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Buying and Selling Software as a Service: A View from the Trenches

October 6, 2005

Continued from Page 1

Access Control

Piracy issues cease to exist in the SaaS world — they simply go away. Since users have to visit a Web site to gain access to software, what can be pirated? Certainly, there can be issues with users sharing credentials, but there are myriad ways to prevent this type of abuse.

Like publishers in the past, software companies need to realize that protection in the SaaS world is actually access control. Access control refers to the advanced authorization, authentication and delegated administration measures necessary to ensure that digital products — in this case, software applications — are in the right hands. For ISVs that sell to consumers, SaaS is a function of access control directly linked to flexible billing.

With SaaS and any other digital asset (games, music or video), users are paying for the ability to access a service, and ISVs need the ability to flexibly control access and billing and change their business models as required by the market.

Flexible Licensing for SaaS

In the 80s, software was physically installed at customer locations and licensed by the seat. This process was automated in the 90s, and later, companies would offer electronic software delivery, or ESD, where software is downloaded and installed locally.

Even with the virtual elimination of piracy in its legacy form, licensing and sales practices must be carefully considered within the SaaS framework. Software being delivered as a service necessitates access control parameters, but perhaps even more importantly, successful SaaS delivery requires innovative pricing and billing practices.

With SaaS, software companies can now license on a per-seat, pay-per-use, subscription, modular, timed or trial period basis, allowing varied business models for the same service. Additionally, utility or telco models can be applied. The ability to test and deploy these different licensing strategies is critical functionality for any successful SaaS initiative.

Don’t Go It Alone

ISVs can’t expect to turn into service providers overnight. It’s important to understand the core competency of the organization, which is, typically, the development of its application(s). To successfully offer software as a service, some ISVs will need to “web-enable” their actual code. Further, all ISVs will need to consider their hosting and application support options and determine how they will provision accounts, provide access to features and modules, and present payment options.

eMeta had to make the same decisions before we launched eRightsWEB — a hosted version of our flagship software solution delivering access control, subscription management, and commerce capabilities. We use a world-class data center that happens to be located just a few blocks from our headquarters in New York City. We opted to provide support ourselves and we use our own eRights application suite to manage access control and billing. Of course, in the case of the latter, most ISVs will not have the option to use their own access control and billing software.

Slow and Steady Adoption

SaaS is on everyone’s radar, if not their roadmap. The challenge for most software companies is determining the right financial justification to proceed with SaaS initiatives. Trepidation exists because there’s a real cost to implementing SaaS. But, for some companies, there is no choice: SaaS is a necessary survival tactic. Naturally, some ISVs will be complacent and market efficiencies will be the judge.

The list of benefits to the SaaS vendor is long, and includes the elimination of piracy, a predictable, recurring revenue stream, a lower cost of entry for end users, and better software industry-wide. The investment in infrastructural technologies and partnerships with service providers ultimately pays for itself. Without evaluating SaaS and looking at the big picture, today’s ISV may not survive in an increasingly competitive market. In fact, ISVs are likely doing their customers and partners a disservice in the short- and long-term if they don’t carefully investigate their options to move toward a service-delivered model.

About the Author

Chris Miranda is Vice President of Sales for eMeta Corporation, the leading provider of access control, subscription management and commerce software that allows media, software and entertainment companies to license and sell digital assets. Mr. Miranda is responsible for eMeta’s worldwide sales strategy, managing the company’s sales initiatives and developing partnerships and alliances.

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