6. Example case
6.2 Applying the SCRME framework
In this part the SCRME framework is applied for software X. Per revenue model the business model factors are examined and subsequently is concluded which revenue models are applicable. However, before evaluating the revenue models, the guidelines which were defined for using the SCRME framework are applied.
The first step was to mark the business model factors which apply for company X. The business model factors that apply are underlined. Next, when the impact of a business model factors has a probably positive impact on the viability of a revenue model, that particular box is colored green. If a business model factor has a probably negative impact on a specific revenue model, then that particular box is colored red. When a business model factor has no influence on a revenue model, that particular box in the SCRME framework is left blank. In figure 11, the filled in SCRME framework for company X is presented.
75 Figure 11: Filled in SCRME framework for software X
Business model factors Revenue model
One-time-
charge Subscription Freemium
Customers are large organizations probably positive
probably negative
-
Customers are small-medium sized organizations
probably negative
probably
positive -
The software is provided on-premise probably positive
probably
negative -
The software is provided on-demand probably negative
probably
positive -
Customer service is automated - - probably
positive
Customer service is personal - probably positive
probably negative
Development costs do not have to be recouped quick in order to fund software development
- probably positive
probably positive
76 One-time-charge
When we look at the one-time-charge revenue model, we see that the two business model factors who have a probably positive effect on the viability of this revenue models, 1) customers are large organizations and 2) the software is provided on-premise, are present. The business model factors who have a negative impact on this revenue model do not apply. For these reasons, the one-time-charge revenue model is seen as an appropriate revenue model for software X.
Subscription
Customers of company X mainly include large organizations. As the SCRME framework illustrates, the business model factor customers are large organizations, has probably a negative impact on the viability of the subscription revenue model. Also, the business model factor customers are small-medium sized organizations is not present within company X’s business model. So, at a first glance, the framework indicates that the subscription revenue model is probably not an applicable revenue model for software X.
However, three other business model factors who have a probably positive effect on the viability of the subscription revenue model are present within company X’s business model. Namely, 1) the software is provided on-demand, 2) the development costs do not have to be recouped quickly in order to finance software development and 3) customer service is personal. Since the technical condition (providing an on-demand solution) is met by company X, the subscription revenue model can be used. However, the notion is made that it is not likely that customers will prefer this revenue model.
Usage-based
According to the SCRME framework, when customer service is personal, it has a negative impact on the viability of the freemium revenue model. As discussed in the previous section, implementing software X involves a lot of personal support (i.e. implementing the software takes on average three to four working days). In addition, customers of company X need to be trained in order to exploit the full potential of the software. So, per customer, the investments, and thereby the costs, for company X is relatively high. For this reason, the freemium model is not seen as an applicable revenue model for software X.
77 Conclusion
Based on the SCRME framework, the one-time-charge revenue model is seen as an appropriate revenue model for software X. The subscription revenue model can also be used, however the notion is made that it is not likely that customers will prefer this revenue model. Whereas, the freemium revenue model is seen as an inappropriate revenue model for software X. So, the example case illustrated how revenue model can be analyzed. It also showed that it is a useful tool to evaluate revenue models.
However, the example case also pointed out that the SCRME framework has its shortcomings. Namely, it showed that depending on the business model of a software component developer, the importance of certain business model factors in the SCRME framework may differ. Also, one business model factor can have a positive effect on the viability of a revenue model and another business model factor can have a negative impact on the viability of the same revenue model. Since the SCRME framework does not give an overall score which decides whether a specific revenue model is applicable or not, the SCRME framework can create obscurities for someone who uses the framework. Therefore, it might have been better to make the SCRME framework in the form of a decision tree, which is a tool that shows decisions and their possible consequences. However, due to the time restrictions and the scope of this master thesis, it was not possible to develop such a decision tree. Namely, not enough data could be gathered for developing a decision tree. Also, in this research, it was note examined whether there was a causal relationship between the dependent variable (i.e. revenue model) and independent (e.g. customer segments) variables. Nevertheless, the SCRME framework remains a useful tool which helps software component developers in IAM to make well-considered changes regarding revenue models.
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