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Best Practices in Software Monetization Strategy - A Customer Perspective

12 Dec 2012 | by Avni Rambhia
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Software License Management solutions are designed to help independent software vendors (ISVs) and device vendors to efficiently monetize their products. The three main functions SLM systems perform are: defining software versions and licensing rules (development); automating license issuance and invoicing (deployment); and ensuring that software is used in accordance with terms of a purchased license (enforcement). While many mature and functionally comprehensive solutions are sold commercially today, the market itself is far from saturated. Frost and Sullivan estimates that only a quarter of software sold today uses commercial LM systems, while over a half of the software market uses home-grown solutions.

One of the key challenges the market faces is that the return on investment for an SLM solution is hard to measure. License Management systems were originally built with the goal of preventing piracy and thus maximizing monetization of software. Over time, complex business models, automated back-office infrastructure and evolving platforms have resulted in high functional demands on an LM system. At the same time, software is ultimately a collection of digital bits and bytes, and  evolving technology makes it easier and faster for pirates to reverse engineer software and tamper with security routines. Over time, nearly every past-generation license management solution has been hacked, and several current generation solutions are considered compromised as well. The industry is drinking it's own proverbial kool-aid, with a widely held belief that software piracy cannot be prevented and maybe not even controlled. Accordingly, most SLM vendors today position their solutions in terms of keeping honest users honest (as opposed to preventing intentional piracy). In effect, software license management solutions are being built and positioned primarily as entitlement management solutions, even though most products still include include anti-tamper protection features.

The problem is, losses from piracy are real and hurt an ISV's bottom line. More importantly, they hurt an ISV's customer's bottom line. Illegal software users have lower cost of business and can consequently afford to undercut pricing offered by legal software users. As markets globalize and economies remain challenged, pirates are able to win more business and flourish while legitimate users see shrinking profits and eventually shrinking workforces. Customer demand, and an ISV's need to maximize their own profitability, are making piracy management an increasingly critical important component of an overall software monetization strategy.

In a recent white paper, we talk about customer-centric best practices in crafting and implementing an effective software monetization strategy. The paper is available for download here. We also presented a joint webinar with Wibu-Systems exploring best practices in software monetization strategies. The webinar discusses technical trends in the ISV market that lead Frost and Sullivan to recommend that ISVs strongly consider adopting commercial LM solutions in lieu of homegrown systems, and ensure their license management strategy encompasses both piracy management and entitlement management components. It also provides a comprehensive overview of Wibu-Systems' CodeMeter solution, which is among the few solutions on the market that strongly emphasizes its software and hardware security capabilities. You can register to view a recording of the webinar here.

If you are a software publisher, what license management solution do you use today? What factors influenced this choice? How are you evolving your software monetization strategy for 2020? We'd love to hear from you, and answer any questions you might have.

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