Essentials in Software Monetization

“As today’s technology becomes increasingly complex, modern software monetization is essential. The adoption of modern technologies like the cloud have pressured independent software vendors (ISVs) to learn how to better protect their intellectual property (IP)…. To meet new demands, ISVs should look to modern delivery models and monetization methods including a user-centric focus, customer intelligence, and transparency for software usage.”

So writes Olivia Cahoon in a recent article in Software Magazine, Seeking Transparency: Modern Software Monetization. The gist of the article is that modern technologies such as the cloud and delivery models like Software-as-a-Service are giving consumers more options in the way that they use and purchase software. And because consumer preferences continue to evolve in rapid fashion, ISVs must be agile enough to re-package and deliver their offerings to match these dynamic usage requirements.

Marcellus Buchheit, President and CEO of Wibu-Systems USA, noted in the article: “Gone are the days of selling software with a perpetual license in a box. The ability to offer flexible licensing models is an important component in every ISV’s toolbox for optimizing their software monetization strategy.”

We can define modern software monetization as the ability for ISVs to maximize revenue by licensing and delivering their software with creative business models that are best suited for their customers’ requirements while protecting their software from outright piracy and illegal license usage, whether deliberate or inadvertent. Monetization issues are similar across all applications, whether delivered via on-premise, cloud, or mobile platforms.

Deploying usage-based licensing is a critical monetization consideration for ISVs as customers gain increasing say in how they want to consume and pay for their software. Traditional perpetual software licensing agreements are rapidly falling out of favor as often times they place restrictions on product use that do not fit the dynamic business needs of the end user. Many smaller companies, for instance, benefit from the ability to tailor licensing usage and subsequent costs to reduce their upfront expenditures and more closely match their business cycles.

For ISVs, the flexibility to offer licensing models tailored more closely to their customers business needs can help them reach new markets that they might not have been able to achieve with a conventional perpetual licensing strategy. ISVs need to decide whether their existing licensing system can deliver the flexibility they need to keep pace and even stay ahead of the market, or should they consider a licensing solution offered by a 3^rd party to achieve their business goals. For example, look at the comprehensive range of license models readily available to ISVs with Wibu-Systems’ CodeMeter licensing platform, including both traditional single user or network licenses as well as consumption and user-based models, such as feature-on-demand, pay-per-use, and subscription licensing.

Software piracy continues to be a major monetization challenge faced by ISVs today. Unprotected applications can allow unauthorized access and theft of IP and personal data; insecure license management systems enable unlawful use of the software; and proprietary portions of source code can be hacked to reverse engineer and build counterfeit products – all resulting in losses in the billions of dollars for ISVs around the globe.

Compounding that issue is the importance of protecting cloud deployed applications and data against IP theft, counterfeiting and reverse engineering. Encrypting source code of the cloud application using strong cryptographic techniques protects IP against piracy and tampering. User authentication mechanisms and secure techniques for creating, storing and delivering licenses in the cloud further protect against unauthorized usage and ensures the proper monetization of the software.

In summary, today’s marketplace requires flexibility in licensing, delivery, reporting, and management while also protecting intellectual property. Said Cahoon: “Modern software monetization ensures customers use the services they pay for while taking advantage of cloud adoption and real-time analytics tools. To maintain customer satisfaction and improve monetization, ISVs should ensure data and software usage is transparent and easily understood by customers.”