The document discusses strategies for software companies to grow revenues in the cloud computing market. It outlines various cloud market segments and revenue growth strategies for pure-play SaaS providers, packaged software companies, and device manufacturers. Specific challenges are identified for each group, such as one-size-fits-all pricing leading to missed revenues or credential sharing abuse. Corresponding strategies are proposed, such as tiered pricing, entitlement management systems, and virtual appliances. Flexera Software is positioned as providing solutions for application usage management and monetization in the cloud.

1. Licensing and Subscription Management to Grow Revenues in the Cloud June 2011 Dr. Richard Northing VP of Global Services

2. Agenda Cloud Computing Market Segments Cloud Revenue Growth Strategies Pure-Play SaaS Packaged Software Device Manufacturers Flexera Software 2 © 2011 Flexera Software, Inc. | Company Confidential

3. Cloud Computing Market Segments Intelligent Device Manufacturers Virtual Appliances Pure-play SaaS Packaged Software Cloud Applications Software as a Service (SaaS) Virtual Appliances for Packaged SW S+S: Software + Services App Development APIs Cloud Platform Platform as a Service (PaaS) App Development, Web Infrastructure, Data Warehousing Cloud Infrastructure Infrastructure as a Service (IaaS) Servers, Networking, Storage 3 © 2011 Flexera Software, Inc. | Company Confidential

4. Pure-Play SaaS Revenue Growth Strategies 4 © 2011 Flexera Software, Inc. | Company Confidential

5. “Pure-Play” SaaS Providers Business Challenges Leaving money on the table because of a “one size fits all” approach to offerings Credential sharing abuse – user-based license model vulnerability Challenges with Building Your Own or Using a CRM System for Entitlement Management System Transitioning to tiered offerings requires tracking and enforcing customer entitlements Homegrown entitlement management systems and spreadsheets fail to deliver revenue opportunity from tiered offerings Tiered offerings require on-going tweaks. Homegrown backoffices cannot keep up and get in the way of revenues. 5 © 2011 Flexera Software, Inc. | Company Confidential

6. 1 – 56% of SaaS ISVs Miss Revenues Due to “One Size Fits All” Packaging and Pricing What is your estimate of revenues you are leaving on the table because of “one size fits all” pricing/packaging? Source: Flexera Software online poll of SaaS ISVs, April 2011 6 © 2011 Flexera Software, Inc. | Company Confidential 56%

7. STRATEGY 1: Package and Price Offerings to Match What Customers Want to Buy 7 © 2011 Flexera Software, Inc. | Company Confidential Tiered packaging approach also helps to fund R&D by having customers that value premium features pay extra for them

9. Customer purchases 1 credential but 3 users share itSaaS Services Machine ID: C Machine ID: A Machine ID: B Some providers are losing 40-60% of potential users to credential sharing 8 © 2011 Flexera Software, Inc. | Company Confidential

10. STRATEGY 2: Prevent Revenue Leakage Due to Credential Sharing Abuse Machine Identity + Credentials SaaS Services Machine ID: C Machine ID: A Machine ID: B 9 © 2011 Flexera Software, Inc. | Company Confidential

12. X 3 License Models

13. X 2 MetricsFeatures (5 tiers) Leads Marketing content Opportunities Support Incidents Reports Trial # Users Annual Subscription # GB Documents Stored Day Pass License Model (3) Metrics (2) 10 © 2011 Flexera Software, Inc. | Company Confidential

14. 4 – 38% of SaaS ISVs Use Spreadsheets or Homegrown Tools to Track Entitlements Which approach best describes how you keep track of customer entitlements? 38% Source: Flexera Software online poll of SaaS ISVs, April 2011 11 © 2011 Flexera Software, Inc. | Company Confidential 38% of ISVs use spreadsheets and homegrown tools to track entitlements CRM systems cannot cope with complex entitlements though they are used by 46% of respondents

16. “True-up” conversations are almost always painful and rarely recover the full revenue potentialSource: Analysis of Flexera Software SaaS product line 12 © 2011 Flexera Software, Inc. | Company Confidential Non-Compliant Customers Compliant Customers

18. SaaS providers will need to evolve pricing / packaging approachesSource: SoftletterSaaS Report 2010, http://www.softletter.com/Research/SoftletterSaaSReport.aspx

