Software Monetization Featured Article
The New Challenges of Software Monetization - Packaging Flexibility and Transparency between ISVs the End-userSeptember 04, 2012
By Erin Harrison, Executive Editor, Cloud Computing
Despite a challenging economic climate, the software industry has continued to thrive largely because independent software vendors (ISVs) have been able to help their end users cut costs through flexibility in how the package and sell their software products.
IDC (News - Alert) expects software subscription revenue to grow at a 17.5 percent five-year compound annual growth rate (CAGR) to reach $108 billion by 2016, representing 24 percent of total software revenues by 2016.
Trends driving growth in the forecast include the adoption of software as a service (SaaS (News - Alert)) – or public cloud services – offerings, as well as the increased availability of subscription options, and the improved maturity of subscription offerings.
Actual subscription revenues in 2011 were slightly higher than forecast, exceeding expectations by $5.5 billion or 13 percent. This is the second year in a row that subscription revenues have exceeded growth expectations.
But today, many software providers are not fully monetizing their product and are potentially missing a big piece of the revenue pie without a successful software monetization strategy of which flexible packaging should be a critical element.
In a recent interview with TMCnet, Amy Konary, Research Vice President of IDC’s Software Licensing and Provisioning program, explained that the software vendors who are doing the best job monetizing their applications are the ones who understand the importance of product packaging flexibility and transparency between the software vendor and the end-user.
Flexibility, as Konary explained, is the cornerstone of an effective software monetization, and Michelle Nerlinger, Director of Marketing for SafeNet (News - Alert) agrees. According to Nerlinger, “The software applications offered by many organizations today can and should be sold into a variety of diverse industries. The issue is that not each industry or market segment will use a product in exactly the same way, frequent the same features, and see the same value provided by the application. Which is why it is so important that a software vendor is able to leverage flexible packaging options – without re-engineering – to find the right price, the right feature set, and the right value for every market segment, every time.” Nerlinger believes that this will result in maximum market applicability and therefore maximum profitability for software vendors.
When asked about determining the value of software Konary responded very similarly “The way the software is valued is based on the kind of company using it and what they are using it for,” she told TMCnet.
Nerlinger went on to explain that flexible software packaging is about much more than which features are bundled together at which price point. Flexible packaging must also take into consideration how a software vendor intends to allow customers to consume their applications. Most businesses are given the option to buy via a subscription as well as the perpetual licensing option where they can pay up front and use it forever. As cloud-based services continue to rise in adoption, a subscription-based model is more appealing to many companies, as it allows them to compete with business models offered by their cloud-based competitors without having to introduce a cloud-based service themselves.
Konary will address this topic at the upcoming SafeNet LicensingLive! Event being held Oct. 2-3 in San Francisco. Konary will speak at the “The New Look of Software Monetization” session.
Edited by Peter Bernstein
Software Monetization Resource Center:
Learn about these core elements to a complete software monetization strategy:
- Case Study: Iritech increases sales, secures its competitive edge, and flexibly expands into new markets using hybrid instance of Sentinel HASP
- Webcast: How to Sell More Software Using Trialware
- White Paper: Addressing New Challenges in Software Protection with .NET
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- White Paper: Understanding White Box Cryptography
- Webcast: 7 Traits of Licensing Champions
- White Paper: How to Get SW Licensing Right the First Time
- White Paper: Build vs. Buy
- Video: Software Monetization in the Cloud: Navigating the Top 6 Cloud Blocks
- Video: Introduction to Cloud Licensing
- Webcast Series: Let's Do It In the Cloud (2011)
- Webcast Series: Navigating the Cloud (2010)
- White paper: Best Practices for Transitioning On-Premise Software Business to the Cloud
- White paper: Cloudy with a Chance of Insight: An ISV's Guide to Customer Usage Data Collection and Analysis in the Cloud
- Report: Frost & Sullivan Global Software License Management Market Report 2011
- White Paper: SafeNet and IDC Present a Lifecycle Approach to Software Licensing and Entitlement Management
- Case Study: Following Several Acquisitions, Sage Implements Sentinel RMS to Harmonize a Multitude of Disparate Licensing Systems
- Video: Software Licensing Operations
- Video: Cleaning up the Back Office
- Case Study: Vero Software Simplifies Distribution and Reduces Costs with Sentinel RMS
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