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Model 1: On-Premises
Conventionally, vendors have used on-premises business models such as SAP, Oracle, and Microsoft for many years. In this model, the client pays off a one-time, permanent license fee, which is the right to use the software.
Besides the license fee, the provider will price you for security and support, which is often a spin-off of the license fee. They have incredible business models.
Model Two: Open Source
The number two model is an open-source model, suggesting that the buyer receives the software at no cost. However, the dealer collects the money for support and maintenance as a tool to make money from the open-source.
There are just a couple of benefits of this model, and that too with few examples. Although some of you may think there are a handful of examples that exist, they are just in a minority, and they, too, charge customers for support and maintenance in other ways.
Model Three: Outsourcing
Because of this cost to manage software, model three has realized. Outsourcing firms entered and stated, “We will deal with your plight at a very cheaper rate.” Get the software from the software dealer and pay them the support and maintenance expenses, but we will maintain it for a much cheaper rate than what you will pay doing this alone.
As one can understand from the model, this model took a gargantuan ascending in the late 1990s, because of Indian outsourcing companies like Tata, Infosys; etc. The reason is that manual labor controls the third model.
This implies that people perform the management of the security, availability, and performance of the software. Thus, you can scale down expenses by switching to low labor rate countries.
Model Four: Hybrid
It is a model that started slightly over ten years ago at Oracle. From that moment on, many current conventional software firms have adopted this model.
Mostly, it is like, “I will charge you for the software and the support and maintenance, but I, the maker of the software, will deal with the safety, availability, and operation of the software at a considerably cheaper rate than you can by yourself.”
Model Five: Hybrid+
This business model practices the model four fees and packages them into an altogether unique monthly, per-user subscription model. For example, as opposed to paying an advance license fee, you pay per month.
Model Six: Software as a Service (SaaS)
A handful of people will call model six the SaaS model. Roughly all-new application software companies that have gone national since 2000 have released software in this model.
Simply put, they are handing over their software only as a cloud service. In this scenario, you realize that the preference of at home or at customer no longer succeeds. Also, you, the customer, have no option on when the upgrades will take place.
But for the sake of enhanced degrees of standardization, you get completely lower-cost systems, that differ from what we have observed in model four and model five.
Model Seven: Internet
In this model, where all consumer application cloud services exist. We sometimes refer to the economic model here as an asymmetric business model. That is to say, I don’t ask you for money openly for the usage of Facebook, Twitter, or eBay.
Alternatively, I can make money with ads, which is certainly the situation with Google, or I can make money with transactions like eBay and PayPal. Or when you think of it, every time you purchase a book on Amazon, a tiny fraction of your book fee is heading off to usage of the Amazon.com software.
You can reflect on how much lower the cost structures can be when you do the excessive degrees of standardization and automation. There are rising degrees of standardization, specialization, and automation carrying out fairly different cost structures as you review each of these business models.
Each software vendor must adopt and run one or more of these models. Each model has some merit and specific cost structures stashed inside, all that needs to be examined.
For example, a software vendor shouldn’t get worried about attempting to establish a model six business on top of a model three outsourcing cost structure.
In conclusion, be a student of finances, because finances have powered every significant technological development.
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