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Monetizing Software: Four Ways New Licensing Approaches Can Serve Vendors and Users

December 13, 2013

The world of software has changed dramatically and the pace of this revolution is only accelerating. There are three issues causing such disruption: Vendors are looking for the predictable revenue streams that come from subscription and usage-based pricing; customers are looking to get out from under onerous CAPEX expenses; and the cloud is requiring new ways of licensing and paying for software.


This is a terrific opportunity for savvy vendors who want to monetize their software and at the same time better serve customers.

Amy Konary, an analyst with IDC (News - Alert), sees these changes first hand, “New licensing models are being developed in response to software industry shifts toward subscription, Software as a Service (SaaS (News - Alert)), virtualization, concurrent user licensing, usage-based licensing and cloud computing. These models push the limits of licensing and billing systems that were built to support the software business as it existed a decade ago,” she argues.

These changes require new technology that can deploy software based on hardware or geography, can closely track use and can track “when it’s hard to determine which hardware resources are being used and for how long,” Konary believes.

Adding to the mix is the fact that every end user these days has roughly three devices, and wishes to access software from all of them.

The SafeNet (News - Alert) Solution

SafeNet has long been on the forefront of protecting intellectual property and safely licensing software. In the white paper, ‘The Four Cornerstones of a Comprehensive Software Monetization Strategy’ the company offers a step-by-step approach to properly pricing, licensing and serving up software.

The paper, aimed at software publishers, analyzes how vendors can make more money by taking a whole new approach to customer enablement, licensing and entitlement management.

Many are already doing so. In fact last year 57% of the top 100 software vendors had subscription programs, and 16% of those got more than half their revenue from subscriptions, says Konary.

Subscriptions are just one approach. “As technology and delivery models have evolved, it has become strategically and operationally more complex for software vendors to provide their software in the many ways that customers prefer to purchase – subscription, freemium, use-based, feature-based, or any combination of these and more. Software pricing, packaging and licensing have become more complicated,” SafeNet argues. “Software publishers must be able to easily and effectively package, control, track, and manage their offerings. It is these four cornerstones which lay the foundation for an effective software monetization strategy.”

SafeNet believes there are four pieces to the monetization puzzle. But what does SafeNet mean by monetization? Konary knows for sure, “Software monetization is really the business of software, and how software developers and software companies can go about monetizing the great products they bring to market. But also beyond that, the relationships they have with customers, the benefits the customers get out of the software. It is not just about shipping units any more, it is about building relationships and enabling customers to have positive experiences,” Konary explains. “There are lots of opportunities that creates in terms of monetizing software. The selling units work in some situations, and in other situations it is incompatible with how the customer values the software product and how the software provider themselves values what they are bringing to the table. The issue is looking holistically not just at what software is, but what it does.”

The Four Pillars

Packaging is one factor in the monetization equation. The cloud changes how software can be packaged. But the software needn’t be in the cloud to have cloud-powered licensing features such as usage-based pricing and tracking or subscription pricing.

“When you boil it down, software packaging really focuses on addressing three things: the what, the how, and the how much.

  1. WHAT aspects of my offering does the customer want or need access to?
  2. HOW does this customer need or prefer to pay for my product or service?
  3. HOW MUCH does this customer perceive the value added by my product or service to be?”

These questions are important, but just as critical is using tools that allow you to create an offering that meets the criteria you’ve come up with. You may need to track usage, or you may want to offer just a select set of features, delivering a range of versions of your product, from low-end to premium.

This and more can be handled by something called “feature-level authorization” where you can mix and match to come up with an array of packaging options.

The Control Factor

Next up is control. This is how you actually get paid for all the unique packages and approaches you’ve come up with. “All of the creative pricing and packaging in the world won’t get you anywhere if you have no way to:  a) ensure payment for products or services rendered; and b) protect your intellectual property from tampering or reverse engineering,” SafeNet said.

Part of this is tracking, controlling and ultimately charging for usage. And this control technology is also how one prevents software piracy.

Tracking

An adjacent issue is tracking. Once you set usage guidelines, they need to be enforced and this requires tracking. And for volume software publishers, this tracking must be automated.

Management Lessons

The final piece of the puzzle is managing. “It is critical that all the systems put in place to help effectively price, package, bill for, and manage your product offerings not only integrate easily with each other, but are simple and easy to use for both internal and external stakeholders,” SafeNet concludes.




Edited by Peter Bernstein
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