Application producers are ignoring clear market signals that the business climate is changing, and are failing to automate business-critical software monetisation processes in order to prevent revenue leakage and maximise profits.
These are the findings of a new survey report by Flexera Software, which clearly reveals that producers are aware of rapid change impacting their ability to make money from their software products, but they’re not adopting automated licensing and entitlement management systems that would protect them from those changes and enable them to be more agile, and grow revenues and profits.
In-house systems preferred
Moreover, 58 per cent or respondents develop and maintain their own entitlement management systems (sometimes in conjunction with another solution). Similarly, 61 per cent of producers have not adopted best-in-class licensing technology for all of their needs. Rather, they develop and maintain their own licensing systems in house.
In the software industry, specialised commercial software monetisation solutions help producers automate, manage and track customers’ use rights and the software license lifecycle—the front and back-offices. These systems automate software license management and back-office operations (entitlement management) and are specifically designed to help producers adapt to technology changes and build flexibility into their business models.
However, only 23 per cent use a purpose-built third party commercial entitlement management system, 22 per cent do nothing, and 19 per cent use a proprietary, custom extension of their ERP/CRM system. For licence management automation, 17 per cent do nothing, and only slightly more than a third – 35 per cent – use a purpose-built commercial licensing technology.
Opportunity and risk
Producers are aware that rapid technology changes are impacting the business climate, creating opportunity and risk.
Thirty-two per cent of producers said that today the IoT is having a high impact on customer satisfaction. Within 12-24 months, 16 per cent say that the IoT will have a high impact on supporting new business models – meaning producers must adapt their businesses to capture the revenues and profits promised from the IoT – a proposition also supported by a recent Gartner report.
Cloud, Virtualisation & Mobile Impact Security Concerns: 38 per cent of respondents said the cloud has a high impact on security concerns. 29 per cent say that virtualisation has a high impact on security concerns. And 33 per cent say mobile computing has a high impact on security concerns.
Software license non-compliance
Within two years, the number of producers who claim all their revenues are derived from a perpetual software license model will be nearly cut in half from 26 per cent to 14 per cent, and the number of producers who say half or more of their software revenues come from SaaS-based software subscriptions will rise significantly from 14 to 21 per cent.
Even while producers clearly understand the extent and breadth of the changes in the technology climate impacting their businesses – the survey suggests they haven’t yet widely built sufficient agility and flexibility into their businesses to adapt.
One measure of whether producers are effectively battling the impacts of business climate change is whether or not they are actually able to identify and recoup all the revenues due to them in accordance with their software license agreements. According to the report, software license non-compliance is rampant, with 63 percent of producers saying customers are out of compliance – they’re using software beyond what they’re entitled to use.
Fifty-eight per cent of producers report difficulty enabling customers to manage their own software entitlements, and 38 per cent find it difficult to quickly package and bundle features to create different product versions in order to accommodate changing market needs or unique customer demands.
Moreover, 33 per cent find it difficult to support “try-and-by,” trial and/or evaluation licensing.