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Today’s Evolving Licensing Landscape Amy Konary Director, Software Pricing and Licensing IDC
Tectonic Shifts ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Why is this Happening? ,[object Object],[object Object],[object Object],[object Object],[object Object]
Software Industry Landscape Software as a Service 88% of WW software revenue in 2009 Perpetual Subscription LICENSING APPROACH Service Product DELIVERY APPROACH These approaches can be mutually exclusive!
What’s Wrong with this Picture? ,[object Object],[object Object],[object Object],[object Object],[object Object],X
New Software  Value Framework Product ,[object Object],[object Object],Experience ,[object Object],[object Object]
The VOMIT Chart
Experience-Based Value Creation Subscription Consumption Outcome Capacity Metering/ Tracking Service Importance Prevalence
Total Software Revenue Mix, 2006-2014 20% 6% 1% ‘ 09-’14 CAGR%
Subscription is Here- Vendors ,[object Object],[object Object],[object Object],[object Object],[object Object]
Licensing Model Attractiveness ,[object Object],Source: IDC Software Pricing Survey, April 2009 N=326
Cloud Services  Definition   Consumer and Business products, services and solutions  delivered and consumed in real-time over the Internet Cloud Services   ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Key  Attributes “ casual  description”
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
What’s in it for Software Vendors? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Two Likely Reactions at this Point in the Presentation 1) 2)a 2)b
Case Study:  Siebel and Salesforce.com   MORE FUNCTION-ALITY HIGH-COST  PERP. LICENSE TRADITIONAL DEPLOYMENT LARGE ENTERPRISE PARTNERS LOW-COST SUBSCRIPTION 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)
Underlying Technology Change by the Numbers ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
A Delicate Balance ,[object Object],[object Object],[object Object],[object Object]
Software Licensing Technologies
Licensing Technology Forecast by Phase ($M) Source: IDC Software Product Lifecycle Management Forecast, Dec. 2008 15% CAGR 12% CAGR 9% CAGR
Role of Licensing Technology- Case Studies ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Role of Licensing Technology- Case Studies
Challenges ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Guidance ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

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SafeNet EMS Showcase: Today's Evolving Licensing Landscape

  • 1. Today’s Evolving Licensing Landscape Amy Konary Director, Software Pricing and Licensing IDC
  • 2.
  • 3.
  • 4. Software Industry Landscape Software as a Service 88% of WW software revenue in 2009 Perpetual Subscription LICENSING APPROACH Service Product DELIVERY APPROACH These approaches can be mutually exclusive!
  • 5.
  • 6.
  • 8. Experience-Based Value Creation Subscription Consumption Outcome Capacity Metering/ Tracking Service Importance Prevalence
  • 9. Total Software Revenue Mix, 2006-2014 20% 6% 1% ‘ 09-’14 CAGR%
  • 10.
  • 11.
  • 12.
  • 13. 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
  • 14.
  • 15. Two Likely Reactions at this Point in the Presentation 1) 2)a 2)b
  • 16. Case Study: Siebel and Salesforce.com MORE FUNCTION-ALITY HIGH-COST PERP. LICENSE TRADITIONAL DEPLOYMENT LARGE ENTERPRISE PARTNERS LOW-COST SUBSCRIPTION 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)
  • 17.
  • 18.
  • 20. Licensing Technology Forecast by Phase ($M) Source: IDC Software Product Lifecycle Management Forecast, Dec. 2008 15% CAGR 12% CAGR 9% CAGR
  • 21.
  • 22.
  • 23.
  • 24.