20. Takes resources and focus away from feature releases

22. For a SaaS ISV with $10M in revenues, this translates to $50K-$150K

23. Opportunity cost: Resources pulled away from feature releases

25. 16 © 2011 Flexera Software, Inc. | Company Confidential Business Challenges and Strategies BUSINESS CHALLENGES STRATEGIES SaaS providers are leaving money on the table because of a “one sizes fit all” approach to packaging offerings Package and price offerings to match what customers want to buy WITHOUT involving engineering Prevent credential sharing abuse SaaS providers are losing 40-60% of potential users to credential sharing Transitioning to tiered packages requires tracking and enforcing customer entitlements. Homegrown backoffice systems and spreadsheets fail to deliver revenue opportunity from tiered offerings Tiered offerings require on-going tweaks. Homegrown backoffices cannot keep up and get in the way of revenues. Invest in a best of breed entitlement management system Reducing number of hardware variations (SKUs) to meet diverse needs

26. Packaged Software Incumbents Cloud Business Models and Growth Strategies 17 © 2011 Flexera Software, Inc. | Company Confidential

27. Cloud Computing Will Allow Packaged Software Producers To Grow Revenues And Lower Costs 18 How would you describe your business goals with respect to Cloud Computing? (Check all that apply) Source: Flexera Software Virtualization and Cloud Computing Business Model Trends Survey, June 2010 © 2011 Flexera Software, Inc. | Company Confidential

28. © 2011 Flexera Software, Inc. | Company Confidential Four Monetization Strategies for Software in the Cloud 1 3 4 2 Bursts of Use Pay by Hour Pay to Accelerate Business as Usual Source: Flexera Software Virtualization and Cloud Computing Business Model Trends Survey, June 2010 19

30. Pre-paid vs post-paid

31. Public vs Private Cloud

33. Search for parts online (stored in Amazon S3)Source: Company website

35. Compute in the cloud (Amazon EC2)

36. Accelerate resultsLocal Servers Performing Computation Cloud Servers Performing Computation Scheduler Source: Company website

37. Packaged Software in Cloud: Charging by the hour for EDA software 23 © 2011 Flexera Software, Inc. | Company Confidential

38. Monetizing Virtual Appliances (for Device Manufacturers) 24 © 2011 Flexera Software, Inc. | Company Confidential

40. Oracle has delivered a set of Amazon Machine Images (AMIs), that can be downloaded from the Oracle site

41. Developers can take advantage of the provisioning and automated software deployment in these AMIs to rapidly build applications using development tools such as Oracle Application Express, Oracle JDeveloper, Oracle Enterprise Pack for Eclipse and Oracle Workshop for WebLogic. 9000 virtual appliances on the Amazon Web Services (AWS) marketplace 1400 virtual appliances on the VMware marketplace Sources: Oracle/Amazon web sites

43. Upgraded for capability or capacity changes

44. Consolidated using virtualization technologiesVirtual Appliances Physical Appliances Pay-as-You-Grow MPX 15500 (15 Gbps) MPX 12500 (8 Gbps) MPX 10500 (5 Gbps) VPX 1000 (1 Gbps) VPX 200 (200 Mbps) VPX 10 (10 Mbps) MPX 7500 (1 Gbps) MPX 9500 (3 Gbps)

45. Business Challenges and Strategies- Virtual Appliances for Intelligent Device Manufacturers 27 © 2011 Flexera Software, Inc. | Company Confidential Virtual Appliances enable manufacturers to protect margins, enable cross-sells/upsells and flexible capacity models Challenges Strategies Transfer hardware costs to end customers by making device capabilities available as pure software Device manufacturers face eroding margins on hardware products Grow upsell/cross-sell revenues by delivering capabilities as software add-ons or on a trial basis Allow service providers to dial up/dial down capacity on-demand without deploying hardware, eliminating unused hardware Service providers provision capacity to meet peak demand which leads to unused capacity during off-peak periods Service providers want to reduce power consumption, space and administrative costs Consolidate many capabilities into one device

46. Summary Cloud computing will transform business models for software producers and device manufacturers Business model transformation has many of the needs of on-premises software: Monetization of products Capacity counting/ tracking Authentication & authorization of use Usage tracking Binding to help with compliance Best of breed subscription and entitlement management solutions will power the transformation 28 © 2011 Flexera Software, Inc. | Company Confidential

48. Over 20,000 FlexNet enabled applications

49. 1,500 of the Global 2000 Enterprises29 © 2011 Flexera Software, Inc. | Company Confidential

51. Solidly profitable

52. 425 Employees

53. 80,000 Customers

54. 20,000 FlexEnabled Applications

57. Marriott San Jose ● October 24-26, 2011 SoftSummit offers a comprehensive look at the entire software and device product lifecycle—providing you with strategies and the know-how to adapt your business to thrive in today’s fast-changing market.