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Opportunity: Software Licensing Revenue Recovery

 
 
By Michael Vizard  |  Posted 2015-12-22
 
 
 
 
 
 
 
 
 
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    1 - Opportunity: Software Licensing Revenue Recovery
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    Opportunity: Software Licensing Revenue Recovery

    For software vendors and, by extension, their channel partners, the lack of visibility into how software is being used creates revenue leakage.
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    2 - Best Sources of Upside for ISVs
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    Best Sources of Upside for ISVs

    Mobile apps (51%), virtualization (45 %), subscription-based licensing (43%), embracing public cloud computing (41%) and the Internet of things (37%) are cited as having the most growth potential.
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    3 - Greatest Sources of Risk
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    Greatest Sources of Risk

    Nearly half (48%) cited security. Only 20% of respondents see risk associated with bring-your-own-device practices, while mobile apps and public cloud were cited by 18% and 17%, respectively.
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    4 - Role of the Internet of Things
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    Role of the Internet of Things

    32% cited IoT is having a high impact on customer satisfaction, while 30% said it is having a high impact on security. In the next 12 to 24 months, 16% said that the IoT will cause a significant impact on business models.
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    5 - Impact of the Cloud
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    Impact of the Cloud

    38% said cloud security is still a concern. In 12 to 24 months, 15% of respondents said the cloud will impact business models and lifecycle processes.
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    6 - Impact of Virtualization
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    Impact of Virtualization

    29% said security concerns are having a high impact. In 12 to 24 months, 13% said virtualization will affect lifecycle processes.
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    7 - Impact of Mobile Computing
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    Impact of Mobile Computing

    Customer satisfaction (34%), new product innovation (33%) and security concerns (33%) are all high-impact issues. In 12 to 24 months, 17% of respondents said they will feel the effect of mobile in both the security arena and supporting new business models.
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    8 - Licensing Options
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    Licensing Options

    Only 51%, offer "try-and-buy" options, and 49% offer variable-licensing models to accommodate customer preference. Only 47% package different product variants to accommodate unique market needs. Still fewer, 39%, offer upgrade paths to more expensive software versions. Only 23% offer "freemium" licenses. And just 20% offer mobile versions of their software.
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    9 - Dependence on Perpetual Licensing
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    Dependence on Perpetual Licensing

    Just over a quarter (26%) said that all of their revenue comes from perpetual licenses. Within two years, this will shrink to 14%. But 61% said half or more of their revenue still comes from perpetual licenses today. Within two years, this will decrease to 54%.
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    10 - Dependence on Usage-Based Licensing
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    Dependence on Usage-Based Licensing

    Today, 17% of producers said that half or more of their revenue comes from usage-based licensing models. Within two years, that will increase to 21%.
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    11 - Usage of Licensing-Management Systems
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    Usage of Licensing-Management Systems

    61% do not rely on a commercial licensing system. Rather, they develop and maintain their own licensing systems in-house to address at least some of their needs. Only 35% use a purpose-built commercial licensing technology.
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    12 - Software Revenue Leakage
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    Software Revenue Leakage

    Software license non-compliance is rampant. A full 63% said that customers are out of compliance in that they're using software beyond what they're entitled to use.
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    13 - Levels of Software-Licensing Automation
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    Levels of Software-Licensing Automation

    The majority of producers still have not automated their back offices by implementing entitlement-management systems. In fact, 58% develop and maintain their own entitlement-management systems to address at least some of their needs. In contrast, 22% do nothing, while 19% use a proprietary, custom extension of their ERP/CRM systems. Less than a quarter (23%) use a purpose-built third-party commercial entitlement management system.
 

A high number of software vendors continue to rely on traditional software licensing models, and most of them know that customers are using their software well beyond the scope of their licensing agreements, according to a new survey conducted by Flexera Software, a provider of software licensing-management tools. For software vendors and, by extension, their channel partners, the lack of visibility into how software is being used creates revenue leakage, yet most software vendors don't seem to be doing much to plug the gap. The study, based on a survey of 580 professionals working at software vendors, finds that the majority rely on home-grown systems to track licensing. On the plus side, the survey finds that software vendors are optimistic about future growth, thanks to the rise of mobile computing, virtualization, cloud computing and the Internet of things. But given the complexity of the licensing schemes involved, many vendors may not be in a position to take advantage of those opportunities. That may be disappointing to channel partners that often prefer to team up with software vendors based on the amount of licensing revenue they can generate per customer engagement.