Notas del editor

  1. Seismologists have long been predicting a major shift in the software licensing landscape- it's no longer a question of if, but when. With so many forces working together to alter the status quo, it's no wonder that traditional licensing practices are no longer effective, or relevant. This IDC presentation will identify the shifts we are observing in the industry, and how these are changing the fundamentals of pricing and packaging software. The speaker will also provide guidance to software publishers that are trying to adjust to new market realities as well as plan for the future.
  2. This is a classic IDC showing the varying approaches to software delivery and licensing that paint the market landscape. Most software today is still delivered as a perpetual, on-premise product. However, that is changing.
  3. Copyright 2007 IDC. Reproduction is forbidden unless authorized. All rights reserved. Title of Presentation Client The second signal of disruption, referred to as "type 2" disruption, is the ability to address the needs of nonconsumers. Nonconsumption can be found in two different forms: potential customers that are not using any products and those that may already have a solution implemented but aren't utilizing it or find that it isn't meeting their needs. This phenomenon of "competing against nonconsumption" enables a new population of customers to access a product (or in this case, a service) where none existed previously. To serve a new market, an entirely new value network (the ecosystem of companies and systems necessary for the production, delivery, and service of a comprehensive solution) often emerges to complement the innovator and its innovations. In the software industry, nonconsumers are companies that do not/cannot use application software because they lack the necessary skills or financial resources to do so. Nonconsumers for software could also be departments or individuals within a larger organization where the enterprise owns a license but only a select few have the expertise to utilize the application. To some degree, companies providing ASP services have attracted nonconsumers at small and medium-sized companies that want access to the same function-rich applications that large companies utilize. However, the Web-native applications providers built their businesses based on the needs of nonconsumers. These nonconsumers are found in small or otherwise IT resource–challenged organizations that were unable to implement enterprise software internally and therefore could not utilize it unless it was delivered in a less cumbersome way (in this case as a service), as well as in departments and regional offices of large organizations. In both cases, these nonconsumers are happy to have some functionality, even though these applications are not as mature as the packaged applications that dominate the software market today. In addition, these nonconsumers are attracted to the pricing model of Web-native applications providers, which does not include an up-front software purchase: Instead, customers pay one monthly subscription for the software and the hosting service. By entering the software market with "good enough" technology — and by competing against nonconsumption — Web-native application providers are establishing a strong beachhead in the software market. Over time, the lessons learned and the innovations that companies such as Salesforce.com, NetSuite, UpShot, and others are building into their solutions will enable these applications to begin tackling larger and more mission-critical tasks — and eventually, to disrupt the established software market with a less expensive alternative (see Figure 3).
  4. Copyright 2007 IDC. Reproduction is forbidden unless authorized. All rights reserved. Title of Presentation Client -> real value is the ease, intuitiveness, and seamless ness of the experience
  5. Title of Presentation Client Copyright 2007 IDC. Reproduction is forbidden unless authorized. All rights reserved.
  6. IDC has just finished updating it subscription and SaaS market forecasts. It’s interesting to note that most subscription revenue in the industry today is associated with on-premise software, not SaaS, but that SaaS makes up a growing portion of this segment. The final bullet provides a good comparison between the growth of SaaS, compared to all SW and all APPS WW. It also provides some guidance for makers of applications: that customers increasingly want the flexibility of SaaS delivery, and also that there is a faster growth trajectory for native SaaS applications, if you are a provider looking for a new path to market. During a tough economic time, resellers will always look to recurring revenue among the portfolio of what they sell, and ISVS are finding willing partners to take their offerings to customers.” Title of Presentation Client Copyright 2007 IDC. Reproduction is forbidden unless authorized. All rights reserved.
  7. Copyright 2007 IDC. Reproduction is forbidden unless authorized. All rights reserved. Title of Presentation Client Disruptive innovations typically have enabled a larger population of less-skilled or less-wealthy people to do things in a more convenient, lower-cost setting, which historically could only be done by specialists in less convenient, centralized settings. Disruption has been one of the fundamental causal mechanisms through which our lives have improved. Disruptive Innovation and Relevance to IT: Opportunity: Create new markets by using technology to reach customers with a fundamentally different business model New companies emerge that are not hindered by conflicts of interest Threat: Existing, often proprietary, systems are replaced by modular architectures Profit migrates to new areas in the value chain Salesforce.com is competing against non-consumption Type 1 disruption Salesforce.com is addressing over-served customers with a lower-cost business model Type 2 disruption