Financial Models for Software Companies

Microsoft and other large software vendors are moving towards cloud-based software solutions. This change impacts software vendor’s financial models and without careful financial modeling, the software vendor can run into cash-flow related issues. The change from traditional software licensing model with maintenance payments will move to recurring revenue models that has different financial impact on how a software company runs its business.

We work with software vendors (ISVs) by providing tools to simulate different types of scenarios when building a business that includes cloud solutions. We are using the market leader investment calculation software Invest for Excel that is a Microsoft Excel-based solution with templates to simulate different types of scenarios that a software vendor might run into when planning and budgeting for its operations.

We have recognized multiple different scenarios that software vendors innovate in the new cloud era:

• A start-up software company that innovates solutions using cloud platforms as architectural foundation.
• A mature software company that has an on-premise solution, but wants to extend its solution with a cloud extension.
• A mature software company that wants to re-write the solution with new technology, using multi-tenant cloud technology
• A software company that wants to create cloud services providing information enabling third-party software vendors to consume with effective application programming interfaces (APIs).