUD SOFTWARE

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1 UNLOCKING THE COMMERCIAL POTENTIAL IN YOUR CLOUD SOFTWARE By Aidan Gallagher

2 HOW INISHTECH S SOFTWARE POTENTIAL SERVICE HELPS WINDOWS AZURE APPLICATION DEVELOPERS MONETIZE THE CLOUD. loud computing is having a transformative effect on the IT landscape. This wave of change has not been seen since the transition to client / server computing that heralded the arrival of the PC in the 1980s. Although this presents software companies (ISVs) with considerable technical challenges, the cloud overwhelmingly provides even more business opportunities as long as any transformation leverages the full potential of new business models. Table of Contents Unlocking Potential Volume 3, 2012: Issue 2 21

3 The business of software is a central feature in the technology landscape, and, unsurprisingly, is utterly transformed in the march to the cloud. Very little remains the same when you compare what has become known as the traditional on-premise software world with the pure cloud software as a service business. As with any dramatic industry shift, there will be winners and losers: A hegemony rarely lasts and an en- exception. Consider that nine of the 11 largest computing companies from the pre-client server era are no longer with us; there is no reason to expect that current order. This change is being played out in every nook and niche of the software industry today, as agile new entrants offer cloud-based software as a service that can deliver a comparable solution for a fraction of the price and in a fraction of the time of their old-world counterparts. The cloud presents what is possibly the greatest challenge for established software vendors yet. How do they reinvent their business for the new age? They have mature existing technology and an established presence in the market with paying customers, ongoing projects, legal obligations, and support and maintenance contracts. On the face of it, a shift to the cloud will cannibalize their business, erode their market share, and destroy their pipeline. And if the customer doesn t ask for it, why would they invest in such a major distraction? However, adopting a wait and see attitude will not win this particular battle. The most important consideration for the indecisive ISV is cloud computing s undeniable appeal to customers. Simply put, it s a better way of doing things. With the move to the cloud the customer is the ultimate winner, and because the customer is always right, the ascension of cloud computing is guaranteed to be the next logical step in the evolution of computing. THE CLOUD TRANSITION software vendors in trying to reinvent their business thing they must do. It is simply a choice of evolve or die. developer of software applications to being a provider of software as a service. This presents a need for the software professional to make a drastic and challenging change like the dynamic engine of computing, they are coded to conceive, build, and sell their software applications. Now they must operate and service those applications, too. Look at the brightest and best new technology companies of the past decade; Google, Amazon, Facebook, LinkedIn, Twitter, and Salesforce. Very few, if any, but collectively they are probably creating more software than most classic ISVs. You can see a similar, if less pronounced, shift in established software leaders like Microsoft, Apple, IBM, Oracle, EMC and operations across their extensive global businesses. business you are in and evolving it accordingly. The second problem software companies will face is that very evolution understanding exactly how to adapt their business to take advantage of the opportunities offered in the cloud. Too often, this second challenge of How do we move to the cloud? is tackled before the switch in the psyche of the business--the acceptance that they are now in a whole new business--has taken root. If that is the case, and the full weight of the business is not committed to the cloud, the initiative tends to get downgraded to a technical exercise. The software application itself gets ported, rebuilt or moved across to a cloud-based environment usually a branched version of the core application. Then the ISV will attempt to sell this new solution, often into a new market, where the on-premise solution was previously unaffordable. Initiatives such as these are doomed to failure. If the cloud fundamentally affects every aspect of a software business, then expecting your engineering team to accomplish the transition alone is unreasonable and shortsighted. If you think of the task ahead as an iceberg, where the majority of the ice is below the surface of the water, hidden from view, then the technical challenge is the ice you can see, and the business challenge is the ice that is hidden. The cloud doesn t just determine how your software is built and delivered, it also changes how your software is marketed, sold, packaged, licensed, deployed, and improved. Everything about the software business is different in the cloud, starting at the most basic level. Software vendors are no longer Independent Software Vendors, or ISVs as they have long been known. They are now Cloud Service Vendors, or CSVs, re- 22 Volume 3, 2012: Issue 2

