Today, there are three main models of software delivery in the market: turnkey (out of the box), off-site (off-premises) and on-premises (on-premises).
In the turnkey model, the user purchases a disk containing a software kit and installs it. As simple as it may seem, the main drawbacks of this model are the need to have a computer powerful enough to run the software, but also sufficient disk space, as well as the inability to access the software from a computer. other device than the computer in question. However, storing data on personal servers and reducing the risk of data leaks are among its advantages.
The off-premise model, also known as “software as a service” (SaaS), relies on the cloud. It was a real revolution. In fact, users no longer have to install .exe files on their computer hardware: they only have to connect to an online platform and pay a subscription. The big plus: you no longer have to worry about licenses, databases, workstations or network devices. On the other hand, this model is prone to data leaks and data connection and control issues.
The on-site model involves paying for a subscription and storing data on personal servers. It’s a bit like a 2 in 1 solution. You have to have a server or rent one. This model offers the highest level of corporate data security and allows continuous access to data, even without an internet connection. On the other hand, it is necessary to ensure the maintenance of the IT infrastructure.
The on-premise model remains one of the basic standards for complex IT solutions. Typically, on-premise software follows this pricing structure:
Implementation: software installation and implementation costs;
Integration: the costs of integrating the software into the customer’s systems and applications, often higher than the price of the software itself;
Licence: the amount paid by the customer to use the software over a given period;
Maintenance: repair costs and changes made to the software after its integration.
If an on-premises IT solution provider wants to adopt the Netflix model, they will need to offset the costs of implementation, integration, and maintenance with licensing fees. The license fee payment could then become a subscription payment, with the option to subscribe at any time.
In theory, this is rather attractive. However, in practice, this is almost impossible to achieve due to the considerable operational risks:
Switching to a subscription model for on-premises solutions would make sense for software providers, as it would allow them to offset the costs generated by the subscription model with the revenues generated by this same model, thus ensuring a financial stability to the company. The problem is, only providers who already have enough cash are going to be able to survive the transition, when one-time sales stop and the subscription system will only begin to take hold. In the on-premises model with a perpetual license, IT companies maximize their profit all at once, when they sell their software to a customer. In contrast, in the offsite model, the business runs the risk that the customer terminates their subscription before it becomes profitable for the business. IDC estimates that by 2022, 53 percent of all software-related revenue will be generated through subscription models. It can be expected that this model will become the norm for some IT products. Now, IT vendors must think about the different possible methods to adopt it.
The hybrid approach to take the plunge
The hybrid approach mainly focuses on a combination of off-premise and on-premise models, emphasizing the importance of the evolving SaaS model.
IT companies whose operations are easily scalable and consist of selling and upgrading their own products will be inspired by service companies. These companies will thus bring together software development skills under one roof. This includes integration, system configuration and most importantly a comprehensive knowledge of the market and their customers’ operations. This method will allow them to use the model off-site for some of their products – or some modules of their products – without abandoning the on-site model. The hybrid approach recognizes that customers want to both benefit from the security provided by the on-premises model and take advantage of SaaS billing and usage methods. The value proposition here lies in the fact that they will be able to move from a physical infrastructure to the cloud, and vice versa, according to their needs, without losing their data history or their business configurations.
New customers, new horizons
By adopting a hybrid model, IT companies will have the opportunity to create new self-onboarding channels and attract new customers – those who did not plan to use the on-premises version because of its initial cost. With this new self-integration system, customers do not have to contact the sales department to gain access to certain IT products. Obviously, this does not mean that we should abandon direct and indirect sales. In fact, the more complex the product or service, the more the company will have to rely on its salespeople.
To retain the customer for life, the company will naturally have to adopt a long-term partnership approach and invest in a tailor-made product or service to ensure maximum customer satisfaction. And because SaaS products are much more affordable to begin with, they present a golden opportunity to build a comprehensive offering spanning the entire customer lifecycle.
IT vendors who demonstrate the most flexibility in their usage offerings and subscription policies and who offer complete ecosystems for their products will be the most competitive in the long run, without having to completely reinvent their business strategy – or go straight to the point. at all Saas.
Many IT vendors are going through a hybrid stage in their transition to a SaaS model, moving closer to the Netflix model in the medium term. Comarch is no exception.
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, Business Development Manager at Comarch Benelux.