Our most recent analysis of the software licensing and monetization market shows that some core value propositions endure even as the technology and its applications undergo significant evolution and change. Software licensing solutions were originally created with the goals of preventing piracy and protecting revenue of software products.

While anti-piracy remains a core feature today, the crux of the value proposition has shifted toward monetization. Moving far beyond functions such as floating license management and metering, modern SLM solutions serve to bridge chasms between finance, marketing, sales, and engineering teams. This trend is closely correlated with how software businesses are evolving. Software publishers are moving away from perpetual licensing and fixed-product editions in response to growing customer demand for usage-based pricing and growing use of the cloud. As the IoT revolution continues to gain traction, hardware and embedded manufacturers (and their customers) are transforming into software-based, data-driven businesses capable of offering software-activated features rather than rigid SKUs. Companies can no longer afford delays of weeks or even days for customer requirements to filter in via marketing or sales, then be implemented or customized by engineering, and finally deployed to the client. Orders need to be fulfilled within hours if not minutes, with automation and tight inter-departmental integration becoming increasingly crucial for competitive agility. IoT, analytics, and instant-on deployments are driving transformation of how products are built, selected, sold, and deployed. The age of custom-built, specialized hardware is ending.

We are in the business-at-the-speed-of-cloud age, where connectivity, data, and analytics are transforming every aspect of business models and processes. Across the many industries and markets that Frost & Sullivan’s analyst community covers, such as industrial automation, healthcare, and telecommunications, we are finding that profit margins are growing fastest and revenue growth is most stable for companies that are pivoting toward a software mindset. This is not a straightforward transition by any means, and it is fraught with challenges and risks. SLM technologies serve as a key enabler of this transition and an experienced SLM vendor is an invaluable partner for companies – particularly intelligent device manufacturers – seeking to modernize and fully bring the power of software and software-based business models to bear on their ongoing growth strategy.

Even as we see more and more companies across a growing number of verticals embrace commercial SLM solutions for their value proposition and favorable total cost of ownership, there is still considerable use of solutions developed in-house, particularly for the server and back-end components. The advent of SaaS monetization solutions that automate metering, invoicing, billing, and renewals is causing growing confusion among customers as they try to differentiate between solutions for orchestrating business operations, SaaS monetization, and full-fledged SLM solutions. Specifically within the area of licensing enforcement, we continue to see a transition from hardware-based enforcement (using so-called dongles) toward electronic enforcement. While hardware is by no means headed for obsolescence, increased connectivity and lower costs and complexity lend increasing favor to electronic enforcement wherever feasible. Which brings us full circle to another key finding; counterfeiting, piracy, gray manufacturing, data theft, and malware infection remain serious threats for software and software-powered products. We find that modern SLM solutions are effective at tackling these threats while preserving product quality, reliability, and performance. With piracy becoming a problem that’s solvable by technology, the focus of the industry is now shifting toward more comprehensive monetization and optimization.

We find that SLM revenues will approach the half-billion US dollar mark by 2022, rising to protect more than 45 billion dollars’ worth of software and software-powered products in that timeframe. North America is experiencing a surge in adoption, particularly in the embedded segment, while long-term growth prospects are strongest in the APAC region. From a competitive perspective, Gemalto is now the leader of the SLM market, having acquired long-time market leader SafeNet. Also worth noting is the increasing demand among smaller publishers for basic protection for their products as global expansion inevitably places revenues and IP at risk. There are a growing number of low-cost vendors that cater to this demand, however high start-up costs for deploying full-fledged SLM solutions remain a barrier to entry. In addition to the uptake of commercial SLM solutions by SMBs and major publishers, rapid adoption by embedded manufacturers and cloud-based services results in encouraging long-term growth prospects for the market.

Click here to learn more about our latest research on the SLM market. We’re always happy to discuss its implications for your specific business – please reach out to us via email or twitter. You can also view an in-depth discussion of the implications of the IoT paradigm and software-defined businesses on embedded industries here.