Software Monetization Featured Article

Cloud Virtualization Licensing and Entitlement-Getting Out of the Bind

August 04, 2014

It is a common phrase both in business, as well as in our personal lives, that we wish to “unlock the potential” in something or someone.  The general idea is simple: i.e., having options and agility, and not being bound or constrained by out-dated practices and rules, can liberate people to explore new avenues of personal fulfillment and organizations to become more efficient and effective.

A prime example of how unbinding can be liberating in a business context is what is happening in software licensing and entitlement management  as a result of cloud and the way in which it is transforming how ISVs produce, deliver, track and monetize their intellectual property (IP), along with how licensees appreciate the value of that IP. As almost ‘“E”verything’ becomes virtualized and starts moving to the cloud, the unbinding of software from hardware is having profound and beneficial impacts for all involved.

I recently had the opportunity to discuss the impacts of virtualization and cloud on software monetization with Todd Steel, director of product management at SafeNet (News - Alert), to get his insights on the rapidly changing world of software monetization. 

TMCnet:  With so much software being deployed in the cloud, what are the challenges ISVs are facing in terms of licensing and entitlement management in this new environment.

Steel:  Cloud licensing represents two things. The first is that thanks to the move to the cloud, it is clear that this is the next evolution in the industry and how all software will be deployed. We have seen this in consumer markets for many years. We are starting to see it gain traction in enterprise as the expectations are that consumption of enterprise software should be as easy as consumer software.

The second is that ISVs understand the value of expanding their business models to include ones that are cloud-based; this is creating significant challenges, as well as opportunities, as they deploy more and more in virtualized environments. 

ISVs are looking to provide subscription-based solutions. Traditional approaches to licensing, and the management of those licenses, do not work in virtualized environments since licenses were locked to specific hardware. They were bound to an authorized environment, i.e., a machine.  The idea of locking software to authorized environments no longer makes sense; nobody wants to have licenses locked to a machine. They want it locked to the user.  I, as a user, have rights, and I want them to follow me as the user.

TMCnet:  Can you elaborate a bit more on the issues involving ‘binding’ as it applies to licensing?

Steel:   As noted, the reality of the modern software business is that we, and this now includes enterprise IT departments, don’t want to be bound.  Historically, licensing evolved from gaming companies who were upset about being ripped off; multiple copies of their games were being used multiple times by multiple people without the content creator being compensated.  Next came hardware dongles.  If we fast forward we get to where we would like to be today. The user, regardless of their persona and type of use would like to be authenticated once for the use of a license and run it on any device, whenever they want. 

With the proliferation of valuable apps that people wish to use for work, this desirability of authenticate strongly once and play anywhere at any time has become a powerful driver. 

TMCnet:  Let’s back up for a minute. What are the risks of licensing in virtual environments and how does Sentinel Cloud eliminate them?

Steel:  It all goes back to not being bound. In a virtualized world you want to be able to move from any server to any server. Enterprise IT wants a virtualized infrastructure where they can move things as they see fit.  In this type of environment you reduce locking.  Plus the big benefit to ISVs is that they can police the number of licenses customers are entitled to, along with having visibility into how, when, where, and by whom they are being used. This happens to provide added value to IT since they are getting better visibility into usage, which means they are not only in compliance with license terms and conditions, but they are also only paying for what they need and use.  

TMCnet:  That is a nice segue to having you briefly walk through the benefits of Sentinel Cloud

Steel:  We view the Sentinel Cloud as a win/win for ISVs and their customers.

ISVs get all of the things we have been discussing. They not only get tremendously enhanced visibility, they gain the granularity based on usage that helps them with things like renewals and the ability to refine their feature packaging and go-to-market capabilities, including moving to subscription models.  They also get things like automation of provisioning and the ability to provide rapid and trackable updates. I should also add what may seem obvious, and that is that with better visibility and control, you achieve improved protection and prevent abuse of IP.      

For ISVs, cloud translates into increased efficiency and an improved user experience. This means enabling them to provide their end users with access to licensed applications via any device – including smartphones, tablets, and desktop computers – without needing to generate new licenses for usage on multiple machines. And, as I said before, it also means they can see what their users use or don’t use, and can adjust their purchases accordingly.

TMCnet:  What are you seeing in the market in terms of adoption of new software monetization capabilities like Sentinel Cloud, and what are the drivers that really grab ISV’s attention?

Steel:  I divide ISVs into two categories.  The first is with new companies, and or in new markets. Vendors in this category get it. They wish to ride the cloud trend because of its benefits as a delivery model and for tracking and packaging reasons.  We see strong adoption in this market. 

The second category is for ISVs with existing customer bases which are mostly using on-premise solutions with perpetual licenses.  They are slower to move.  Part of the reason is cultural, part financial, because of the way in which revenue recognition changes with a subscription model, and part is because of the fear of the cost of implementing new licensing models and the challenges this can create on the backend. SafeNet understands these migration and transitional challenges, and this is why our solutions focus on one platform that supports any licensing model in any environment – so that transitioning from traditional models to the future is almost seamless.

TMCnet:  Any final thoughts? 

Steel:   Just one to add to the discussion about why this is a win/win.  While we understand that virtualization is causing a culture change for ISVs and their customers, what we have seen in the use cases is that those adapting to new technologies see and are realizing the value in user-associated licensing.  ISVs are using it as a competitive advantage, and enterprise IT is getting analytics that are providing actionable insights that are enabling them to be smarter and more customer focused. 

Edited by Adam Brandt
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