Software Monetization: How In-House Software Becomes a Revenue Driver

Most companies use a combination of different software solutions to ensure their operations run smoothly. Some of these are large enterprise software suites, while others were developed in-house for specific purposes—such as product testing, specialized calculations, or managing certain types of content. It is precisely within this in-house software that an often-overlooked revenue opportunity lies dormant.

The potential already lies within the company

Ansgar Dodt, VP of Product Management, Software Monetization at Thales, emphasizes that companies specializing in hardware, in particular, should ask themselves whether their custom-built internal software might also be suitable as a product for customers in similar industries. «Most companies focus on customer acquisition and retention. However, they often underestimate what is possible with their existing products and how these can be monetized in other ways,» explains Dodt.

Not only is this opportunity often overlooked, but its potential is also underestimated even when it is discussed. According to Dodt, a transformative impact can only be achieved once all departments involved understand the revenue that can actually be generated through monetization.

Transformation requires support—including from investors

The impetus for such a transformation usually has to come from management. The challenge here is that a portion of the revenue from the hardware business will initially decline while new revenue from software subscriptions is still being built up. It is precisely during this transition phase that investors often express reservations.

Such transformation processes can take several months—or even a full year in some companies. Dodt therefore considers it crucial to involve investors early on: «You have to discuss the likely decline in revenue with investors, but also show them ways to achieve more stable and predictable revenue through new business models.» Software monetization via subscriptions and user-based billing enables exactly that: predictable, recurring revenue growth.

Conclusion: Hybrid Models and the Proper Use of AI

Management must keep a close eye on revenue potential while ensuring that infrastructure costs do not spiral out of control. Companies that adopt an «AI-first» approach, in particular, run the risk of underestimating the associated infrastructure costs. In the worst-case scenario, a few large customers could jeopardize the entire business model and monetization strategy.

In most cases, Dodt recommends a hybrid model that combines subscriptions with a usage-based component. Relying exclusively on usage, on the other hand, is risky—the costs of profitability could end up being too high. And although artificial intelligence is not a mandatory success factor today, virtually all software will integrate AI features in the near future—which, in turn, will require new monetization strategies.

Source: www.thalesgroup.com.