Business models for software are typically pretty simple: the software is sold under a License, as a Service or in a combination of License and Services (e.g. SaaS).
I believe this model is very unsatisfactory.
Why? Because it does not really distinguish between the different aspects that constitute the specific value proposition of the software concerned.
Whether you offer a software under a license or as a service is typically not really determined by the real value proposition, but by the way customers (are perceived to) want to pay for the software.
I want to propose a better model of determining which business model is appropriate for software, based on the three dimensions I see in software.
These three dimensions are: Technology, Functionality and Content. What do they represent?
For some software products, most or all of the value is in technological development. Examples are Operating Systems, development platforms, middleware, interfaces, etc…
Other products will mainly focus on functionality. Most software applications will fall into this category, from office applications over plug-ins to computer games, including most SaaS, which is functionality offered on-line.
Finally, some products will focus mainly on content. This will apply to a lot of Internet business (e.g. Wikipedia, but also Google and Facebook), but also to a lot of business intelligence software, databases and media content.
Of course, hardly any software belongs to one category only. Every offering will effectively be three-dimensional: the software will address some or more Technology issues, focus less or more on Functionality, and be based more or less on or around the Content created or manipulated by it.
However, positioning a software business on the right place of each dimensional axis of our 3D model will be essential in understanding which business model is most appropriate.
Each axis of each dimension will range from commodity to highly specialized or tailored.
Knowing where your software product sits in this 3D model, will allow you to understand much better whether the real value of the software is better captured in a license model, a subscription model, a content purchase model, or any other model.
Because you will know where to locate the real value created by the software.
And then, once you know this, you can integrate the correct protection (Intellectual Property) and license model to your business.
That can be done through any range of IP tools, from strict patents to fully copyleft open source.
As a result, when properly located in this 3D-IT model, the business will be able to identify its most valuable assets, protect them properly (through use of appropriate IP tools), and use them most efficiently in the business model