Monetizing on-premises software : An explorative study on revenue models of B2B software providers

Abstract: Purpose: The purpose of this study is to increase the understanding of useful revenue models for B2B oriented providers of on-premises software. To fulfill the purpose, two research questions are answered. RQ1: What revenue models are commonly used by B2B providers of on-premises software?  RQ2: What are the advantages and disadvantages with the different models? Method: An interview study was conducted, with a total of nine respondents. eight respondents representing B2B software providers, and one respondent experienced with software procurement who provided a customer point of view. The interviews were transcribed and analysed through a thematical analysis, where codes were generated and sorted depending on which revenue model the respondent was talking about. Findings: The findings contain five revenue models that is viable to use in order to monetize on-premises software for B2B providers. Subscription and perpetual licensing, which seem very popular and where there is a trend to move towards subscription. Usage-based revenue models, which carry good potential if the provider can measure customers’ usage in a reliable and secure way. Open source offers multiple ways to generate revenue from the software, mainly by creating additional services. Lastly, the study found a respondent with experience of using a gain-sharing model. Strengths and weaknesses have been identified for all of the models, which enables better evaluation to which situations they are suitable selections for software providers. The findings are also compared towards existing theory related to the revenue models. Implications: The results contribute towards extending the knowledge of revenue models for provision of on-premises software, how the industry operates today and what pros and cons that are associated to various models. The results may be used by managers to improve their business models by making better decisions about revenue model design, and it provides a more updated picture of current state of business which allows future research to continue exploring how software providers may optimize their revenue models. Limitations and future research: The study contain information from nine industry experts, but it would still be beneficial to continue studying the industry and generating more views of various ways to monetize software. Focus could be put on interviewing people outside of Sweden or how software providers’ competitive situations affect revenue model suitability.