Seven software business models

A big concern when buying expensive equipment is whether the customer will be able to utilize the equipment to its maximum capacity. This is where the idea of sharing assets comes into play.

We are starting to see this IoT business model already with car-sharing or bike-sharing companies. Could I just pay for the amount of car I use? IoT has the potential to solve this problem, and we are already starting to see solutions with self-driving cars, virtual power plants, shared drones, etc.

This IoT business model revolves around selling your extra capacity back into the market. The goal is to maximize the utilization of your IoT product across multiple customers. That way, each customer pays a reduced price and you are able to get faster market penetration, compared to when a single customer has to pay for your complete product. I had the opportunity to work within this model, deploying smart batteries for commercial buildings at Stem, Inc.

The batteries provided energy to the building, and if there was extra capacity, we sold that energy back to the Grid. In this IoT business model, the batteries are a shared asset between the building and the Electric Grid. You can either throw away that extra capacity or figure out a way to monetize it. Your IoT product can be designed for selling other products. This business model can be very lucrative for products that have consumables needing constant replacement.

For these types of products, it is very important that the customer never run out of the consumable. Otherwise, the product loses its value proposition. You see, the challenge for manufacturers of these products is that there might be a gap between when the consumable runs out and when the customer reorders it.

Sometimes that gap becomes permanent, and the customer never buys again. But what if the product itself could reorder its consumables whenever it needs them?

That would provide value for the customer AND for the vendor. Amazon also uses this model with their Amazon Dash Buttons. When you press the button, it re-orders that item from Amazon and it arrives at your door within a few days. By introducing this clever connected product, Amazon is reducing the barriers for you to re-order any product you need. Basically, any product that needs to reorder parts is a candidate for this IoT business model. Whether you sell industrial hoses, bearings, tires, etc.

The value of the Internet of Things is in the insights you can derive from the data you collect. The question is, who benefits from those insights? Think about companies like LinkedIn or Facebook. They collect a huge amount of data from all of us often for free and although they provide us the user with value for providing that data, the real value is provided to advertisers and other third party companies that use the data to promote their products and services.

In this case, LinkedIn or Facebook are tools for collecting data to offer it to advertisers. The same business model works in IoT. You can build your product to provide value to the end user and also to collect valuable data you can then sell to a third party. In this approach, you can offer your IoT device at no cost to eliminate the buying friction for the end user.

The goal is to deploy as many devices as possible to collect data. As a franchise owner, you get to leverage our super buying power and offer your customers what they love at great prices — without cutting into your profit margins. Our world-class support enables you to run your stores. College of Operations Leadership in-store training. After your franchises open, we continue to help provide assistance so you can focus on managing and growing your business.

Go Now. Toggle navigation Apply Now. Enter state, city or zipcode Search. Search Site. Room to Grow. Redesign or rewrite the application component from scratch while preserving its scope and specifications.

Eliminate the former application component altogether and replace it, considering new requirements and needs at the same time. STEP 3: Choose the modernization approach with highest effect and value Finally, choose the modernization approach that will have the highest effect and value to your organization by mapping the seven modernization options in terms of their effect on technology, architecture, functionality, cost and risk.

Experience Applications conferences Join your peers for the unveiling of the latest insights at Gartner conferences. View Conferences. Subscribe to the Latest Insight. Work Email Person Type. Subscribe for the Latest Insight.

Subscribe Back. Thanks for submitting the form. Error submitting the form. As high-speed Internet connection has become a new standard, hybrids will become increasingly more common.

Another way to realize the hybrid deployment is to let customers choose between a SaaS service or an on-premises solution and provide the opportunity to switch from one to the other if needed. For example, Microsoft Outlook can be deployed on-premises but can also be accessed online.

The hybrid approach combines and amplifies the difficulties of both SaaS and on-premise approaches. In this case, code written in a high-level language is assembled in a machine language, which is executable by a machine but unreadable by a human.

Most companies make their software products proprietary to protect it from copying, changing, or emulating. There are exceptions. Sometimes, software protected by copyright does have code available for alteration by users. Open source software means that users get software and access to source code free. Nowadays, an increasing number of technology companies create open source software. Black Duck Software , the open-source software OSS solution provider that helps maximize value by minimizing risks from open source software, has disclosed the results of The Tenth Annual Future of Open Source Survey.

According to the research, 78 percent of respondent companies run part or even all of their operations on OSS, and 66 percent said their companies create software for customers built on open source. At the picture below you can see that operating system, database, and development tools are the top OSS areas in The main drivers of growing open source adoption in are the quality of OSS solutions, feature support, and susceptibility to customization.

The vendor charges for customization, support, and maintenance are traditionally the main open monetization mechanisms for open source software. This includes user support, product maintenance, hosting, consulting, and defining the product strategy. For instance, Jet Brains creates tools for developers that are used all over the world in different well-known companies such as Wikipedia, Salesforce, and Pinterest. At the same time, JetBrains is an active participant in the open source community.

It has its own open source projects and JetBrainers make commitments to non-JetBrains open-source projects. For example, PyCharm is a product developed by JetBrains. PyCharm is the integrated development environment IDE used in computer programming , specifically for the Python language. Generally, most software companies have a hybrid mix of revenue streams to meet different market needs.

The concept of a license-based revenue stream entails a provider charging a customer money once for installing software. This is probably the most common and simple monetization approach widely used with on-premise products.

On the other hand, a finite price can also be a barrier for you to gain a large number of users due to the competition with free and open source analogs. If you want people to purchase your product, you should demonstrate to them its high value.

In a traditional on-premises distribution approach, a one-time upfront, perpetual license fee is used, which gives customers the right to use the software indefinitely. However, technical support and the right to product updates can be priced separately in some cases, especially for professional software.

For instance, the Cinema 4d, 3d modeling and animation package requires paying for each new version even if a customer has paid a full price for a perpetual licence. In-app advertising allows you to make money by selling advertising space in your application. However, this means of monetization will be the smart choice only if the implementation is done correctly and you deliver the relevant advertising content. The more personalized advertisements you make, the more revenue you will derive from it.

Sponsorship is a subtype of an in-app advertising monetization stream. According to the sponsorship strategy, you agree to become a partner with an advertising company which will provide users of your product with some rewards for completing certain actions in your app.