Features-on-Demand: From Insurance to Software

Only pay for what you need has been the key selling point and differentiator for at least one major insurance provider in the U.S. for the past several years. The benefit to consumers, they say, is that they can tightly customize their coverage for only those provisions that they truly need, and thus save money from not having to pay for additional coverages. This presumably also suggests that other insurance companies require consumers to pay for coverage that is not necessarily needed, hence the differentiation from competitors.

Today, some ISVs and embedded systems engineers are finding ways to introduce a similar business model for software monetization. Over the course of their evolution, the features and functionality of software products tend to increase as developers add modern technologies to keep pace with their customers growing needs and market challenges. It is a normal product development and business progression. However, not every user needs all the new features, yet the software pricing will typically reflect all the new enhancements. This creates a dilemma for both the software user and the developer. Users do not want to pay for things they never use while developers do not want to give their work away for free.

This is where the features-on-demand licensing strategy comes into play. The end user makes an initial investment of just those capabilities that are needed at the time of purchase. Later, additional software features can be enabled through a simple software key activation without requiring any hardware changes since the features already exist in the device and need only to be unlocked.   

For developers, a features-on-demand business model enables them to lower the upfront investment required by their customers, and thus remove a significant barrier to entry for new customers who previously may not have had the purchasing power to invest in the software. Plus, the software can be easily upgraded with new features as needed, with extraordinarily little effort required by the developer. We discussed this approach in our blog several years ago, using one of our medical device customers in a real-world success story.

Just recently we hosted a webinar on implementing features-on-demand software licensing using our CodeMeter licensing, protection, and security platform. If you missed this masterclass, you can still register and watch the recording at your convenience.

During the webinar, we addressed three key areas in implementing a features-on-demand strategy: 1) software development, 2) license creation, and 3) the business model.

1. Software development: What does the developer have to do in order to license and sell the software by individual features? Do the features and functions have to be placed in separate components (.dll), or can they stay in a single executable? How does the decision affect the integration of software protections and licensing? Should there be a free bare-bones version of the software?
2. License creation: How should the licenses be modelled for each feature, and how will they get to the user? In gaming, in-app purchases are all the rage, which allows users to simply buy add-on features at the click of a button. How can this be integrated?
3. The business model: What are the opportunities and risks of feature-on-demand business models? How would the transition affect an existing product portfolio? Can feature-on-demand models be combined with subscription offerings, or is this dangerously close to opening Pandora’s box?

I invite you to register for the recorded webinar and hear from our licensing and security experts on best practices in implementing a features-on-demand licensing model.