12 Ways

12 Ways

Featured Article from Software Monetization

Eleven Big Software Licensing and Monetization Trends

July 14, 2014

Frequent visitors to this site (and if you are not you need to bookmark it) know how much I enjoy talking with recognized subject matter experts on various aspects of how and why there is a virtual revolution taking place in the creation, consumption, tracking, protection and the monetization of software.

From greater visibility of customer behavior to enhanced security to the move to subscription models, independent software vendors (ISVs) are being confronted with an explosion of risks to their businesses if they cannot adapt to the changing software licensing and entitlement management landscape, and the opportunities available to them if they do.

I recently had the chance to ask one of those internationally recognized subject matter experts, Ansgar Dodt, Vice President of Worldwide Sales, Software Monetization Solutions, at SafeNet (News - Alert), to help you and me better understand the major trends impacting software licensing. To say the least it was enlightening. 

I was expecting half a dozen or less such trends, but Dodt provided a list of 11 that is certainly food for thought not just for ISVs but for their customers as well.  It is a list you might wish to keep handy. As Dodt explained, “these are the 11 trends that somehow or in some way impact our customers.”

Below is his list with a bit of explanation:

Cloud: It may seem obvious but as Dodt explained, interestingly ISVs are still trying to get their head around the cloud and its impact on their business. In fact, he observed that what they are finding out is that the cloud changes things even if you are not a cloud vendor. It changes how customers and customers’ customers are thinking about what they have, what they use and how they use it. 

Subscription and usage-based licensing: Put simply, and as has been recognized as a true disruption in the market, the days of perpetual licensing are over.  There are now two different elements relating to the cloud. The first is the technical change in how software is delivered. The second is about the business models for how it is consumed. Right now the impact is really on the on-premise legacy solutions. They can emulate what cloud is doing, and over time thanks to solutions from SafeNet, provide the ability to manage licenses no matter where they reside and hence offer a smooth migration path to customers as to when, how, where and why they wish to move. It is about giving ISVs time to transform to cloud.

Office automation: Cost reduction is the number one driver for all aspects of business along with faster processing speeds and improved data consistency. The ultimate goal here is to get to a set of fully-automated back-office processes. The challenge is that the number one pitfall is giving transformation projects only to the engineering team.  The reason is they usually don’t care about back office issues. Dodt stated that they typically see that projects run by operations are more successful. It all starts with the person who is assigned the project. In short, you also need to think about re-engineering the engineers on the project, too.

Business Intelligence (BI): This Dodt “pet project” is all about using big data to achieve a vision for the licensing business. BI starts with entitlement management data. You need to know what you have sold. Next is moving to feature-based licensing which enables ISVs to control what customers can do with their product. Dodt sees the elegance in this for ISVs in that they can set up checkpoints that enable them to bake in what they want and measure functionality, leading to better packaging.

“By sharing usage-based data, ISVs can start behaving like e-commerce and social networking vendors,” Dodt observed. He cited Amazon as an example where two or more versions of their apps run simultaneously, allowing them to do A/B comparisons. What this means to ISVs is immediate feedback on what is most successful. As Dodt says, “Software vendors need more feedback to be responsive and they need not just real-time data, but real-time understanding.”

Virtualization: This has been a huge issue for traditional ISVs, especially those that deal with large customers where virtualization is now commonplace. Locking to hardware is the challenge, and the complexity of virtualized operating systems that can be moved dynamically is only making this harder and an important hurdle to overcome.

License follows the users: The cloud has taught the market that you don’t need four licenses. The trend here is to enable on-premise vendors to simulate what can be done in the cloud in terms of multiple device use of software and making sure that in the process the customer is not confused.

Electronic Software Delivery (ESD): Dodt sees a big push to integrate entitlement management into the delivery and tracking processes.

Customer sales/service: This is the part of automation on the front end where any interaction can be self-service and provide instant solutions, from the initial activation to re-hosting a license.

Old-fashioned schemes: Intellectual Property protection will never go away. Especially in an age where access to information is so easy, ISVs cannot afford to leave their software unprotected and subject to reverse engineering. 

Security: It’s about considering how to keep bad guys out and keep honest people honest.

Hardware and software vendors: There is a need to start thinking about licensing everything because everything involves software to some degree and you have the ability to offer multiple variants of your product.

Dodt concluded by saying, “It goes without saying that the role of ISVs and their IT customers are in the midst of massive transformation. Every part of the ecosystem must deal with technology hurdles, virtualization and mobility. With this as context, it is also clear that the times where licensing was fairly trivial are over.  ISVs now need to think of so many other elements to not upset customers and be able to compete. Updating licensing solutions is what frees ISVs to adeptly go down the right path to the future. It is a win for them, their customers and their customers’ customers.”

As noted at the top, these trends are all important to keep as top of mind when looking at how software is created, packaged, deployed, consumed and monitored.  Let the trends be your friends.

Edited by Rory J. Thompson
IDC Infographic