Sponsored by Flexera Software LLC
Overview of Survey Findings
The 2010 Key Trends in Software Pricing and Licensing Survey of 234 participants, prepared jointly with IDC, found that software vendors and their enterprise customers, increasingly challenged by the current economic downturn, are looking for better strategies to derive more value for their organizations through software licensing and pricing. While, not surprisingly, some of those strategies diverge between vendors and customers, many are complementary and serve to strengthen the positions of both. Some of the key findings include:
Cloud Computing on the Rise
The 2010 survey reveals that cloud computing is on the minds of software producers, who are planning on a significant market shift towards private and/or public cloud-based models. 60% of producers indicated that their licensing will need to adapt to the cloud over the next two years, and 30% expect that the change will be significant.
Implicit in this trend will be the need for both producers and enterprises to manage the heightened complexity associated with cloud-based computing. For producers and high-tech manufacturers, this means more sophisticated entitlement and compliance management. For enterprises, this means more sophisticated software asset management and software license optimization to ensure, among other things, continual compliance.
Increased Emphasis on Usage
The survey also reveals an increasing demand for more flexible licensing models, which in turn is going to fuel the demand for more sophisticated application usage tracking tools. For instance, 22% of producers currently offer usage-based pricing (up from 15% in 2009), and over the next two years 41% expect to offer usage-based pricing.
In the midst of this shift, while 70% of enterprises report that tracking software license usage is important, one-third of the software producers that have or plan to have usage-based pricing do not track usage at all today – not even manually. Just over 50% that have or plan a usage-based pricing model in the next two years are offering tools to help their customers track application usage. For both producers and enterprises, the ability to track and understand current usage is a prerequisite to making an intelligent decision to migrate to a usage-based model. Thus, both sides will have to acquire better tools as this pricing model takes hold.
Producers Still Lagging in Usage Tracking & Enforcement
The 2010 survey indicates that despite the growing complexity of software licensing models and increased enforcement, producers are not adequately tracking software usage. 43% of Producers indicate that either they do not monitor software usage or they do not know if they do. Likewise, 13% of Producers indicate that they still have not implemented any means of enforcement, although this number is a vast improvement over 2009 when 28% reported that they had no enforcement mechanisms. These numbers belie the growing importance of software compliance and speak to an absence of industry-wide standardization and automation of software usage tracking and enforcement.
Preferred Enforcement Mechanisms Converging
Given that software license enforcement is a necessary reality, the 2010 survey indicates a convergence of both producer’s and enterprise’s preferred enforcement mechanisms. Overwhelmingly, 66% of enterprises prefer network-based licensing enforcement, up from an already-strong 60% in 2009. Software producers are responding to this preference, with 46% now reporting that they use networking licensing (more than any other method), up from 28% last year. This enterprise desire matches the findings around trends towards more usage-based licensing models.
Software Audits: A Growing Reality
13% of software producers report in 2010 that they use compliance team audits as an enforcement mechanism. While this number is low compared to other methods, including serial number checks (39%), product activation (36%) and dongles (24%), audits are on the rise. Last year only 3% of producers used audits as a compliance mechanism. Looking forward, 18% of producers expect the use of audits to increase over the next two years. This increase in audits, often initiated as a result of mergers and acquisitions, and changes in environment such as virtualization, while adding to the producers’ coffers can also add tension to the relationship between producer and customer. Tools that help producers and enterprises better track usage and ensure continual compliance would ultimately serve both parties more effectively by better identifying under- and over-utilization and spreading the costs to the parties actually using the licenses.
Value Satisfaction – Is Value Equal to Price?
Software producers and enterprises are largely in agreement that pricing models capture the value of the software. The survey asked enterprises to rate their satisfaction of pricing for database, middleware, ERP, CRM, engineering and desktop applications. Most respondents indicated they were largely satisfied. Enterprises were most satisfied with database software pricing -- with only 10% of respondents registering dissatisfaction; they were least satisfied with ERP software pricing, but not by a significantly higher amount -- only 20% registered dissatisfaction.
79% of software producers, likewise, said that their company’s pricing and licensing strategies captured the value of their software effectively. Notwithstanding current satisfaction levels, producers also understand that their customers want more choice in licensing models. Most producers are increasing the flexibility of licensing by adding more choice. They are doing this in order to generate more revenue (72%) and improve customer relations (69%).