Strategy & Best Practices

Three Ways SaaS Vendors Can Start Monetizing Their Software Ecosystems

By Ideas @ AppDirect / June 8, 2020

If you look five years into the future, will your business model be the same as it is today? If you answered no, you’re in good company—76 percent of business leaders say that their go-to-market models will be unrecognizable within that timeframe. What’s driving such significant change in the way companies operate? Software ecosystems.

For a real-world example of the power of software ecosystems in action, look at Salesforce.com. The company recognized the significance of IT ecosystems early on, and in 2005 it launched the AppExchange, a marketplace for business applications purpose-built for the Salesforce.com platform. The AppExchange has been so successful that by 2024, the Salesforce ecosystem will be six times bigger than the company itself, meaning that for every dollar made by Salesforce, its ecosystem will generate $5.80.

As these numbers prove, however, merely having an ecosystem isn’t enough. To be successful, you need one that helps developers generate revenue from their software. Here are three steps you can take to start monetizing your software ecosystem today.

1. Attract the best developers to your platform

Drawing developers to your platform is a key component of creating a software ecosystem, but the competition is tough. Why should a developer invest the time to create products and services around your core offerings?

It boils down to helping developers maximize their ROI in your platform. Again, turning to Salesforce.com, one reason the AppExchange is successful is because it provides tools to developers that enable them to cut development time by as much as 40 percent. Salesforce also enables developers to cut the cost of quality assurance—as well as time to market—which increases market reach and improves sales. One more way to attract developers is to provide opportunities for skills-building and certification.

2. Re-orient your technology to an open API-based model

An API (application program interface) is a set of tools, protocols, and routines for building software applications. APIs specify how software components will interact, without a human administrator. This is why they are such a powerful tool for software ecosystems; you can create APIs for pricing, billing, provisioning, and more that will allow you to onboard developers and integrate new software and services with very little manual effort.

As IDC explains, “The creation of open APIs—and developer ecosystems around them—will allow enterprises to massively scale distribution of their digital platforms and services through third-party digital innovators, accelerating adoption and revenue.”

However, legacy technology that is difficult to connect to new API-driven commerce systems can be a huge barrier to growing and monetizing your software ecosystem. In this case, creating an API-powered integration layer that connects old and new systems is the least disruptive, most cost-effective way to transition to an ecosystem model.

3. Work with a knowledgeable ecosystem solution provider

Before you can monetize your software ecosystem, you will of course need to decide whether to build a solution yourself or work with a third-party provider. Often, this choice boils down to a set of familiar factors, including:

• Cost
• Ability to get to market quickly
• Control
• Industry and technical expertise
• Security

Each company is different, but working with a knowledgable partner can deliver significant cost savings and accelerate time to market, among other benefits. However, before you can make the build versus buy decision, you need to understand your organization’s current technologies and capabilities. Here are the steps you need to take before you get started:

• Assess every system involved in the order to cash process (CRM, billing, accounting, etc.)
• Determine if your current applications provide capabilities for third-party developers or resellers to log in and manage their products, orders, etc.
• Create requirements and scope to support third-party transactions outside of your existing processes
• Determine requirements and scope to develop APIs for various aspects of your ecosystem

The software industry is being transformed by ecosystems. This new way of doing business can offer amazing opportunities for innovation, scale, and revenue at a speed that is faster than ever before.

To learn more about monetizing developer ecosystems, click below to read our white paper, “Creating a Path to Monetization: How Companies Can Win Developers and Create Thriving Ecosystems.”
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