Worldwide Software Pricing and Licensing 2014 Top 10 Predictions

IDC's worldwide software pricing and licensing 2014 top 10 predictions are:

  1. Software Subscription Revenue Will Continue Its Rapid Growth Trajectory, Increasing by $12 Billion in 2014, a 20% Increase Over 2013.
  2. Software License Complexity Will Indirectly Cost Organizations an Average of 25% of Their Software License Budgets by 2015.
  3. Seeking to Increase Revenue, Software Vendors Will Initiate Twice as Many Audit Requests in 2014 as in 2013.
  4. Owing to Negative Customer Feedback and Bad Press, at Least One Major Software Provider Will Reverse a Major Licensing Policy in 2014.
  5. Organizations Will Increase Their Investments in Software Asset Management by 35% Over the Next 18 Months.
  6. Because of the Rise of 3rd Platform Investments and the Spending Shift from IT to Line-of- Business Budgets, 60% of Operational Spending on Software Will Come from the LOB by 2017.
  7. Mobile Enterprise Software Apps Will Be Used by 80% of Licensed Users by 2015, But These Apps Will Drive Less Than 5% of Total Enterprise Software Spending.
  8. Usage-Based Software Pricing Models Will Be an Option for 80% of Applications by 2017.
  9. Discount Levels on Perpetually Licensed Software Will Continue to Trend High in 2014, at 50– 80% Off of List License Price.
  10. Software Licensing Policy Will Cause More Than Half of Organizations to Substantially Modify Their Plans for Private Clouds by Mid-2015.

IN THIS STUDY

Throughout conversations with software vendors, enterprises, and other technology firms, IDC has developed refined trends and validated our thinking about the effect that key trends will have on software licensing spending, policy, and management over the next two to three years, with particular focus on developments in 2014. This study presents IDC's top 10 predictions for software licensing and pricing and a description of the ways that these predictions will impact IT buyers. Also included are IDC's recommendations for IT buyers in light of these predictions.

SITUATION OVERVIEW

The software industry is going through a phase of dramatic change with the advent and adoption of 3rd Platform technologies. This driver, as well as other key drivers, is leading to the obsolescence of traditional pricing models, the development of new pricing models, and making pricing models more important than ever that IT buyers understand licensing and manage software licenses effectively. This top 10 predictions document will help IT buyers understand what types of shifts to expect, how these shifts will impact IT buyers, and how to capitalize on these key industry dynamics.

Key Drivers for the Software Pricing and Licensing Top 10 Predictions

There are many external factors that have a direct or an indirect impact on software pricing and licensing. IDC has identified economic, social, and technology forces that are shaping our software pricing and licensing top 10 predictions for 2014, as discussed in the sections that follow.

Rapid Adoption of 3rd Platform Solutions (Mobile, Social, Cloud, and Big Data)

A combination of factors are actively driving the adoption of the 3rd Platform technologies, some of which are an evolution of previous drivers (including lower cost and ease of use) and other factors are brand new. The adoption of 3rd Platform solutions is helping drive the adoption of subscription pricing models. IT buyers should also expect to see models that enable flexible access to applications and consumption-based pricing models.

IDC is observing that IT buyers are building investment plans not just around cloud, social, mobile, or Big Data but around business solutions that include two or three solutions — or all 3rd Platform solutions together. However, the transition to 3rd Platform business models will happen incrementally. During the transition and beyond, IT buyers will have to contend with a complex hybrid mix of onpremise/ cloud, perpetual/subscription, and PC/mobile software.

Explosion of Applications and Licensing Models

Software is everywhere! From vending machines to cars to wristwatches, software is bringing the "Internet of things" to life and forever changing consumer and business experiences. Along with the proliferation of software, there is an explosion of ways to monetize these software. At the same time, many of the tried and true ways of pricing software (such as one-time perpetual license fees) will remain. Software vendors and device manufacturers are offering IT buyers new and more flexible ways of licensing software. While choice can be a good thing, many of these models are inherently complex. It's not clear that anyone will figure out how to balance simplicity and flexibility in software licensing anytime soon. In the meantime, it is clear that IT buyers will be licensing (and managing) more software via a wider variety of software pricing models.

Customer Expectation for Increasing Levels of Service

The levels of complexity in software licensing are unacceptable to many IT buyers — and the software providers themselves. This complexity creates challenges throughout the software purchase and management process, directly resulting in investments in time and money with little or no value-add. In the past, IT buyers had little choice but to bear the burden of managing this complexity. However, new market entrants with "good enough" technologies and much simpler and transparent business practices are offering real alternatives to traditional software. This development, as well as an overall industry focus on improving the software customer experience, is helping drive improvements in software pricing and licensing.