Today’s software end users are increasingly connected and mobile. In addition, they’re looking to have software delivered to them as a service on the device of their choice, and they only want to pay for what they use. These changes and others are fundamentally shifting the way software vendors conduct business.
The growth of cloud computing, virtualisation, advancements in mobile technology and day-to-day experiences using the Internet have impacted software end users’ expectations. Whether they are looking to free themselves from rigid licensing constructs, embrace pay-per-use models or use self-service entitlement management, the way people want to consume software is evolving.
Users of all forms of software, from consumer applications and enterprise ones to the software in intelligent devices, seek anytime anywhere access, user-centric licensing and pay-per-use consumption. However, vendors have been slow to adopt new business models that enable them to deliver the experience their customers want. Many of those who have been in the game for a while are still clinging to their on-premise or traditional hardware roots.
As the demands of a new generations of users start to shift, these vendors need to embrace the evolution or go extinct when users look elsewhere to meet unfulfilled needs.
For many software vendors, monetisation simply means collecting revenue by selling rights to use the intellectual property they have developed into valuable code. For them, monetisation challenges revolve around protecting the revenue stream, defending themselves from piracy, theft, reverse-engineering and misuse of software. But now more than ever, monetisation goes beyond just protecting revenue and involves enabling revenue growth.
Delivering software in ways that customers want to consume is now a prerequisite in the ultra-competitive software market. Building relationships based on trust is the key to selling anything, and traditional software licensing has become a barrier. Software vendors need to look at licensing not exclusively as a rights-enforcement hammer, but instead as a way to differentiate themselves from their competitors and provide a rich user experience. Or at least one that does not leave the customer feeling cheated, bullied or confused.
Survey results, end users
To take a closer look at software monetisation challenges vendors are facing, as well as software user disappointments with enterprise software vendors, Gemalto commissioned a survey of 600 enterprise software users at enterprise organisations with 500 or more employees from Austria, France, Germany, Japan, Switzerland, UK and US and 180 independent software vendors with at least 10 employees.
The survey research revealed that the vast majority of all respondents 85%, think software vendors need to constantly adapt to evolving market needs. More specifically, 83% said that software packaging must be flexible to meet a variety of customer needs and 81% said that software should be accessible across multiple devices. 81% also agree that software needs to be future-proof to be successful.
Of the end users surveyed, only 10% said their organisation is not experiencing challenges with their software licenses. Among the top difficulties cited were inflexible license agreements that do not meet business needs, usage audits, slow time to activation, long customer on-boarding, and lost licensing keys.
When the same 600 end users were asked how independent software vendors could improve their service, most agreed or strongly agreed that clarity around audits, usage tracking, pricing models and license enablement were all areas for improvement.
In addition, the survey asked enterprise users their opinions about packaging and delivery options, and separately asked independent software vendors about the types the types of packaging and delivery options they are currently providing to their customers.
The two main areas of difference are per feature and metered usage, where vendors did not seem to be keeping up with user demand.
Survey results, vendors
While end users are frustrated, software vendors are facing challenges monetising their software, especially with back office tasks and licensing enforcement.
Amongst back-office challenges, 83% of independent software vendor respondents claimed frustration with the cost of renewing and managing licenses, 82% expressed frustration with the time spent renewing and managing licenses, and 82% were frustrated with the research and development time spent on non-product-related development.
In addition, 68% of independent software vendor respondents said it was difficult to some degree to get visibility into how their products are being used. A quarter of respondents 24%, said it was either very difficult or extremely difficult to get that visibility.
84% of independent software vendor respondents worry that their software might become compromised, that is stolen or copied, and a full third of them 32%, worry a lot. While slightly less than half 48%, claim that software piracy has a considerable or significant impact on their business, 59% claim that competitors stealing intellectual property has a considerable or significant impact on their business. Slightly more than half also say that licensing violations, made either knowingly or unwittingly by users, and limited flexibility of licensing models negatively impact their revenue.
Amongst independent software vendor organisations surveyed, no more than half are using any single type of software monetisation tool to ensure the security, flexibility and profitability of their offerings.
