Key Trends in Software Pricing and Licensing Survey: Producers Profiting from the “Appification” of the Enterprise

Survey Background

The 2013-14 Key trends in Software Pricing and Licensing survey was conducted by Flexera Software with input from IDC’s Software Pricing and Licensing Research division under the direction of Amy Konary, research vice president - software licensing and provisioning at IDC. This annual research project looks at software licensing, pricing and enforcement trends and best practices. The survey reaches out to executives at application producers (Software vendors and intelligent device manufacturers) and enterprises who use and manage software and devices. Now in its ninth year, the survey is made available to the industry at large each year.

Methodology and Sampling

In total 1,828 respondents participated in the survey, including 430 enterprise participants and 1398 application producer participants.

Enterprise Demographics

41% of the enterprise respondents were from larger enterprises of $1 billion or more in revenues and 27% were from companies with $3 billion in revenues or more. Among other places, 56% of respondents were from North America, 28% were from Europe, and 7% were from Australia.

Application Producer Demographics

The largest segment of application producer respondents (60%) come from companies with $10 million and under in revenues. 3% of the respondents were from companies with $1 billion or more in revenues. Among other places, 47% of respondents are from North America, 23% from Europe, and 13% from Australia.

Introduction

The proliferation of consumer devices and apps, which do everything from control our homes to monitor our heart rate, has made an entire generation of users accustomed to employing software in highly tailored ways to accomplish specific tasks. Those consumers are also employees – and their growing comfort with technology is driving Bring Your Own Device (BYOD) and consumerization of IT trends within organizations. And this is resulting in demand for the same user-friendly, tailored, task-oriented software experience in the enterprise that employees experience at home. It’s driving the “appification” of the enterprise.

In an “appified” enterprise – the application itself takes central stage. As much as possible, all activities and underlying processes are transparently and seamlessly contained within the application, regardless of who is using it and where it’s being used. So, for instance, the complexities of licensing, platform compatibility and environment should be masked, empowering the employee to simply accomplish her task without distraction.

We already see the appification of consumer software. Consumers have a need (i.e. “I’d like to map my daily runs”), so they go to an app store (i.e. ITunes, Google Play, Windows App Store), click on the app that will accomplish their task, pay for it, a license is issued entitling them to use it according to specific terms, they download it and start using it – all within a span of seconds. Behind the scenes, the automated app store is handling the software licensing, entitlement management and delivery, thus creating a seamless, user experience that masks the complexity.

Enterprises have significantly more complex needs than individuals. And therefore traditionally enterprise applications have also been significantly more complex. Yet flexibility, breadth and simplicity are the new market requirements. And application producers can do more to automate key processes, such as software licensing, entitlement management and delivery to create a more application-centric experience for enterprise users. And they have good reason to do so.

Application producers are eager to cater to the evolving needs of enterprise workers to grow their businesses. In recent years we’ve seen a cascade of change in the enterprise software sector – from new software delivery models (i.e. virtualization, cloud, Software-as-a-service) – to new approaches in developing applications (i.e. agile development, mobile app development) accommodating a market eager for a familiar, consumer-like experience in the workplace.

While consumer app producers are often venture-backed and able to forego short term profits for long term market share, most enterprise application producers do not have that luxury. Fierce competition and finite target markets that must be quickly won in the business-to-business sector mean that producers simultaneously need to innovate for a consumerized IT environment, and profit from it quickly. This points to the need for flexible software monetization models -- enabling producers to easily package, monetize and protect their intellectual property – the appification of the enterprise.

This report examines how enterprise application producers are transforming their business models to profit from the appification of the enterprise.