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Trend Alert: ISVs Looking to the Cloud for Licensing Solutions that will Pick Up Steam in 2014

January 07, 2014

Independent Software Vendors (ISVs) have a lot to consider. Not only do ISVs need to be continuously developing innovative solutions, they need to regularly evaluate and evolve their overall business strategy to align with market demands and stay ahead of the competition. Because of this, vendors need to be able to adapt their licensing models and employ a way to track their licenses accurately and in a timely manner so they can best monetize their ingenuity and assure users are in compliance with the terms and conditions of those licenses. And, software vendors need to be able to do this in a hotly competitive world where giving licensees a flexible and compelling user experience is the emerging differentiated value.

As with almost everything these days, the cloud has become a place for the virtualization and automation of time-consuming and manual tasks so that sellers can concentrate on producing the next big thing. It is also the vehicle by which buyers can have visibility into what they have and where they stand monetarily for planning, security and a host of other reasons.  It is for this reason that using the cloud for better monetization of software is gaining traction in the market, and why 2014 is shaping up as a year when this trend picks up steam.

With this in mind, I caught up with Shlomo Weiss, VP and General Manager of SafeNet’s Software Monetization Division to get an expert view on cloud-based software licensing and what lies in store for 2014.

TMCnet:  Let’s start with the basics, what is cloud-based licensing?

Weiss:  Put simply, cloud-based licensing is exactly what it sounds like. It is software licensing delivered from the cloud that can serve both on-premise or cloud based software. It offers the ability for ISVs to have connectivity into the customer in real-time. This “cloud connected licensing” experience provides the ISV with full visibility into where the licenses are deployed, the state of the licenses, and the ability to easily update the licenses. Another major benefit of cloud-based licensing is the ability to track and aggregate software usage data in real time, which can be used for pay-per-use billing purposes or to gain valuable intelligence on how customers are using the software.  This provides the ISV the tools and peace of mind they need, to know precisely where their business is, and actionable insights on things like payments, renewals, opportunities to up-sell, updates, number of licenses being used, and more.  It is real-time licensing and entitlement management, which translates into better and more cost-effective compliance and monetization.

TMCnet:  I understand the ISV needs, but why should users care?

Weiss:  First, up front, it is important to say that benefitting the ISVs is only half of the story. Satisfying user requirements is the other critical half and has been a SafeNet (News - Alert) design criteria. 

Second, end-users/enterprise IT departments are looking at the profound changes being wrought by virtualization, Software as a Service (SaaS), the cloud in general and mobility. They want to be able to have flexibility in consuming software on any device regardless of whether it is a desktop on-premise or, increasingly, a mobile device. In addition, just as they utilize elastic cloud services from providers like Amazon Web Services (News - Alert) they want to be able to consume software on a pay-as-you go and pay-as-you-grow model. In other words, they want the convenience they are accustomed to in other aspects of their personal lives and now in the workplace as well.

In fact, the enterprise market is now not just being IT driven but is being end-user driven.  As a result ISVs are rethinking how they deliver, charge and track their services, and hence rethink all of the processes involved.  What we are seeing is a move to user-centric licensing.

The facts are that users don’t care where their software is accessed from, be it on-premise or via the cloud.  What they want, and what we are providing, is license mobility. The term we use is “follow me licensing.”  They want to go seamlessly from one device to another.  They want the license to follow them and do not wish to be locked to a specific machine. 

While this sounds like it is making things more complicated, from an IT perspective there is a lot of benefit to having a single licensing model for dealing with software providers, especially when they, like the ISV, have deep visibility and control into their licensing environment.  It is a true win-win.   

TMCnet:  Compliance, making sure users are obeying the terms and conditions of their licenses, has been an industry issue. When software was delivered by physical media this was a nightmare; now that so much of it is delivered via the web, has it become less of a problem?

