The software market has undergone fundamental change for a number of years now with the rise of virtualization, cloud computing, SaaS and mobile. These changes affect the way software companies approach how they do business. Companies are not only looking at every possible avenue to grow revenues from their current client base but also are looking at ways to expand into new markets. Next-generation software monetization is not about protection and limited to licensing but is about growth and enabling new business models.
Customer impacts
Three primary characteristics describe the software licensing impacts for the coming year from the customer perspective.
- Anywhere, anytime access. End customers expect access to software applications from any device at any time, whether deployed on-premises, in the cloud or across hybrid environments.
- User-centric licensing. With end users accessing software from any device, licensing mechanisms need to evolve to become user centric, meaning license delivery and enforcement based on who is using the software rather than what machine it is being accessed from.
- Usage tracking. The growing demand in the market for pay-per-use licensing models is driving ISVs to implement capabilities to track and aggregate usage data to enable pay-per-use and business analytics. This increasing demand for pay-per-use is not just for consuming software from the cloud but also for software delivered on-premises.
- Common user experience. End users expect a common licensing experience, no matter how or from where they access the software. From a user’s perspective, the licensing mechanism should be consistent across on-premises, cloud and hybrid environments.
Areas of change for software vendors
In 2015 software firms will need to change their monetization and licensing strategies in several areas.
Here are the top factors driving the changes.
Leveraging the cloud
- New demands. ISVs will need the capability to deal with the shift in usage tracking from a CAPEX to an OPEX model. They will also need to enable licensing in virtual environments.
- Multiple delivery methods and license models. Now many software companies use a hybrid approach to deliver software, running a SaaS service and delivering the same application on-premises (e.g., Microsoft Office 365). Next-generation licensing solutions need to be able to handle these multiple delivery methods as well as multiple license models with one back end and one enforcement technology.
- Single version of truth. Most software companies struggle to reconcile the different licenses sold to customers and the renewal dates, duration, capacity, etc. Their software monetization solution will evolve to become their single version of truth around which software each customer has and how much of that software is being used.
Shifting into mobile
- User expectations.Doing business on mobile devices has become a reality. Many publishers now offer either a stripped-down version of their application, predominately dashboards with the same workflow steps, or provide the end user with a browser-based solution to access the application. There is also a cultural shift taking place. Users are getting more comfortable with BYOD and are starting to expect continuity in the user experience when they shift between devices to access an application or functionality.
The right monetization solution should not only be able to secure the application across multiple devices (ability to support Android, iOS or Windows) but also provide a smooth transition. It thus becomes important to have a user-centric as opposed to a device-centric licensing strategy.
Leveraging business intelligence for improved business models
- A la carte pricing scenarios. With the arrival of the subscription economy, recurring revenue models are gaining traction and becoming more popular. Next-gen business/pricing models will be hybrid models, which will have a combination of subscription plus pay-as-you-go models. In fact, the hybrid models will give rise to al a carte pricing scenarios where companies will have the ability to charge for additional features or more bandwidth, etc.
- New monetization channels. The a la carte pricing scenarios will drive a new monetization channel, which is the incremental revenue stream. The true power of packaging can be leveraged here to build once and deliver to many. Feature-based packaging concepts can be taken to the next level where publishers can turn on features in real time through in-application messaging (promotions) and purchases. This enables a capture of consumer surplus through a low-friction, incremental revenue-generation model. This trend is common across gaming vendors and is seeing wider adoption in the software/online services space. From an execution perspective, the right licensing solution should have the ability to manage, modify and update entitlements in real time or near real time.
- App usage analytics. Also key is the ability to generate and track true application usage, which will enable consumption-based pricing models. Alternatively, this usage information can be gathered to track and analyze application consumption patterns. Some of the analytics that are possible on this data are truly revolutionizing. For example, if you correlate application usage with the price a customer is paying, you can quickly derive insights with an up-sell opportunity (high consumption, low price) or a churn risk (high price, low software utilization). Then you can take action based on the insights. For example, the sales team could call on the high-churn risk customer to ensure adoption increases or begin an email and/or video training series that educates users on specific features.
Innovating in the Internet of Things space
- Boosting security levels brings monetization opportunities. Enhancing the functionality of solutions by creating new Internet of Things (IoT)-based applications is at the top of many OEMs’ priority lists. By harvesting and analyzing the big data from their intelligent embedded devices, OEMs can create a host of new monetizable applications and services. Sounds good, but there are challenges.
Embedded engineers rate security as the greatest obstacle when it comes to deploying Internet-connected solutions. Fortunately, solutions with professional license and entitlement management present a way of boosting both IoT security levels and monetization opportunities. And with feature-based licensing, companies can even generate the big data required to develop these innovative applications.
Recommendations for ISVs
To leverage the monetization opportunities and ensure next-gen licensing and business models to grow their business, we recommend that software firms take the following actions:
- Offer “cloud-like” and usage-based business models to complement on-premises solutions. Develop service delivery capabilities in parallel.
- Pure-play cloud software providers should segment their offerings and adapt their business models as their companies continue to evolve and mature.
- Device vendors selling hardware enabled by software should realize the business value shift from their hardware to their software and adopt an effective software monetization strategy to increase the value of their offerings.
SafeNet’s Sentinel product family
To help you step into 2015 – 2016 with greater success, our Sentinel product family is positioned to provide evolving protection, licensing and entitlement solutions that are designed to grow and expand with a software vendor’s needs. It caters to our customers’ requests to “separate the business decisions from the development decisions.” We do this through our PODMEO methodology:
- Protect Once: initial integration of protection and licensing technology
- Deliver Many: license and entitlement solutions and various packaging options
- Evolve Often: rinse and repeat to repackage, enable and disable features according to the business needs without reopening the code.
Realizing that software firms are looking to deploy in multiple environments and on various devices — but with a common interface and one back end — our Sentinel product family provides one platform that achieves the following:
- Supports the widest deployment options (on-premises, disconnected environments and virtualized servers)
- Provides the most comprehensive enforcement solutions (hardware, software and cloud based)
- Managed by one back-office Entitlement management system (Enforcement vendor agnostic, capable of managing entitlements from various licensing and enforcement vendors)
In addition, software firms are requesting internal process reviews targeted at reducing operation costs. The Sentinel portfolio includes a comprehensive consulting and professional services package that works closely with our customers to create clear, results-oriented blueprints to work with our customers on implementing automated back-office management systems for all their licensing and entitlement needs in minimum time with minimum disruption.
Ariella Shoham is the senior director of marketing for the Software Rights Management unit at SafeNet. Ariella joined SafeNet in 2009 and has played a key role in creating market awareness and customer education during the launch of SafeNet’s key strategic initiatives including Sentinel Cloud Services and Sentinel Embedded. Prior to SafeNet, Ariella held marketing leadership positions at various IT companies including IXI, Electronics line and Advanced Recognition Technologies.