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Software Packaging and Pricing

Software packaging is not a onetime event and ‘one size’ is never going to ‘fit all’. Even with the most sophisticated, feature-rich offering on the market, if a software publisher is unable to offer flexible pricing and licensing models they will never reach their maximum potential.  Software packaging really focuses on addressing three things: the what, the how, and the how much.

  1. WHAT aspects of my offering does the customer want or need access to?

  2. HOW does this customer need or prefer to pay for my product or service?

  3. HOW MUCH does this customer perceive the value added by my product or service to be?

Asking these questions is only half the battle. Once a software publisher knows s the answers they will need to have the tools in place to enable them to act. The ability to take action requires product versatility, access to flexible licensing models, and business agility.

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For true product versatility, you first need to establish a value for each feature within your catalog and then have the ability to bundle those individual features into multiple service packages with a variety of pricing options. The ability to tie together components of your offering into different packages without engineering effort or writing one line of code, enables you to quickly and cost-effectively deliver the right offering for every customer every time.

When you build feature-level authorization and therefore packaging capabilities into your service catalog, you really improve the overall accessibility of your application across a multitude of diverse markets. You can deactivate or remove premium features from a ‘basic’ version that you can offer at a lower cost to capture low end markets. Alternatively you can charge a premium for access to cutting-edge features that provide additional value to high-end customers or niche markets. One thing is clear, if you don’t have the ability to monetize the individual features of your solution, you end up significantly limiting your market applicability or the price you can charge for your services – which equals lost revenue opportunities.

View Licensing Flexibility Resource Library

The next thing it takes to be successful with software packaging has to do with how your customers consume your services. It takes license model flexibility to address the “HOW” aspect of the packaging trifecta. Every organization has a unique internal process for budgeting, purchase requisitions, PO creation, and invoice payments. Some processes are clean and simple and some are very slow, complex, and cause frustration for everyone involved.

Customers have a definite preference when it comes to how they purchase goods and services. Your service offering could be exactly what they are looking for, but if you don’t offer a licensing model which aligns with how they do business, they may choose a less attractive competitor out of necessity.

There are many factors that influence consumption preferences – from market segment, to the size of the organization, and even how critical the application is to your customer’s business. Small, or start up customers may prefer (or even need) to make many small payments with no long term commitment. Large, complex enterprise organizations may prefer long term, quarterly or annual unlimited-usage plans. Licensing flexibility is a critical tool for helping your customers budget for and consume your service in a way that works best for their business.

Success in feature bundling and licensing will set you up to address the third and final aspect of the packaging trifecta, “HOW MUCH”.

Licensing Flexibility
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As most established ISVs know, product versatility and flexible licensing models are only the first steps of an ongoing commitment to customer satisfaction. What is right for customers today will need to evolve for tomorrow. Customers will want to stop paying for features they don’t use and will want the ability to add features that they either overlooked in their initial purchase or have been added to your service offering as your product has evolved.

 Furthermore, if you don’t have the ability to quickly change your product catalog to easily add features to existing packages you make it much more difficult to monetize new R&D work through existing customers and you add a lot of additional engineering work to your go-to-market process.
It is critical then, that when you are designing your service offering that you establish a clear separation between engineering and packaging/delivery. If you are unable to respond rapidly to evolving market and customer demands you create a significant opportunity for your competitors. Being able to adapt your services in real time, without additional coding, not only closes the door for competitive evaluation but it also significantly reduces your engineering costs and time to market.

Learn more about achieving software pricing and packaging success with Sentinel Software Protection and Licensing Solutions now.

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