Vincent Smyth (Global) - Licensing Strategies Give Application Producers a Competitive Edge

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• Posted by Vincent Smyth

• on February 16 2012

43% of enterprises expect their software budgets to increase in the next two years – up from 33% in 2010, according to a joint annual Flexera Software-IDC survey of software vendors, intelligent device manufacturers, and enterprise IT executives and managers. 72% of enterprises indicate that compared to other objectives, managing software licensing and usage is important or very important. Further with virtualization on the rise, 36% of enterprises are already using automated commercial license management to manage their virtual licenses.

On the other hand, 47% of the application producer respondents report that they do not monitor customer usage of their products. In fact, they confess that they do not have technology in place to do so. This suggests that potentially there may be revenue leakage due to poor customer entitlement tracking, peer-to-peer and casual copying.

The current technology trends of virtualization and cloud computing are encouraging the growth of pay-per-use and software as a service license models. Enterprise customers want and demand pricing and licensing models based on what they consume. As a result, to stay competitive and maintain profit margins, application producers must offer hybrid models combining the use of traditional and the new pay-per-use models. This is further increasing the complexity of software licensing and entitlement management. For instance, as application producers migrate their on-premise software to the Amazon EC2 cloud environment, they must put measures in place that prevent the software from being run outside the cloud. Similarly, their licensing models for virtual environments must prevent revenue leakage through their ability to detect and allow or deny access to applications.

The inability to flexibly manage usage and entitlements can impact application producers’ ability to develop creative revenue-generating licensing and pricing strategies and grow the customer base. Automating customer usage tracking, software licensing and entitlement management processes is advisable. There are tools that deliver this capability.

Such solutions provide detailed visibility of customer usage information, which can serve as intelligence to enable application producers to devise customized product packages based on flexible licensing, and identify cross-selling and up-selling opportunities.

Application producers can also deliver applications in innovative ways, aligning delivery with how customers want to access those applications. For instance, some application producers offer bulk licenses to their large customers via a single activation code and allow them to self-manage distribution of the licenses internally. This greatly reduces administration for both parties, and the software producer successfully protects its intellectual property. Similarly, application producers can also offer pricing based on customers’ actual usage of the varied functionality within the software – this meets customers’ preference for usage-based pricing, and allows application producers to in turn increase their own revenue streams.

Further, when launching new products, application producers can leverage such existing software delivery methods to reduce their time to market.

Meeting evolving customer demand with flexibility and agility is crucial to maintaining competitive advantage. There is business merit in automating customer usage monitoring and license entitlement management. The insight provided can enable software vendors to devise new licensing strategies, while eliminating unauthorized use of their applications – ultimately culminating in improved customer experience and satisfaction.

By Vincent Smyth, General Manager, Flexera Software EMEA