webinar3 of 3 in a series: subscription & entitlement management best practices for your saas...
TRANSCRIPT
Making the Most (Money) with Your SaaS Offering
Webinar Series
Webinar # 3
Subscription and Entitlement Management Best
Practices for Your SaaS Offerings
© 2011 Flexera Software, Inc. | Company Confidential2
Agenda
• Business Challenges for “Pure-Play” SaaS Providers
• Best Practices Summary
• Illustrative Scenario and Use Cases
• Flexera Software’s Entitlement Management Solution
• More to Come…
© 2011 Flexera Software, Inc. | Company Confidential3
5 “Pure-Play” SaaS Provider Business Challenges
1. Leaving money on the table because of a “one size fits all”
approach to offerings
2. Transitioning to tiered offerings requires tracking and enforcing
customer entitlements
3. Homegrown entitlement management systems and spreadsheets
fail to deliver revenue opportunity from tiered offerings
4. Tiered offerings require on-going tweaks. Homegrown backoffices
cannot keep up and get in the way of revenues.
5. Credential sharing abuse – user-based license model vulnerability
© 2011 Flexera Software, Inc. | Company Confidential4
1 – Leaving Money on the Table Because of a “One
Size Fits All” Approach to Offerings
If customers paid different prices,
provider would make $35 revenue:• $10 revenue from 1 customer paying $10
• $20 revenue 4 customers paying $5
• $5 revenue from 5 customers paying $1
$1 $5 $10
10
5
1
Price
Cu
sto
me
rs
In this example, “one size fits all” pricing/packaging misses 40% of revenues
EXAMPLE
provider is missing 5
customers that are willing
to pay $1
provider is getting only
$5 from 1 customer that
is willing to pay $10
If all customers paid the same price, they
would all pay $5 for a total of $25 revenue
but the provider loses revenues
© 2011 Flexera Software, Inc. | Company Confidential5
1 – 56% of SaaS ISVs Miss Revenues Due to “One
Size Fits All” Packaging and Pricing
What is your estimate of revenues you are leaving on the
table because of “one size fits all” pricing/packaging?
56%
Source: Flexera Software online poll of SaaS ISVs, April 2011
© 2011 Flexera Software, Inc. | Company Confidential6
BEST PRACTICE 1: Package and Price Offerings to
Match What Customers Want to Buy
Note: The companies mentioned illustrate the trend but may not be Flexera Software customers
Tiered packaging
approach also helps to
fund R&D by having
customers that value
premium features pay
extra for them
© 2011 Flexera Software, Inc. | Company Confidential7
2 – Transitioning to Tiered Packages Requires
Tracking and Enforcing Customer Entitlements
Features (5 tiers)Leads
Marketing content
Opportunities
Support Incidents
Reports
Metrics (2)License
Model (3)
Annual Subscription
Day Pass
Trial# Users
# GB Documents Stored
EXAMPLE A SaaS CRM Application In this example, a tiered packaging
approach will require the SaaS ISV
to track and enforce 30 possible
offerings based on entitlements• 5 features
• X 3 License Models
• X 2 Metrics
© 2011 Flexera Software, Inc. | Company Confidential8
3 – 38% of SaaS ISVs Use Spreadsheets or
Homegrown Tools to Track Entitlements
Which approach best describes how you keep
track of customer entitlements?
Source: Flexera Software online poll of SaaS ISVs, April 2011
38% of ISVs use
spreadsheets and
homegrown tools to
track entitlements
CRM systems cannot
cope with complex
entitlements though they
are used by 46% of
respondents
38%
© 2011 Flexera Software, Inc. | Company Confidential9
3 – Homegrown Backoffices and Spreadsheets Fail to
Deliver Revenue Opportunity from Tiered Offerings
Source: Analysis of Flexera Software SaaS product line
EXAMPLE
For one SaaS product line, 12% of customers
were using more than what they had purchased
~$1.7M per year in missed revenues
• Leaving entitlements in
spreadsheets and
homegrown systems leaves
a lot of money on the table
• “True-up” conversations are
almost always painful and
rarely recover the full
revenue potential
© 2011 Flexera Software, Inc. | Company Confidential10
4 – Tiered Offerings Require On-Going Tweaks
Source: Softletter SaaS Report 2010, http://www.softletter.com/Research/SoftletterSaaSReport.aspx
How do you price your SaaS offering?
