safenet ems showcase: today's evolving licensing landscape
DESCRIPTION
"Today's Evolving Licensing Landscape" by Amy Konary, Research Director, Software Pricing, Licensing, and Delivery, IDCTRANSCRIPT
Copyright 2007 IDC. Reproduction is forbidden unless authorized. All rights reserved.
Today’s Evolving Licensing Landscape
Amy KonaryAmy KonaryDirector, Software Pricing and LicensingDirector, Software Pricing and Licensing
IDCIDC
04/14/23 2© 2008 IDC
Tectonic ShiftsTectonic Shifts
•Perpetual -> Subscription•On-Premise -> SaaS•Clear -> Cloudy
•License Broadly -> License Narrowly•License Opaque -> License Transparent•License Afterthought -> License Strategic•License Haphazard -> License Deliberate
04/14/23 3© 2008 IDC
Why is this Happening?Why is this Happening?
The software industry is maturing
Customers are dealing with a complexity crisis
There is a price-performance-value disconnect
New delivery models and hybrid software/service vendors are gaining acceptance
Underlying technology is changing (multicore, virtualization, etc.)
04/14/23 4© 2008 IDC
Software Industry LandscapeSoftware Industry Landscape
Perpetual
Subscription
LICENSING APPROACH
Service
Product
DELIV
ER
Y A
PP
RO
AC
H
These approaches can be mutually exclusive!
Software as a
Service
88% of WW
software revenue in 2009
88% of WW
software revenue in 2009
04/14/23 5© 2008 IDC
What’s Wrong with this Picture?What’s Wrong with this Picture?
To survive, vendors must continuously push new products and features, making software more costly and complex to obtain and manage
Customers believe that they only use 16% of the capabilities of their software
These customers are overserved
Because software is so costly and complex, a population of underserved customers exist
Overserved and underserved customers are attracted by a solution that provides most if not all of the features they need at a fraction of the cost and complexity
04/14/23 6© 2008 IDC
New Software Value FrameworkNew Software Value Framework
ProductProductDefined by vendorValue typically based on cost to vendor of bringing the product to market
ExperienceExperienceDefined by customer/ vendor interaction
Value based on ease, intuitiveness, and quality of the experience
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The VOMIT Chart
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Experience-Based Value CreationExperience-Based Value Creation
SubscriptionConsumptio
n
Outcome
Capacity
Metering/Tracking
ServiceImpo
rtan
ce
Pre
vale
nce
04/14/23 9© 2008 IDC
Total Software Revenue Mix, 2006-2014Total Software Revenue Mix, 2006-2014
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
SubscriptionMaintenanceLicense
20%
6%
1%
‘09-’14 CAGR%
04/14/23 10© 2008 IDC
Subscription is Here- VendorsSubscription is Here- Vendors
1. Of the top 100 software vendors worldwide by revenue, 40% report subscription revenues
2. For 13% of the top 100, subscription represents greater than 50% of total software revenues
3. Salesforce.com is the only pure-play SaaS provider to make it into the top 10 vendors according to software subscription revenue
4. Projected growth in SaaS impacts the subscription forecast, with SaaS-revenues making up 32% of the overall subscription forecast in 2008 and 33% in 2009.
5. 2009 Spending on SaaS (est $9.5B WW) is YoY growth of 42% vs. All software: (3.4%) vs. All Applications (5.6%)
04/14/23 11© 2008 IDC
Licensing Model AttractivenessLicensing Model Attractiveness
Q: Please rate the attractiveness of the following (1-7 scale). A pricing model which:
0 1 2 3 4 5 6 7
involves unpredictablecosts over time
is value-based
is tied to usage, like autility
taps OPEX
involves predictablecosts over time
reduces CAPEX
Source: IDC Software Pricing Survey, April 2009N=326
04/14/23 12© 2008 IDC
Cloud Services Definition Cloud Services Definition
Consumer and Business products, services and solutions delivered and consumed in real-time over the Internet
Cloud Services
Shared, standard service – built for a market (public), not a single customer
Solution-packaged – a “turnkey” offering, integrates required resources Self-service – admin, provisioning; may require some “on-boarding”
support Elastic scaling – dynamic and fine-grained Use-based pricing – supported by service metering Accessible via the Internet/IP – ubiquitous (authorized) network access Standard UI technologies – browsers, RIA clients and underlying
technologies Pulished service interface/API – e.g., web services APIs
NOTE: Cloud Services is a mix of technical and business model attributes.
Key Attribut
es
“casual description”
04/14/23 13© 2008 IDC
Why Cloud?Why Cloud?
Q: Rate the benefits commonly ascribed to the 'cloud'/on-demand model (Scale: 1 = Not at all important 5 = Very Important)
Source: IDC Enterprise Panel, 3Q09, n = 263
54.0%
63.9%
64.6%
67.0%
68.5%
75.3%
77.7%
77.9%
0% 10% 20% 30% 40% 50% 60% 70%80% 90%
Seems like the way of the future
Sharing systems with partners simpler
Always offers latest functionality
Requires less in-house IT staff, costs
Encourages standard systems
Monthly payments
Easy/fast to deploy to end-users
Pay only for what you use
Source: IDC, September 2009
% responding 3, 4 or 5
04/14/23 14© 2008 IDC
What’s in it for Software Vendors?What’s in it for Software Vendors?