4 MONETIZING THE CLOUD The technical transition to the cloud is an important established software companies but also by startups. In the past, the SaaS model of software delivery has been out of reach for many ISVs because it involved building a substantial computing infrastructure on which to run the application. The cloud changed all that, providing ISVs with a ready-to-go set of choices for development, hosting, management, data processing and storage, and service and support options. The Windows Azure platform from Microsoft is an example of a full service cloud platform that removes many of the hurdles of provisioning. By providing an easy-to-access, affordable and highly scalable platform as a service, Windows Azure enables ISVs to offer their applications as SaaS without the cost and complexity of setting up their own data centers. This allows ISVs to make cloudbased offerings an extension of their on-premise applications to capture new markets and new clients where a SaaS solution is more compelling. The cloud offers the software business a whole new world of opportunity, enabling them to get to market faster with far less investment, and giving them the ability to tap into much broader markets right from the start. But the biggest challenge is the business transition, the hidden ice. There are several commercial considerations that the Cloud Service Vendor (CSV) must address in order to prosper in the cloud. Getting the Business Model Right The cloud expands your addressable market and allows you to adopt new licensing models like payto-use and pay-as-you-go. It is very important to establish a business model that can be managed from within your application and is right for potentially diverse clients. By metering and pricing usage appropriately to your target clients, the right business model can be your major competitive differentiator. A tiered pricing model where small businesses help win new SMB clients. A pay-as-you-go model for large companies that have cyclical workloads does not force them to pay for peak capacity all the time. This can make your solution much more attractive by eliminating the cost of overprovisioning to clients. It also ensures that you get full payment for all licenses used. The Power of Packaging A single instance, multi-tenant service does not can package your service into any number of differentiated offerings, enabling you to become more customer-centric with your service and win more business. For example, you can package standard, professional and enterprise editions of your software that better suit the cost and functionality needs of small businesses, mid-sized companies, and corpo- editions with features tailored to vertical customers. In this way you can address more markets with better pricing than your competitors. Focusing on the Process SaaS is a process-driven business, much more so than traditional software. As the price drops and your reach extends, your service moves toward a more volume-centric model. This requires an ef- and customer provisioning to product updates, payments, and charging. It costs about six times more to acquire a new client than to renew an exist- and maintain customer loyalty and renewals. For example, the process of converting a data entry user license to a business analytics license should be of delay that impact user productivity. A simple issuing of a new activation key can accomplish this. Likewise, for try-and-buy editions of your software, full licenses facilitates the transition to volume. Managing the Metrics In the cloud, everything is measurable and everything must be measured. Metrics like cost of ac- blood of SaaS and enable you to better manage dashboard will tell you when things are working and when they are not. For example, if you seed the Table of Contents Unlocking Potential Volume 3, 2012: Issue 2 23

5 Business Agility is that it gives you the ability to be agile in your business, whether it s aligning your product to changing customer requirements, scaling up and down in response to demand, or leveraging a new sales channel. So, agility should become a core tenet that you adopt for your business, as this is key to survival in the cloud. For example, by designing solutions around a.net-based, service-oriented architecture that applications can quickly adapt new business models to provide competitive business advantage to clients. CONCLUSION market with a try-and-buy edition of your software, you can better tune your offers to increase new client acquisition by tracking the activation and churn rates by customer types. Competitive Advantage Good cloud companies may have very different sources of competitive advantage (e.g., usability, data mining, process, etc.) when compared with their competitors in the traditional software world. But it s vitally important to build defensible com- vantage) in the cloud in order to successfully drive revenue and expand market share. For example, moving a legacy application to the cloud--to eliminate the up-front cost of perpetual license acquisition by replacing it with recurring payments that add up to the same amount over three years--can ing program. Defensible competitive advantage will be achieved when the cloud business model is aging, intelligent pricing, and outstanding service. Data Mining One sizeable difference between traditional software and cloud software is that as a CSV, you have a window into your customer s world; you have access to an endless stream of information about your customer s business, and this information can often be more valuable to your customer than the application itself. For example, retailers can better tailor their promotions to clients that have preferences for The cloud is transforming the software business from selling and maintaining packaged applications to winning long term client loyalty through quality, affordable services that generate recurring revenues. If you re building software applications for the cloud, much of the accumulated wisdom around building a software business does not translate easily. The cloud is a very different environment and the business hurdles are substantial; however, it also presents ISVs with tremendous new opportunities to leverage the cloud business model to expand market reach and acquire new clients. Software Potential from InishTech is an innovative, cloud-based service that enables ISVs to unlock the commercial potential in your software. With licensing, packaging, code protection, and usage analytics all combined into an easy-to-use SaaS service running on the Microsoft Windows Azure cloud, you can manage and control your software like never before. With several hundred customers depending on the Software Potential cloud service to protect and license thousands of applications, InishTech is al- licensing and an innovator in the shift to licensing from the cloud. ADDITIONAL RESOURCES For more information, please visit or click 24 Volume 3, 2012: Issue 2

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