Time to Bring in the Licensing Experts?

Home grown vs. outsourcing – it is a dilemma faced by businesses of all size in most every industry. A metalworking company, for example, may need to decide whether it is more cost-effective to build their own tool to fabricate a new part or simply outsource the work to a contract machining company who specializes in the service. A large enterprise may be faced with a decision to build their own CRM system to manage a growing prospect database for their specialized product or buy an off-the-shelf package and customize it to meet their needs. And it is no different in the software publishing world, particularly when it comes to license management.

A key question for ISVs and embedded software engineers is whether they should create their own system for licensing and protecting their software or integrate a commercial management and protection solution along with professional services from a reliable 3^rd party vendor. Analyst firm Frost & Sullivan framed their opinion succinctly in a market report: “Developing an in-house licensing system can be expensive, slow, and risky. It requires an ongoing investment of significant resources to keep up with the growing needs of the company.”

Either way, there are several market, business, and technical considerations that enter the picture when evaluating whether it makes sense to build and maintain your own license management or use a 3^rd party solution. Let’s look at some of these factors:

Market Considerations

End users have dramatically changed how and where they work. The hybrid workplace has become the norm. The new mobile workforce expects to be able to access their applications from anywhere, on any device, whenever they need them. And their IT department wants to make sure users can access those applications securely and without breaking any licensing rules.

The manner in which people purchase software has changed as well. Pay for only what you use has become an overarching axiom for consumers across all industries, from insurance providers to sophisticated software applications. Consumption-based models have become popular for certain classes of software. To address this trend, ISVs need to be able to turn features and functionality on and off as needed and track usage for licensing and payment purposes.

Additionally, software users have become accustomed to “as-a-service” models like those popular office applications introduced by Microsoft, Adobe, and other market leaders. Subsequently, ISVs must be able to adapt their business model to a subscription or usage-based service to keep up with competitors and address changing consumer preferences and expectations.

Business Considerations

As the market evolves and consumer preferences change, ISVs must be in a ready position to adapt their business models, delivery options, and pricing strategies as market demands. From a software monetization standpoint, the license management solution must be flexible enough to enable publishers to take advantage of emerging revenue streams by quickly adjusting new pricing and licensing models or product configurations as the opportunities present themselves.

Publishers must also protect their IP as piracy makes a significant impact on the bottom line. Ensuring that software is made resilient against piracy, counterfeiting, and tampering is critically important. Protection mechanisms need to be built-in while continuously monitoring and updating with state-of-the-art technologies to stay ahead of would-be attackers.

ISVs must also consider the operational aspects of licensing and entitlement management. Are there enough resources to focus attention on the administrative aspect to efficiently integrate the entitlement management system into existing ERP, CRM, and other back-office processes? The business process to create, deliver, and manage licensing should be automated and operate seamlessly within the office environment. Frost and Sullivan elaborated on this point: “A home-grown solution is tempting but can prove to be costly to implement and maintain: the addition of a new licensing model, for example, may require a full development cycle. This can severely burden development teams, impact roadmaps, and draw out time-to-market for new product releases.”

Technical Considerations

Engineering resources are typically scarce as programmers have their hands full in just doing what they are trained to do – developing and launching new applications and updates with enhanced features and functionalities to meet their customer needs. It can place an undue burden on existing resources to stay abreast of the latest emerging licensing and protection technologies in addition to developing software. For example, hackers continue to try and outpace security protections to steal IP, illegally copy, and counterfeit software. Organizations require the expertise, whether internal or from external experts, to integrate the latest encryption, authentication, and protection mechanism to keep a step ahead of the nefarious hackers.

Another technical consideration is the ability to create and implement a self-service licensing system that provides customers with direct access to and control over their software licenses. Modern licensing systems enable end-users and resellers the ability to activate, return, and manage the complete license process. This simplifies access for users and relieves some of the license management burden for the ISV. However, it is yet another set of skills, expertise, and resources required to create and maintain the license portal on the ISV side.

If you find yourself in the position of evaluating your current software licensing system and determining whether it suits your current and future needs, I invite you to look at our CodeMeter licensing and protection solution. We have an abundance of resources on our website, including white papers, case studies, use cases, technical webinars, and more, that can help you through your assessment and decision-making process.