Increase competitiveness– Allows lower entry price for customers
– Improve customer experience
– Get out in front of public market competitors who may be slow to launch subscription pricing
Increase predictability of license revenues – Public market valuation metrics reward
subscription pricing and recurring revenue business models
Decrease management/sales pressure to close marginal deals at the end of the quarter
– Remove customer pricing leverage
– Increases importance of customer satisfaction in ongoing “sales” process (e.g. product management commitments & customer support)
04/14/23 15© 2008 IDC 15
Two Likely Reactions at this Point in the PresentationTwo Likely Reactions at this Point in the Presentation
1) 2)a 2)b
04/14/23 16© 2008 IDC
Case Study: Siebel and Salesforce.com Case Study: Siebel and Salesforce.com
MORE FUNCTION-
ALITY
HIGH-COST PERP. LICENSE
TRADITIONAL DEPLOYMENT
LARGE ENTERPRISE PARTNERS
LOW-COSTSUBSCRIPTION
SERVICE DEPLOYMENT
SMB PARTNERS
LESS FUNCTION-
ALITY
“I believe I have never encountered them competitively in nine years. And I am absolutely satisfied that they do not have a business model.”
Tom Siebel on Salesforce.com(Source: destinationCRM 10/2002)
04/14/23 17© 2008 IDC 17
Underlying Technology Change by the NumbersUnderlying Technology Change by the Numbers
By the end of 2009, VMs will outnumber physical servers
By 2012, VMs outnumber physical servers 2:1
VMs per server has increased from 3.0 in 2005 to 6.3 today and will rise to 8.0 in 2012
50% of the workload described as production
10-40 fewer servers acquired on average annually
70% are very satisfied with virtualization
04/14/23 18© 2008 IDC
A Delicate BalanceA Delicate Balance
•Simplicity/Complexity•Adaptability/Predictability•Existing Clients/New Clients
Technology Must Play a Key Role
04/14/23 19© 2008 IDC
Software Licensing TechnologiesSoftware Licensing Technologies
III.Entitle
Characterized by: Saleable software Execute a contract License as a verb
Markets include: Entitlement management License generation Electronic store
IV.Deliver
Characterized by: Movement of software from
repository to customer Formally the fulfillment role
Markets include: License fulfillment Electronic store Software distribution
I.Create and
Manage
Characterized by: Code generation tools Version repository Approval workflow
Markets include: Code management Product life-cycle management Internal release management Product launch
II.Configure
Characterized by: Creating salable software Aligning SKUs for delivery
Markets include: Product life-cycle management BOM management
VI. Control
Characterized by: Audit function DRM License metering
Markets include: Software asset management Purchase support Price analysis
V.Install
Characterized by: Proper install/removal
Markets include: Software installation Software configuration
management
InsideVendor
BetweenVendor andEnterprise
InsideEnterprise
III.Entitle
Characterized by: Saleable software Execute a contract License as a verb
Markets include: Entitlement management License generation Electronic store
IV.Deliver
Characterized by: Movement of software from
repository to customer Formally the fulfillment role
Markets include: License fulfillment Electronic store Software distribution
I.Create and
Manage
Characterized by: Code generation tools Version repository Approval workflow
Markets include: Code management Product life-cycle management Internal release management Product launch
II.Configure
Characterized by: Creating salable software Aligning SKUs for delivery
Markets include: Product life-cycle management BOM management
VI. Control
Characterized by: Audit function DRM License metering
Markets include: Software asset management Purchase support Price analysis
V.Install
Characterized by: Proper install/removal
Markets include: Software installation Software configuration
management
InsideVendor
BetweenVendor andEnterprise
InsideEnterprise
04/14/23 20© 2008 IDC
Licensing Technology Forecast by PhaseLicensing Technology Forecast by Phase
0
200
400
600
800
1,000
1,200
1,400
2007 2008 2009 2010 2011 2012
Phase 5&6
Phase 3&4
Phase 1&2
($M)
Source: IDC Software Product Lifecycle Management Forecast, Dec. 2008
15% CAGR
12% CAGR
9% CAGR
04/14/23 21© 2008 IDC
Role of Licensing Technology- Case StudiesRole of Licensing Technology- Case Studies
Enable more flexible licensing
Floating or concurrent models
Sub-feature licensing
“Real-time” licensing
Enable trials
Generate more revenue/improve margins
Reduce the number of SKUs
Stop “giving away a lot of software” due to piracy or non-compliance
04/14/23 22© 2008 IDC
Mask complexity
Move away from error-prone, manual processes
Move away from physical protection
Reduce the number of SKUs
Improve the customer experience
Create a unified view of licensing
Work more smoothly with partners
24x7 self service capabilities, up-to-date reporting
Better intelligence
GROWING PAINS
Role of Licensing Technology- Case StudiesRole of Licensing Technology- Case Studies
04/14/23 23© 2008 IDC
ChallengesChallenges
Connecting licensing to KPIs.
Sometimes workarounds, usually manual processes, ensure KPIs are met even when current systems have shortcomings
Identifying the licensing champion
Getting the attention of senior management
Making a strong connection between licensing and customer/partner satisfaction
Making a clear connection to lost revenue due to noncompliance
Realizing that any approach will take time and money.
04/14/23 24© 2008 IDC
GuidanceGuidance
Policy is the best Policy
Choice is Good
Flexibility is where it is all going, but need to mitigate complexity with:
Education
Communication
Technology
Not a question of if, but when
Take head out of sand
Your customers are moving on, with or without you