webinar3 of 3 in a series: subscription & entitlement management best practices for your saas...

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…


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


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


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


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


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


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%


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


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


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


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


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


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


$ $

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

$

$

$ $ $

$


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


• 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


Next Steps

• Visit and subscribe to our blog:

http://blogs.flexerasoftware.com/ecm/

• Contact us: http://www.flexerasoftware.com/company/contact.htm



http://www.flexerasoftware.com/company/contact.htm

Q & A


© 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


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

[email protected]

webinar3 of 3 in a series: subscription & entitlement management best practices for your saas...

Technology

saas offerings

flexera software customers6

entitlements saas isvs

company confidential

saas isvs miss revenues

saas isv leads

softletter saas report

revenues provider