A look at the historical evolution of software including EDA and CRM systems – and why you shouldn’t build your own software licensing and entitlement management solutions.
Recently we were working with a software producer in the Boston area who was considering building their own software licensing and entitlement management functionality.
This struck us as particularly odd since this company’s products had nothing to do with software monetization, and we weren’t sure what they really knew about what was needed to build the required functionality, much less in a scalable and flexible way.
While there are many reasons why software producers should not build their own software licensing and entitlement management solutions, we looked at the historical perspective of how “building your own” has evolved into specialized software industries outside of software monetization.
EDA (Electronic Design Automation) Software
In the early- to mid-1980’s semiconductor companies designed their chips using manual methods – placing logic gates and manually routing them. Circuits grew exponentially to keep up with Moore’s Law, which meant that they were just too complex to be designed with manual methods, and when they did design the chips themselves it simply took too long.
Beginning in the mid-1980’s, large semiconductor houses like IBM, HP and Intel all developed their own CAD (Computer Aided Design) tools to automate semiconductor design processes. These tools consumed vast amounts of resources – hundreds of people, tens of millions of dollars, and a LOT of time. Despite the inefficiencies this homegrown method to chip design did provide these leading companies a competitive advantage as they could design chips faster and more efficiently than their competition, handling even larger designs.
In the late 1980’s and early 1990’s, the EDA industry was born to meet the increasingly complex needs of product design, especially as it relates to semiconductor design. These commercial, purpose-built solutions could quickly simulate, synthesize, place and route chip design.
Interestingly, the large companies mentioned before (IBM, HP, Intel) recognized that the solutions they were building were no longer providing a competitive advantage, not adding incremental value and not worth the continued reinvestment as commercially viable solutions were now available. Since they couldn’t keep pace with the rapidly changing requirements of chip design they and many other high-tech manufacturers looked to these commercially available design tools – and a $5B EDA industry was born.
There are thousands of other examples where specialized software cropped-up to meet a market need that companies previously built themselves. Take the CRM (Customer Relationship Management) software industry, which started as companies built their own tools to manage customer information on top of their ERP (Enterprise Resource Planning) platforms. Fast forward to today where almost all companies across the world have adopted cloud-based CRM solutions.
Software Monetization Evolution
As commercial software adoption exploded in the 1980’s and 1990’s, many software producers built their own software monetization functionality, including software license key generators. Over time, complexity in software monetization has increased as producers respond to market demands which have evolved well beyond basic license key generators to include use rights management solutions, electronic software delivery and more.
Bottom line: Software producers should learn from history and not build their own software monetization functionality since homegrown solutions divert companies from their core competencies, tend to lack scalability and don’t stand the test of time like a commercial software monetization solution can.
After all – if you were in the market for a payroll system, would you build it yourself? Or would you look to a commercially available, proven solution that can scale with your business?
-Mike & Ben
Read the eBook, “10 Reasons to Buy a Purpose-built Software Monetization Solution“