Today’s software licensing landscape is rapidly evolving. In the last 18-24 months alone, 56 percent of developers have changed their licensing and pricing models. Why? Because they need to generate more revenue, respond to competitive dynamics and improve customer relations. We recently sat down with Eric Free from Flexera Software to talk about the changes happening throughout the landscape, and what you can do to better prepare yourself as a publisher or developer to help earn more revenue.
ADM: What are the biggest changes taking place in the software monetization, licensing and pricing landscape?
Free: According to a recent Software Licensing 2016 report, the
enterprise software marketplace is undergoing a massive transformation as the pricing and licensing models dictating how software is bought and sold evolve. For instance, here are some major changes our research indicates are occurring:
- Only 43 percent of producers say perpetual software licenses contribute to half or more of their revenues. Historically, the perpetual license was the dominant licensing model used by most software vendors.
- 70 percent of producers will change their pricing and licensing models within the next two years. The reasons? To generate more revenues, be more competitive and improve customer relations.
- 36 percent of producers say that less than half of their applications are delivered as traditional installed software.
- Within the next two years, producers plan on changing their licensing policies to accommodate new technologies like:
Cloud (49 Percent)
SaaS (46 percent)
Virtualization (47 percent)
Mobile Platforms (55 percent)
- 73 percent of producers boast their pricing and
licensing policies are effective. Yet despite this confidence, 51 percent of those surveyed admitted they do not track customer usage, 45 percent do not audit customer usage, 55 percent do not have technology in place to track customer usage of their products, and 42 percent say their customers have challenges determining which software products they are entitled to use.
ADM: What is causing these changes?
Free: Fueled by shifts in customer demand and rapidly changing technology, some application producers are poised to profit from the new software pricing and licensing models emerging, while others risk being left behind – especially once subscription and usage models really take off.
ADM: What should developers do to keep up with changing monetization, licensing and pricing models?
Free: Producers need to adapt their pricing and licensing models to accommodate new technologies, including Cloud, Software as a Service (SaaS), Virtualization and Mobile Platforms, as well as capitalize on the Internet of Things. Producers need to also be able to accommodate changing preferences for how customers want to pay for software. They need to be able to flexibly offer, for instance, usage-based and subscription pricing – in addition to traditional perpetual pricing models.
ADM: How does Flexera Software help developers keep up with the massive changes occurring with software business models?
Free: To thrive in this environment, Flexera Software can help producers adopt an
agile Software Monetization strategy and implement automation that flexibly supports multiple business and revenue models.
ADM: Is the developer/enterprise relationship shifting as monetization, licensing and pricing models change?
Free: Yes. Software monetization represents the art and science of maximizing customer value and capturing that value through revenue. Application producers need to provide the right model for their customers in the preferred environment and get paid for delivering that utility. If they do not, customers will find other solutions whose licensing models better align to how they want to use software.
ADM: Based on your recent research, what are your predictions for software monetization, licensing and pricing in the coming years?
Free: Producers will add consumption-based models (pay-per-use, pay-for-average), as well as subscription/term licensing strategies. In the next 18-24 months, application producers will continue to enforce their software licensing agreements by increasing their use of Internet and network licensing, and implementing a vendor-supplied/automated monitoring mechanism.
ADM: What is the role of software monetization, licensing and pricing in the Internet of Things space?
Free: Software licensing and monetization are the foundation for making money in the entire software industry. Traditional software vendors and developers of the software apps that power intelligent and IoT devices depend upon licensing, entitlement management, update and delivery & product analytics to monetize and protect their intellectual property as well as understand how products are being used.
Eric Free is responsible for defining Flexera Software's corporate vision and strategy, overseeing mergers and acquisitions and strategic transactions, managing the company's product and solutions portfolio, and driving the company's marketing activities. He has more than two decades of experience in the technology industry, with a strong focus on growth and new businesses and on connecting the edge to the cloud.