Weiss: The answer is that compliance remains a big issue especially with large enterprises who have literally tens of thousands of licenses.  It has always been a source of friction between ISVs who don’t wish to be nudged but do want to be fast in the market with updates and new services.  Compliance challenges thus slow up time-to-market, and the large customers themselves are challenged to be more responsive about licenses because they may lack the visibility into who and which devices have what, and the version and renewal status of the software. 

This is why a cloud solution is so beneficial. All of the licensing itself is handled in the cloud which means all of the license status information is available to the ISV and end customer in real-time. It has a major impact on eliminating contention and thus on the ISVs’ ability to not just monetize but protect the value of the licenses. And, as noted it gives the end customer unprecedented visibility and context into their software environment.

TMCnet:  That all sounds great but what about all of that legacy on-premise software?  I can only track what I can see. Isn’t this a challenge?  I understand SafeNet has a unique solution.

Weiss:   SafeNet with Sentinel Cloud, was very early to this market.  We saw the value of the cloud for helping ISVs run their business better, and we have also seen that for a variety of reasons the on-premise software consumption model is not going away any time soon.  This is not just a legacy systems issue, it is also one that involves various enterprise policies and rules. 

With that said, we understood we needed to provide a licensing solution that could not just handle cloud-delivered software licenses, but also give the visibility, actually the flexibility of being able to manage on-premise software as well.  With Sentinel Cloud, licensing itself is handled in cloud but it can track to any type of deployment, whether the software is delivered in the cloud, on-premise or a hybrid combination of the two.

That is the SafeNet differentiated value in this market. We are providing a level of visibility and control that until now has been unattainable in a disconnected environment.  The cloud wipes out that disconnected gap, and provides the added benefit of real-time, actionable information for use by the ISVs and their customers.  

Remember what I said about this being a user-centric approach where the license is tied to the solution and is liberated from being device-centric. That is critical, and leveraging the cloud’s ability to provide anywhere and anytime access to all of those licenses and generate actionable insights regardless of what device that license is being used on has tremendous value.

TMCnet:  So what does 2014 look like?

Weiss:   Let me preface this by saying the cloud-based licensing model is very disruptive to the ways in which ISVs are used to going to market and literally taking care of the business end of their business. The move from a perpetual license to subscription is out of many people’s comfort zones. Plus, they are dealing with a new way of doing things that was built from the bottom up to match the needs of an environment that is transforming.  In other words, education on the benefits is still a major requirement because old ways of doing things are hard to change.  

That said, SafeNet is seeing great market acceptance of Sentinel Cloud.  We believe the solution is still scratching the surface of what the platform is capable of doing when it is fully embraced. The market is continuing the move to subscription based models and there’s been a significant increase in usage-based pricing models as well. Pay-as-go and pay-as-you grow makes a lot of sense to ISVs.  

In this regard, SafeNet is very optimistic about 2014. The proof cases for cloud in general are helping ease some of the change issues, and having a capability that really does provide ISVs and licensees new levels of visibility and control; providing flexibility so that licensees’ do not have to do major forklifts to take advantage of new business models, and providing pricing based on consumption are a value proposition that commands consideration. 2014 is a year when that consideration picks up steam in terms of translating into further adoption.    

Here are two final observations.  First, because of the flexibility connectivity and the visibility provided, the market is going to see a lot of hybrid solutions.  As I noted earlier, on-premise is not going away, but the good news is it does not have to do so for everyone to have the visibility, context and control they want.  Second, and this is very important to re-emphasize, while the ISVs are being given tools to better monetize and track their business, the users are driving the ship.  If ISVs want to have on-going and recurring relationships with their customers, a licensing solution to serve both on-premise and cloud delivered software should be part of their arsenal for optimizing customer engagement.  

TMCnet:  It sounds like 2014 is going to be a tipping point year in the market.

Weiss:  SafeNet would agree with you and based on the momentum we are seeing, we are very optimistic about our prospects. 

Edited by Cassandra Tucker
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