Most CIOs would prefer to be freed from the ongoing burden and rising cost of managing software license compliance. It's one of the primary reasons why open source software subscriptions -- that don't require traditional licenses -- are so appealing. It's also a key driver of pay-as-you-go cloud service adoption.
Forward-looking software vendor executives also acknowledge the apparent shortcomings of the legacy licensing model. Some are choosing to change. Others are stubborn and continue to seek ways to extend the life of an obsolete approach to revenue attainment.
Demand for Short-Sighted Software Monetization
The three software license management (SLM) functions include defining software versions and licensing rules (development), automating license issuance and invoicing (deployment) and ensuring software is used in accordance with terms of a purchased license (enforcement).
The latest global market study by Frost and Sullivan discovered that market participants are gradually shifting away from business models based on traditional user- and site-based licensing policies to monetization models centered on the actual use of on-premises and cloud software.
In response to this trend, the SLM market earned slightly less than $300 million in 2013 and is expected to cultivate more than $425 million by 2018.
Across all key verticals -- desktop application software, embedded software within intelligent devices and cloud-based applications -- there remains scope for current and new vendors to find growth worldwide.
SLM solutions are gaining in popularity as they enable software vendors to efficiently monetize their products -- particularly for enterprise, networked, and cloud-based deployments. Unfortunately, they typically don't solve the root problem for end-customers -- CIOs and their Line of Business leaders.
While business-to-business (B2B) software publishers are the most mature users of software monetization technologies, intelligent device manufacturers are becoming a growing end-user segment.
"With the rise of the Internet of Things, embedded device vendors are actively embracing SLM technologies to limit counterfeiting on the production line, achieve dynamic adjustment of product stock keeping units (SKU) after deployment, and manage complex licensing models," said Avni Rambhia, industry manager at Frost and Sullivan.
As SLM solutions become more user-friendly and compatible with new deployment models -- such as virtualization and mobile cloud computing -- they could attract other vendors to the field, but it's a market opportunity that's likely to be short in duration. Eventually, even the most inflexible software developers will migrate towards the subscription or pay-as-you-go business model.