Survey results, licensing
While most software vendors worry about the misuse of their software, from theft and piracy to unintentional licensing violations, almost half of enterprise respondents 48%, report that their organisation has been out of compliance with at least one of their software licenses.
This same group of respondents estimated that slightly more than a quarter of their software 27% was unlicensed, half of them 47%, saying it is because license agreements are inflexible. When asked about how independent software vendors could improve their services, 80% of user respondents think software vendors could provide more clarity around processes and audits and 72% think software vendors could improve usage tracking and audits.
Survey results, IoT
Gartner estimates that 6.4 billion things will be connected in 2016, up 30% from 2015. While this growth is not news, software vendors are still struggling to identify the way to monetise the Internet of Things. When Gemalto asked software vendors and enterprise end users about monetising the IoT, 69% of respondents said they think it could provide their organisation with new monetisation opportunities. However, 69% think there is a lack of clarity about how organisations can monetise the IoT.
21% of respondents are already exploring IoT monetisation opportunities. 50% will explore opportunities within the next year and 80% will explore them within three years. The things that are holding companies back from exploring IoT monetisation opportunities include security concerns 48% and lack of expertise 25%.
Key takeaways
- Of the end users surveyed only 10% said their organisation is not experiencing challenges with software licenses
- Among top difficulties cited were inflexible license agreements that do not meet business needs, usage audits, slow time to activation, long on-boarding, lost licensing keys
- The two main areas of difference are per feature and metered usage where vendors did not seem to be keeping up with user demand
- Respondents stated they are out of compliance in part because of inadequate licensing models and this is having a negative impact on software vendor monetisation
- 68% of independent software vendor respondents said it was difficult to some degree to get visibility into how their products are being used
- Software vendors are still struggling to identify the way to monetise Internet of Things
- The things holding companies back from exploring IoT monetisation opportunities include security concerns 48% and lack of expertise 25%
The software market is undergoing a fundamental change. On-premise software, SaaS and intelligent devices are all increasingly being deployed and consumed in cloud-connected environments, changing the customer experience and disrupting industries. As software vendors adapt their offerings to meet evolving needs of the market, several key themes have emerged.
#1 Anywhere, anytime access
End customers expect access to software applications from any device at any time, whether deployed on-premise, in the cloud or across hybrid environments.
#2 User centric licensing
With end users looking to access software from any device, licensing mechanisms need to evolve to become user-centric. License delivery and enforcement needs to be connected to the individual instead of the device they are using or the company they work for.
#3 Usage tracking
The growing demand for pay-per-use is driving independent software vendors to implement tools to track usage to enable usage-based licensing and business analytics.
#4 Common user experience
End users expect a single licensing experience, regardless of how or from where they access software. From the user’s perspective, licensing should be consistent across on-premise, cloud and hybrid environments.
It is clear that software vendors are not living up to user expectations. Survey respondents clearly stated they are out of compliance in part because of inadequate licensing models, and clearly this is having a negative impact on software vendor monetisation initiatives.
The software monetisation solutions of the future need to be able to handle multiple delivery methods and license models with a single back-end enforcement technology. They need to enable granular packaging, incremental revenue mechanisms and capture usage data, all via the cloud, whether or not the software is cloud-based. These solutions will help software vendors deliver user-centric and list based pricing that will deliver better experiences and increase monetisation.
From an execution perspective, the right licensing solution will have the ability to manage, modify and update entitlements in real-time or near real-time via automated services. This is whether the user or the vendor is the one making the updates, minimising engineering involvement. Integration with ERP, CRM and billing systems will be the next level of licensing automation.
Offering flexible license models, tracking and controlling usage and managing entitlements are common challenges for all software vendors whether they provide on-premise software, SaaS, intelligent devices or IoT solutions, and they will need to address these challenges. As it is clear the changes taking place in the industry are just beginning.
Software vendors will no longer be able to follow conventional models of license based pricing with user flexibility expectations driving change. Jamie Longmuir at Gemalto explains the industry transformation.