Wireless Connectivity

It is no secret that the way in which software is monetized is undergoing a profound and relatively rapid transformation. The medium for the delivery of new software and updates not only is moving from traditional physical forms, but the way software is licensed is also transitioning. All of this translates into one common denominator, the future of software delivery and monetization is in the cloud.

An illustration of just how important the cloud has become for software developers as they look for the best means to quickly monetize the fruits of their efforts, secure their intellectual property and offload back-office tasks so they can concentrate on what they do best – create great software – is highlighted in a new study by software monetization market leader SafeNet (News - Alert), Inc. and the Software & Information Industry Association (SIIA).

The result of a joint survey of more than 600 software developers and 200 enterprise software end users reveals current trends, adoption rates and drivers of cloud-based software delivery. The bottom line here is that independent software vendors (ISVs) see their bottom lines growing by looking to the cloud.

The numbers regarding ISVs cloud adoption reflect a paradigm shift

What follows are the key survey findings. Each item is food for thought on just how fast and how far the paradigm for the delivery and monetization of software is moving and the fact that the cloud-based delivery is emerging as the new model.

Cloud Adoption Trends

• 65 percent of software publishers report offering all or a portion of their portfolios as a cloud service, and on average, cloud services comprise 24 percent of a typical company’s software portfolio.
• Approximately one-third of software publishers have yet to offer cloud-based services
•  75 percent of the respondents have plans to offer at least some of their product portfolios as a service in the next year.
• Of those with mixed portfolios (i.e., both cloud and non-cloud offerings), the percentage of cloud offerings is expected to remain steady at 25 percent.
• During the next five years, the cloud will continue to grow as a percentage of overall portfolios for publishers, even though the number of publishers with no cloud presence will remain steady at 25 percent.

“Cloud-based software delivery is attractive to software publishers and end users alike, most often because of the promise of increased transparency, more flexible business models and perceived operational simplicity,” said Michelle Nerlinger, Vice President at SafeNet. “The ability to reap these benefits is strongly dependent on a software publisher’s ability to effectively track, control and manage their applications in an automated and operationally effective manner. This means that the implementation of effective licensing and entitlement management techniques will be key to achieving software monetization success in the cloud. For transitioning or hybrid software publishers, a platform capable of managing on-premise and cloud applications in tandem will be absolutely critical.”

Understanding Publisher and End-User Adoption Drivers

• 62 percent of respondents said the reason to offer cloud-based services is to reduce the operational costs associated with product delivery, activation and support
• 46 percent cited improving customer experience by “reducing end-user headaches”
• 48 percent named the ability to access new and niche markets
• 33 percent believe the cloud will be beneficial for improving usage tracking
• 32 percent responded that the cloud would enable a faster time to market

In addition, sixty-one percent of software publishers that have already adopted a cloud-based software delivery approach confirm the validity of these expectations by reporting a positive financial impact, due to reduced operations costs or increased revenue. Reinforcing that, only six percent of respondents reported a negative financial impact or security threat once introducing cloud-based software delivery.

Software publishers are not alone in their desire for the flexibility and transparency promised by cloud-based software delivery.

• 35 percent of enterprise end users reported inflexible licenses that don’t meet organizational needs as the number one headache related to software consumption
• 14 percent of enterprise end users cited cloud-based services as their top software licensing model preference
• 16 percent specifically identified a metered billing method as their preferred pricing model

“At the SIIA, we’re watching with great interest how cloud-based software delivery has changed and continues to change over time,” said Rhianna Collier, Vice President of the SIIA’s Software Division. “We’re expecting to see a rise in the adoption of software-as-a-service as developers and users alike look to take advantage of the benefits that the cloud can offer.”

Obstacles to Adoption

The path to the clouds is however not going to be an easy one as the survey revealed. 55 percent of software developers do not see their organizations as “cloud-ready.” In rank order respondents concerns were:

• 36 percent had security concerns about data in the cloud
• 25 percent perceived cost and complexity of the transition from on-premise as the biggest obstacles to true cloud readiness
• On average, respondents said it would take 16 months to make all or a portion of their product portfolio cloud-ready
•  26 percent believed that they could never move their offerings to the cloud

While this is a bit disconcerting, the obstacles should be looked at as challenges rather than impediments. There is an old saying that, “No is just a deferral to the time you will say YES!” This should be the case for those concerned about security, transition issues and the time it will take to get a portfolio “cloud-ready.”

It is also an opportunity to change some of the disbelievers into believers. In fact, survey co-sponsor SafeNet is already providing software monetization solutions that address end-user concerns on all of the issues above. It has developed a series of sound recommendations for developing an efficient and effective software monetization strategy for ISVs. These are:

1.       Create a software monetization blueprint that aligns with business objectives

2.       Price and package software the way customers want to consume it

3.       Accept that IP is vulnerable and implement tools to mitigate risk

4.       Build licensing into the back office, don’t just drop it in

5.       Leverage usage tracking and entitlement data to drive future business decisions

6.       Think like an end user

To learn more about the full survey, download a copy of the SafeNet and SIIA State of Software Monetization Executive Summary at www.safenet-inc.com/softwaremonetizationmatters


Edited by Stefania Viscusi