I stumbled across an interesting Gartner blog this morning that features a series of posts “SaaS vs Software” — all very interesting. In one of his more recent posts SaaS vs Software: Their Licensing Needs to be Integrated, Guy Creese (the blog’s sole contributor) begins to explore licensing. He starts by acknowledging that while everyone is talking about the need for a single platform that can run in-house or in the cloud, not a lot has been written about the growing need for a single licensing model as well. Definitely an interesting read, I recommend checking it out!
First of all, I’d promised myself I would not write about Apple just based on how popular the topic is. Obviously, I’ve broken that promise. What strikes me most though about Apple’s current success is how it seems to go against the currently espoused play-book for success. Secondly, does Apple’s focus on hardware actually result in better software development practices?
In my role I meet with many hardware and device manufacturers. One theme is very consistent: Historically, we ignored our software as it was only really there to facilitate or drive our high value hardware sales. Now though we are looking to monetize our software as we find hardware is becoming commoditized. They want help from us to help them protect, manage and deliver their software. As I mentioned, this driver is one of the most prevalent trends in our overall industry today.
A few weeks ago I tried to download a trial version of a software package from a pretty well known ISV’s website. It wasn’t a huge file and should have been a relatively quick download. Unfortunately, that wasn’t the case. After numerous attempts and spending a frustrating hour trying to download the trial, I decided to forgo the whole thing.
I’m not the first or the last person that has had this type of experience. Yet, it continues to surprise me at how little thought it seems some ISV’s put into their Electronic Software Delivery (ESD) solution. The software download process is part of the customer experience and should be treated as such by the ISV. A good experience could be the first step in a long lasting customer relationship; a bad experience may turn away the customer completely.
Let me start of by apologizing to both Apple enthusiasts, and those on the other end of the spectrum who expected this to be an discussion about the much debated iPad. It is not. While passions run high about iPad’s place in today’s market one thing is clear. Whether its time is now later is a moot point. What it does is shine yet another spotlight on the changing face of technology. The iPad builds on momentum created by the iPhone that is dramatically effecting how we consume technology.
So what does all this have to do with licensing. The new workforce is comprised of a generation that cannot live within the strict boundaries traditionally defined by IT. They also see the unprecedented access afforded by applications like iTunes as something expected, rather than their predecessors, that still struggle with the piracy implications. They expect their software to be consumed in the manner most convenient to them, be it the home laptop, iPhone or iPad. Ask yourself how often you’ve wanted to access your favorite on-line service and just assumed that there must be “an app for that”. I have iPhone apps for most of the web applications for which I used to use my laptop (hurry up United, you’re lagging).
At a recent event for SafeNet Amy Konary made an interesting comment based on analysis performed by IDC. On average end users of enterprise software felt as though they utilized only 30% or so of the availability of that application. That is, they were not getting benefit from up to 70% of the software’s features and functionality. (Amy please forgive me if I don’t have those %’s exactly right but it was in that range) The conclusion reached from this observation is that software should be better dissected so that people only pay for the pieces they want.
The conclusion seems logical enough but I’ve struggled with it ever since. Firstly, if it’s true, why have rational economic buyers still purchased software en masse? Many financial analysts believe that software spending was one of the first sectors to bounce back from the recent economic turmoil.Secondly, are there any other normally functioning markets that have similar traits? Lastly, why do end users on average only use 30% of the available capabilities?
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!
I don’t know if they teach this in every MBA program, but I am sure you have heard that every business case can be boiled down to a certain number of “P”s. It is just a question of how many…some have 4 P’s, some have 5; but in this world of Twitter and brevity, I am going to go with the three that matter most when you think about creating licensing approaches for software: Piracy, Portability, and Profitability.
Most people in the US subscribe to bundles of TV content that is packaged through a 3rd party. There might be 3 or 4 tiers to an offer. A while ago, those people that packaged TV content for you also started to offer on demand services (or pay-per-view). Over the last few years – the ratio of the on demand to the all-you-can eat model has started to shift. Increasingly people use Netflix, Hulu, and iTunes to consume only the shows they want to watch (and usually ad-free too!). Read how an estimated 800,000 US households abandoned their TVs for the web.
The math is pretty simple. Most people are lucky if they spend less than $700 a year for cable. If you could buy only the shows you want to watch at $8.99 with Netflix ($110/year) and 15 must see shows at $40/season – $600. Together that adds up to about the same you might pay for an entry level subscription. If you watch more than that, go with your monthly plan. For a lot of people – the ability to just consume what they want is compelling and driving a big move towards pay-per-view. The internet and the iPad are also changing how you can get and watch content.
It’s not surprising that within the circle of licensing system vendors, one of the topics that comes up time and again is whether hardware-based (dongle) or software-based licensing is better. At SafeNet, we don’t understand the question. We provide the best-in-class solutions as all software, all hardware, or uniquely, as a hybrid licensing solution.
The list of pro’s and con’s regarding one solution over another is meaningless without understanding the context in which the solution is to be applied. I’ll try to correct the misinformation that’s out there about dongles. You can judge for yourself if you think I am biased, but since we offer every flavor of solution (dongle or soft), I don’t have anything to gain in this fight.