More than half of the companies out there that deliver B2B software have some sort of electronic license management embedded in their products. The lion’s share of this market belongs to home grown technologies, an unsurprising fact considering that the one thing software companies do is create software. The pros and cons of build versus buy have been well documented, and isn’t the topic of this article. What mystifies me is the glaring lack of metrics when it comes to this highly pervasive and extremely important issue.
At a recent conference our CEO asked: “What’s the average price of software?”
An interesting question. I started thinking about the mix of consumer vs enterprise, the uptake of subscription based and usage based pricing, and a host of other factors that left me spinning to the point I concocted a number way off the mark. I’ll preserve a little dignity and not share my answer, but ask that for a moment that you ponder the same.
I suppose the title of this article may provide a clue. So do you have your guess?
In speaking with our larger global customers I’ve noticed a troubling and difficult conundrum when it comes to software licensing trends. Firstly, ISV customers in established, advanced economies are demanding greater granularity and flexibility than ever before when it comes to how they implement and use software. In most cases the ISV’s are more than happy to oblige. Closer alignment of pricing and value creates happier customers, less discounting and more achievable up sell opportunities for the future.
One of the inherent dichotomies for software vendors exploring new pricing models is: Who do you talk to? The common response is “Discuss this with your existing customers – they know best” There’s only one problem with that. Your existing customers have already most likely validated your current licensing processes – via the act of purchasing your software. To put it another way, when they looked at your pricing and licensing models they most likely found them to be agreeable enough (or at least not a big enough impediment) to moving forward.
The risk then as you explore new software licensing and pricing models is that you poll your existing customers only. While they’re an important constituent they should not be the only constituent. You need to look at the potential customers who did not buy your solution. Find out why they decided to go in another direction.
I have spent the last couple of decades working for (not just with) major ISVs as the person responsible for “making it all work”. I was the guy the executive team tasked with putting a plan together that showed how we could protect our revenue stream, how we could give customers tools to keep themselves compliant, how we could get better insight into understanding our customers’ product deployment patterns, selecting the right licensing models and policies, selecting the right licensing technology and vendor… all while somehow engineering a good customer experience without upsetting the apple cart. Sound familiar?
As the head of new product development at SafeNet one of my key areas of focus is around bringing to market the types of tools and services ISVs need to help them manage the shift to the cloud – as you can imagine this means that I spend a lot of my time keeping an eye on what the industry is buzzing about!