Software Monetization Featured Article

Internet of Things Changes 'E'verything when it comes to Software Licensing

November 24, 2014

A big buzz at SafeNet’s (News - Alert) recent Licensing Live! event was how in a world where literally “E”verything is digital and connected, from the devices we personally use to all aspects of logistics and manufacturing to even the clothes we wear, how software will be central to turning raw data into actionable insights. And, while there is no disputing the trend to the Internet-of-Things (IoT) era, where we are ushering in being software-centric, there remains a host of questions as to how all of that software will be monetized in a connected world.

In this regard, one of the most illuminating sessions, of what was an event with many of them, was a presentation by Jeff Kaplan, Managing Director of THINKstrategies. He literally asked the audience to think differently about software monetization as it relates to the IoT, or risk the increasingly high probability that they will suffer the consequences of not being agile when it comes to taking advantage of the massive opportunities that lie ahead.

Kaplan started with an interesting chart from Beecham Research that I now constantly refer to for understanding the breadth and depth of the IoT.  

Source (News - Alert): Beecham Research (click to enlarge)

To fully grasp the granularity of this chart, you will need to expand your browser’s zoom settings, but the point is that no matter where one looks on the chart, software is at the core—whether to automate processes to improve performance or for performing sophisticated analytics.

After highlighting how virtualization, enhanced connectivity, increased power computing and  less expensive mass storage combined with the  ability to use the generated information enabled by increasing  cloud and mobile access are changing the economics and speed of services delivery, Kaplan made the point that 80 percent of all new applications will be distributed via the cloud—in other words, software-driven.

In fact, he noted that no matter the vertical market—retail, agriculture, connected home, smart buildings, manufacturing facilities, etc. —all are morphing into highly-targeted software services businesses. Products and services are increasingly ordered, delivered, monitored, maintained, updated, and renewed via the cloud. Differentiating these products and services is the value derived from the software to vendors. Vendors gain the ability to use transactional and other behavioral information to be both more responsive and operationally efficient. 

In short, software is creating a perfect storm for those who can optimize its use across their entire ecosystem, for both internal and external purposes. The IoT makes this a perfect storm on steroids. However, citing the Gartner (News - Alert) Group, Kaplan explained that 85 percent of Fortune 500 organizations will fail to effectively exploit Big Data for competitive advantage through the end of next year.  Kaplan’s solution for companies looking to get ahead is shown below.

 Source: THINKstrategies (click to enlarge)

The lesson is that those who use software to create new levels of value through process automation, and more intimate and personalized customer interactions, will succeed.  This  means leveraging the fact that everything is becoming “E”verything and that adapting new business models for monetizing the value of software in its many forms needs to be carefully planned, executed, measured by new standards, paid for with new currencies, and have the agility to scale to increasingly dynamic and unpredictable needs. 

As the first graphic shows, thanks to the beginning of the IoT era, we are on a wonderfully-connected-world journey that is complex to say the least. However, as Kaplan concluded, this means that to those who understand how to leverage software to create value and monetize it will enjoy the spoils. 

Edited by Maurice Nagle