In 2023, the fifth year of Revenera’s Monetization Monitor research, the move toward software-as-a-service (SaaS) deployments, along with subscription/term and consumption monetization models, continues.
SaaS is the most widely used deployment model today. Significantly, nearly 1 in 5 respondents indicate that they’ve transitioned “all products” from on-premises to SaaS. And while newer models like SaaS are growing in appeal, on-premises deployments are showing their staying power; 46% of respondents indicate that their use of on-premises deployments is likely to increase in the coming 12–18 months.
On the monetization side, more than 4 out of 5 respondents (82%) use subscription/term monetization models at least moderately in 2023, up from 68% a year ago. Subscription/term and consumption are the monetization models most likely to grow, with both being reported by 59% of respondents as being expected to grow as a percentage of overall software license revenue in the coming year and a half. Product managers anticipate even greater growth of these models: 66% anticipate a growth of subscription/term and 69% anticipate a growth of consumption models.
For the 5th year in a row, the trends toward SaaS deployments and subscription/term monetization models continue, indicating software suppliers’ ongoing use of hybrid approaches.
Subscription/term and consumption are the monetization models most likely to grow in the coming 12-18 months, with each being reported by 59% of respondents as a model likely to increase as a percentage of overall software license revenue. However, perpetual models also continue to be relevant and widely used, with 78% using it at least moderately.
SaaS is the most widely used deployment model today. A total 80% of respondents are using it at least moderately, including 28% that use it extensively (for more than 51% of their product lines).
93% of those using purpose-built commercial entitlement management solutions have transitioned at least some of their software products from on-premises to SaaS deployment, compared to 55% of those using homegrown solutions.
As software suppliers look to increase their recurring revenue and streamline operations, there’s a growing trend toward centralization. The number of respondents now using the same software monetization technology across all product lines is 47%, up from 32% a year ago, illustrating a desire to gain greater visibility into licensing and entitlement/subscription management via a single pane of glass.
However, delayed time-to-market for new features/enhancements (54%) and customer churn (41%) are reported as significant barriers to revenue growth, which highlights a need to improve back-office processes and leverage usage insights more efficiently.
This report details current practices of software producers, providing benchmarks to help technology companies navigate the need to effectively manage hybrid monetization and deployment models. It illustrates the importance of usage data and analytics for clarity into how software is being used, how to support innovative licensing strategies, and how to shore up potential risks to revenue.
Nearly all (97%) of respondents either gather product usage data or plan to do so. Additional trends in software usage analytics will be discussed in the next report in this Revenera Monetization Monitor 2023 series; trends in software piracy and compliance will be evaluated in the third report.
The top reason for changing licensing strategies in next 12-18 months is to “better support pricing and packaging changes,” reported by 54%.
However, 54% also state delayed time-to-market is the biggest barrier to growing Annual Recurring Revenue (ARR).
Another significant barrier to revenue growth (reported by 41%) is customer churn, yet 10% don’t monitor churn risk at all.
Among users of purpose-built systems, nearly ⅔ (65%) believe price and value are "totally aligned," compared to only 32% overall; nearly ⅔ (66%) report the ability to collect product usage data "very well," compared to 40% overall.
The Revenera Monetization Monitor:
Software Monetization Models and Strategies 2023 illuminates:
This report is part of an annual series, first published in 2019, focusing on software monetization. This report focuses on software monetization models and strategies. Subsequent reports in the Revenera Monetization Monitor 2023 series will address software usage analytics and software compliance & piracy. All reports are based on 454 responses to a survey conducted by Revenera from March through July 2023.
Software suppliers continue to rely on hybridized software monetization and deployment models.
Hybrid may refer either to a mix of deployment models (e.g., using on-premises deployments in combination with SaaS or cloud deployments) or a mix of monetization (licensing) models (e.g., offering perpetual and subscription/term licenses).
As the use of hybrid models grows, so does the need to streamline licensing and entitlement management operations. The number of respondents using the same software monetization technology across all of their product lines is 47%, up from 32% a year ago, illustrating the move away from practices such as using different technologies per product line or per deployment model.