By John Smith
As the software market continues its inexorable shift to move to SaaS and cloud, new issues are emerging in the relationship between software buyers and sellers. In particular, both parties are asking deeper questions about how to optimize the exchange of money for code.
Question 1: What should buyers pay for?
SaaS subscription models are evolving as buyers and sellers learn from experience. Obviously, the cost parameters for a software subscription can include the number of users (concurrent or named), feature sets (from entry/basic to premium tiers), and volume (of data, transactions, etc.).
But these parameters alone don’t define the nature of the financial engagement between buyer and seller. A limited number of feature tiers, for example, may be too inflexible for future buyers who want to activate and deactivate features in a more granular and dynamic way. The market may therefore push vendors into enabling buyers to more adaptively modify their consumption—and their monthly bill.
Question 2: What kind of self-service experience can sellers engineer?
Today, most software sellers just have to authenticate each new user and grant appropriate permissions for one of a few well-defined feature tiers. That’s not nearly as difficult as allowing individual users to mix-and-match features with a high degree of granularity independent of any predefined tiers.
Sellers also have to figure out how to give buyers better visibility into their consumption so they can make informed software usage decisions based on factors such as how much volume they’ve already consumed or how much money they’ve already spent. Sellers will likely also have to give buyer-side administrators the ability to flexibly define usage policies for different types of users. Implementing these types of capabilities in a secure and intuitive manner is a non-trivial engineering challenge.
Question 3: How will buyers govern their software spend?
In traditional software markets, corporate software spending was relatively easy to manage. You set a budget and then took a limited number of bites out of that budget with license agreements that covered a year or more.
In a consumption-driven market, governing your software spend is much more difficult. You need to define and enforce limits on spending for each software resource. You need a way to appropriately change those limits if business needs expand or contract. And you need a way to reliably audit usage, even though that usage is not taking place in your own environment. These again are non-trivial issues that have to be resolved if buyers and sellers are to take full advantage of the cloud’s consumption economics.
These are not the only questions that face software buyers and sellers. It remains unclear, for example, how sellers and buyers can best handle invoicing and payment in a marketplace of consumption-driven micro software transactions. But these three questions provide a good starting point for anyone who buys or sells software—and who wants to succeed as that buying and selling continues to evolve.
John Smith is the General Manager of Infrastructure Management at CA Technologies.
