The benefits of cloud computing have been touted all throughout technical journals as companies have the opportunity to leverage key capabilities that were previously out of reach. The opportunity to shift all responsibility for the management of key platforms and software is appealing, unless you’re a software vendor driving revenue through software licensing. Offerings through the cloud, it seems, are creating new challenges.
According to a recent eCommerce Times post, software vendors are facing new challenges to meeting their business objectives. A survey of independent software vendors conducted by Vanson Bourne on behalf of Gemalto (News - Alert) last year determined that the majority were dealing with an escalating array of organizational issues when it came to monitoring and monetizing the capabilities of their software.
The shift in the market is clear as consumers and businesses are no longer interested in downloading or acquiring software. The preference has solidly shifted to on-demand, subscription or usage-based consumption alternatives. As a result, independent software vendors can no longer rely solely on traditional software licensing models and instead must pursue new approaches to design and monetization.
Of the independent software vendors who responded to the survey, 91 percent reported that they were experiencing challenges in their software licensing, while 88 percent were experiencing challenges in software packaging and bundling. More than 80 percent reported a need to adapt to the evolving needs of the market, while at the same time developing software packaging that could meet the needs of a variety of customers already using their solutions.
Software licensing issues have definitely hurt the bottom line for many of these vendors. According to the survey, 54 percent reported they had lost revenue as a result of licensing issues. Likewise, 68 percent shared that they didn’t have visibility into the use of their products, making it difficult to determine how to enhance the software on a continuous basis for optimal market appeal. As the Internet of Things continues to take hold in user behaviors, the problem is expected to continue to get worse without a real change in approach.
As software is embedded into everything in the Internet of Things, there are growing opportunities for revenue recognition. The key here is for independent software vendors to adapt their strategies and tactics to support this new way of doing things. The problem is that 70 percent of those vendors don’t have complete clarity on how they can monetize in this new arena, which could leave them on the outside looking in.
The challenges to software licensing in the age of cloud computing and the shift to the Internet of Things are very real, but so too are the opportunities. The vendors who are able to recognize how they fit into the new model will come out ahead and more profitable, leaving others quickly behind.
Edited by Maurice Nagle