App Producers Must Adapt to Business Climate Changes

Thriving in a changing business climate means adapting business models and operations, and applying best-in-class people, processes and technology.

Producers are seeing the greatest potential in providing mobile apps (51 percent), supporting virtualization (45 percent), offering subscription-based licensing (43 percent), embracing public cloud computing (41 percent) and the Internet of things (IoT) (37 percent).

While producers find potential in how cloud computing can affect their bottom lines, there is still a concern for risk. With respect to the cloud, 38 percent of respondents said a high impact today is around security concerns. In 12 to 24 months, 15 percent said there will be cloud impacts around supporting new business models and lifecycle processes.

The Internet of things (IoT) continues to be a hot area for organizations, especially as customer experience drives brand loyalty. While 32 percent of respondents said IoT is having a high impact today on customer satisfaction, only 30 percent confirm they are seeing a high impact on security. In light of the recent IoT hacks, we will continue to monitor for any significant impacts producers will see around supporting new business models.

The business climate has shifted away from the days of the “perpetual” license; today, customer purchasing demands call for services via a subscription. This shift is creating instability in producer’s revenue and software monetization models. Only 26 percent of producers today said that all their revenues comes from perpetual licenses. Within the next two years, that figure will drop to 14 percent. Producers must act now by offering a variety of licensing models to accommodate this seismic shift in consumer needs.

New technologies and rapidly changing environments are making it easier for businesses to fall out of license compliance. For example, have employees downloaded software from the Internet without paying for it? Are employees sharing their access IDs with others? There are many ways in which customers can, intentionally or inadvertently, use software beyond the terms of their license agreement. This leads to revenue leakage from producers and is rampant across organizations, with 63 percent of producers saying that customers are out of compliance.

One of the biggest findings from this survey is how producers are lagging when it comes to adopting best-in-class software monetization practices to automate critical operations around software licensing and entitlement management. Thirty-eight percent of survey respondents have difficulty in quickly packaging and bundling features to create different product versions to meet changing market needs and customer demands. An additional 35 percent cite difficulty in managing customer entitlements, and 33 percent find issues in supporting “try-and-buy,” trial and evaluation licensing.

Producers are largely suffering as a result of not implementing or automating critical operations around software licensing and entitlement management. For example, 58 percent of producers report difficulty enabling customers to manage their own software entitlements, 55 percent have had difficulty ensuring enforcement of their software licenses in virtualized environments and 45 percent report difficulty protecting their software against unauthorized use.

Most organizations have heavily invested in automated systems to track their operations, customers and the customer lifecycle, including both front and back offices. Software monetization solutions can automate these functions as they apply to the software license lifecycle, especially in managing the back office when it comes to customers, customer self-service and software entitlements. According to the survey, a majority of producers still have not automated their back offices by implementing entitlement management systems. For example, 58 percent develop and maintain their own entitlement management system to address some of these needs, and 22 percent have done nothing.

Just like entitlement management, automating licensing helps maximize efficiency and revenue, while allowing customers to buy the software using the business model that makes sense to them. However, it’s a widespread problem, as producers are failing to implement automated licensing. In fact, 61 percent of producers do not adopt best-in-class automation. Instead, they develop and maintain their own systems that only address some of their needs. While 17 percent report doing nothing, only 35 percent use a purpose-built commercial licensing technology.

Software monetization strategies and technology enable producers to very flexibly package and sell their software in myriad ways to appeal to different types of buyers. As the survey revealed, producers that have not implemented automation—or those that have built their own systems in-house—would have a rough time offering the various and evolving monetization strategies demanded in a global marketplace, and adapting to rapidly changing, highly competitive market conditions.

Software monetization can help organizations remedy revenue leakage, and quickly and effectively mitigate the impacts to their customers caused by mergers and acquisitions. If you’re affected by these business climate changes, there are four key software monetization process areas (pictured) that should be considered when formulating a strategy to positively impact your revenue streams.