• No silver bullet with
respect to pricing model
• SaaS providers will need
to evolve pricing /
packaging approaches
© 2011 Flexera Software, Inc. | Company Confidential11
4 – Homegrown Backoffice Systems Cannot Keep Up
and Get in the Way of Revenues
• SaaS ISVs should expect to spend
0.5-0.1.5% of revenues to build an
entitlement management backoffice
• For a SaaS ISV with $10M in
revenues, this translates to
$50K-$150K
• Opportunity cost: Resources pulled
away from feature releases
• On-going costs are about 20% of the
initial costs which also comes at the
expense of feature releases
Costs of a homegrown back-
office for managing entitlements
Source: Flexera Software analysis of customers
• Though critical for revenue
growth, building systems to track
and enforce entitlements is not a
core competence for SaaS ISVs
• Takes resources and focus away
from feature releases
• Inflexible to changing
pricing/packaging needs
© 2011 Flexera Software, Inc. | Company Confidential12
BEST PRACTICE 2: Invest in a Best-of-Breed
Entitlement Management System
Subscription and
Entitlement
Management
Verify
Entitlement
De-provision
Users
Up-sell Users
Set up Service
Bundles
Provision Users
Gather Usage
Renew
Customers
Bill
Customer
Entitle Customers
© 2011 Flexera Software, Inc. | Company Confidential13
5 – User-Based License Models are Vulnerable to
Credential Sharing Abuse
Machine
ID: C
Machine
ID: A
SaaS Services
Machine
ID: B
Some providers are losing 40-60% of potential users to credential sharing
• In this example, the SaaS
offering is priced based
on named user
• Customer purchases 1
credential but 3 users
share it
© 2011 Flexera Software, Inc. | Company Confidential14
Machine ID:
C
Machine ID:
A
SaaS Services
BEST PRACTICE 3: Prevent Revenue Leakage Due
to Credential Sharing Abuse
Machine ID:
B
Machine Identity +
Credentials
Business Challenges and Best Practices
15 © 2011 Flexera Software, Inc. | Company Confidential
Package and price offerings to
match what customers want to buy
WITHOUT involving engineering
SaaS providers are leaving money on the table
because of a “one sizes fit all” approach to
packaging offerings
BUSINESS CHALLENGES BEST PRACTICES
Reducing number of hardware
variations (SKUs) to meet diverse
needs
Transitioning to tiered packages requires tracking
and enforcing customer entitlements.
Homegrown backoffice systems and spreadsheets
fail to deliver revenue opportunity from tiered
offerings
Tiered offerings require on-going tweaks.
Homegrown backoffices cannot keep up and get in
the way of revenues.
Invest in a best of breed
entitlement management system
Prevent credential sharing abuseSaaS providers are losing 40-60% of potential
users to credential sharing
© 2011 Flexera Software, Inc. | Company Confidential16
$ $
Scenario
Marketing
Package
• Leads
• Content
SaaSuite- a
CRM
application
Features:
• Leads
• Marketing content
• Opportunities
• Support Incidents
• Reports
Metrics:
• # GB documents
stored
Marketing
Package with
Reports
• Leads
• Content
• Reports
Sales Package
• Opportunities
Support Package
• Support Incidents
Annual
Subscription
Annual
Subscription
Annual
Subscription
Annual
Subscription
Day Pass
UPSELL
“Best Fit”
Service Bundles
“Best Fit”
License Models
“Best Fit”
Price
$
$
$ $ $
$
© 2011 Flexera Software, Inc. | Company Confidential17
Subscription and
Entitlement
Management
Verify
Entitlement
De-provision
Users
Up-sell Users
Set up
Service
Bundles
Provision Users
Gather
Usage
Renew
Customers
Bill
Customer
Entitle Customers
Use Cases in the Entitlement LifecycleTom - Marketing Package
Jan - Sales Package
De-provision Jan - Sales Package
Upsell Tom to Marketing
Package with Reports
Tom access SaaSuite from his
home machine – allow since it
is within policy
SOLD TO: ACME Corp
• 10 users on Marketing Package
• 10 users on Sales Package
• 10 users on Support Package
• 100 GB Storage
Set up service bundles
• Features
• License models
• Usage policies
Any given user can
access the SaaSuite
from up to
TWO machines
(e.g. an office machine
and a home machine)
May 2011: Acme is using 50
GB of storage
May 2011: Bill Acme for 50 GB
of storage
Flexera Software Solution for SaaS Providers
Login
• User ID/Password
• Machine Identity
User
Check user’s entitlement
• Service bundle
• Entitlement valid dates
• License policy (e.g. login within allowed
number of machines)
• Login allowed/denied based on policies
• Application configured to service bundle
purchased
1 2
3
SaaS
Application4
Billing System
Billing data: Account,
Product Package or
Features, Hours used
5
© 2011 Flexera Software, Inc. | Company Confidential19
• Define service bundles based on features
• Define license models (e.g. concurrent use, annual/expiring,
trials etc)
• Define license usage policies (e.g 1 user on 5 machines)
• Create entitlements for service bundles
• Provision SaaS users based on entitlements
• Automate subscription renewals, upsells and cross-sells
• Track and report usage against entitlements
• Customer insights on products and versions
Flexera Software Solution Capabilities
© 2011 Flexera Software, Inc. | Company Confidential20
Next Steps
• Visit and subscribe to our blog:
http://blogs.flexerasoftware.com/ecm/
• Contact us: http://www.flexerasoftware.com/company/contact.htm
Q & A
21 © 2011 Flexera Software, Inc. | Company Confidential
© 2011 Flexera Software, Inc. | Company Confidential
SoftSummit offers a comprehensive look at the
entire software and device product lifecycle—
providing you with strategies and the know-how
to adapt your business to thrive in today’s fast-
changing market.
Marriott San Jose ● October 24-26, 2011
22
23 © 2011 Flexera Software, Inc. | Company Confidential
Thanks for Attending the
“Subscription and Entitlement Management Best Practices
for Your SaaS Offerings” Webinar
Bashyam Anant
Director, Product Management
Flexera Software
408-642-3912