Business Disruption: Time to Consider a New Licensing Model?

Your software business is booming but what happens when unexpectedly your customer’s business spirals out of control? Consider this hypothetical situation: An ISV has developed a software solution that is right on target for a specific market niche and the customer’s business is booming (as is the ISVs). Unfortunately, some unexpected and uncontrollable events have suddenly soured the market and the customers’ need for the software has been drastically reduced. Is it time for the ISV to panic?

That’s the gist of a hypothetical story that has played out numerous times in the software industry, so says a member of Forbes Technology Council and managing partner of Software Pricing Partners, Chris Mele, in his article Amid Turmoil, Software Leaders Must Rethink Their Pricing Assumptions. With the backdrop of the scenario above, the author suggests that software executives should not view turmoil “fatalistically,” but rather use the event to re-evaluate their licensing, pricing, and packaging strategy and look for innovative solutions that will enable them to survive the market turmoil until better times.

“Put another way, if a software company’s licensing, packaging, and pricing during turmoil are the same as they were pre-turmoil, they’re likely missing the boat,” he noted.

In that case, what pricing options can the ISV consider? Perhaps a product bundling strategy, or a move from a pure subscription offering to a feature-on-demand scenario, or an “only pay for what you use” consumption-based licensing option; either of which may ease the burden for the struggling customer. However, for an ISV to even envision such potential solutions, much less readily implement them without major disruption to their business processes, the ISV must first have a flexible licensing system that allows them to even consider all the possibilities.

Case in point, let’s look at a creative solution enabled by Wibu-Systems CodeMeter software licensing and protection system. Desoutter Industrial Tools designs and produces electric and pneumatic assembly tools for the aerospace and automotive industries. In a highly competitive market, they were undergoing a dramatic digital transformation driven by the new customer expectations envisioned with Industry 4.0.

Desoutter’s high-tech solutions comprise controllers, embedded systems, and software, all of which form part of the complete package. In the past, each tool needed a separate controller to operate. Now, one controller can run up to twenty tools via a wireless connection. Every piece of hardware also used to have its own software on board, with a traditional product license attached – too rigid and unwieldy for the Industry 4.0 world.

To adjust to the rapidly evolving market, Desoutter radically changed the way they delivered their products. Desoutter no longer sells software with fixed licenses. Instead, the company implemented an innovative concept that lets its customers dynamically assign a certain budget (in the form of Unit Values – UVs) to access only the features and functions they need. The idea is straightforward: Customers buy UVs, which they can then deploy to use a certain service. When they no longer need the service, they can recover the UVs and convert them into a different service or even redeploy them on another tool. This allows their customers to quickly rebalance their operations.

With the change in licensing strategy, Desoutter’s customers use an online configurator to cherry-pick the features they want on a specific tool and then order the UVs they need to run their service. Desoutter delivers the UVs via an e-wallet and activates the service by simply connecting a USB stick with the appropriate license to the controller. Ultimately, the solution provides greater versatility and economy to their customers while allowing Desoutter to monetize their software and generate new business opportunities with existing and new customers.

The solution itself is based on CodeMeter software protection and licensing system, with Wibu-Systems tailoring its technology to meet the specific needs of Desoutter. Not only does CodeMeter take care of the general protection of the design concept, but also of the infrastructure needed to create and deliver the UVs.

Desperate times are often mitigated with creative solutions vs. desperate measures. Read the full Desoutter case study and learn more about the CodeMeter flexible software licensing and protection system.