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Software Industry Trends in Licensing

Software Industry Trends in Licensing 3 Strategies for Optimizing Revenues Through Electronic Licensing. Walter Marek Sr. Sales Engineer Macrovision Corporation. AGENDA. Software Industry Trends 3 Revenue Optimizing Strategies. Paper license. Paper license + node lock. Paper license

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Software Industry Trends in Licensing

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  1. Software Industry Trends in Licensing 3 Strategies for Optimizing Revenues Through Electronic Licensing Walter Marek Sr. Sales Engineer Macrovision Corporation

  2. AGENDA • Software Industry Trends • 3 Revenue Optimizing Strategies

  3. Paper license Paper license + node lock Paper license + node lock + concurrent user 1 company = 1 application 1 company = many applications 1 company = many applications + modules 1 company = many applications + modules X acquired companies 1 company = many applications + modules X acquired companies X Web service components Need for Software Audit Compliance … + +Usage based +On-demand +Activation +Try & buy +Mobile user Paper license + node lock + concurrent object + subscription Demand for CustomPricing Software Industry Is Undergoing A Crisis in Complexity 90’s 80’s Today

  4. Global Software Market Software industry growth is slowing… Log Worldwide Software Revenues ($) 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Source: IDC Beacon III Software Forecastertm

  5. We take full advantage of all the capabilities of our software Existing software assets are underutilized Thinking about the major software applications that drive your business, with which of the following statements do you most agree? Software Capability Usage by Respondent or Company Size N = 352 Source: IDC Survey of Line of Business Managers, 2003

  6. Customers are getting smarter… Customers have begun to collect and use information to: Enhance productivity: • Understand how to use software to improve their lives, or improve the way they do business Cut costs: • Analyze current behavior and determine ways to cut costs and increase business benefits of software usage Gain visibility: • Compare data on aggregate to help them determine what they should buy, and how much of it they really need Optimize purchases: • Negotiate with software vendors and to optimize software spend

  7. The software business has never been more challenging! Vendor

  8. AGENDA • Software Industry Trends • 3 Revenue Strategies

  9. Price intelligently Achieve deeper account penetration by offering multiple pricing models Package creatively Appeal to new market segments with configurable product packages Prevent unlicensed use Protect your IP and convert unlicensed users into paying customers Given their growth challenges, software vendors are adopting 3 revenue strategies: 1 1 2 2 3 3 All enabled by strategic use of licensing throughout the product lifecycle

  10. “Pricing is the Biggest Lever Affecting Profitability” STRATEGY #1:Price Intelligently Raising price by 1%… …increases profit by 7% 101 15 14 “1% increase in pricing delivers an additional 7% increase in earnings on average.” Operating Profit 26 100 COGS 59 Sales Fixed Costs* Average economics for ISVs between $100 million and $10 billion in sales Source: McKinsey & Co. Oct. 2003

  11. Many Publishers Price Products for One User Type.… STRATEGY #1:Price Intelligently $ Revenue Developer

  12. Many Publishers Price Products for One User Type.… And Leave Significant $ Behind STRATEGY #1:Price Intelligently Manager $ Revenue Tester Developer Many Companies Set Pricing for One Market Segment.… And Leave Significant $ Behind

  13. SOLUTION: Gain Deeper Account Penetration by Offering Multiple Pricing Models STRATEGY #1:Price Intelligently Usage Simon Bute Mary Jones John Smith Ralph Cox Dan Rapp John Mox Kyle Cool Fred Hiss Ernie Ho Joe May Sue Trix Jeff Sox Cary Ng Jim Grif Kati Did Gail Bit

  14. SOLUTION: Gain Deeper Account Penetration by Deploying Multiple License Models STRATEGY #1:Price Intelligently Usage

  15. EVIDENCE: Wind River is pioneering Utility Pricing STRATEGY #1:Price Intelligently

  16. Price intelligently Achieve deeper account penetration by aligning price with value Package creatively Appeal to new market segments with configurable product packages Prevent unlicensed use Protect your IP and convert unlicensed users into paying customers Given their growth challenges, software vendors are adopting 3 revenue strategies: 1 1 2 2 3 3 All enabled by strategic use of licensing throughout the product lifecycle

  17. Many Publishers Package Products for One Market Segment.… STRATEGY #2: Package Creatively $ Revenue All Features

  18. Some Features Most Features Many Publishers Package Products for One Market Segment.… And Leave Significant $ Behind STRATEGY #2: Package Creatively $ Revenue All Features

  19. SOLUTION: Appeal to New Market Segments with Configurable Product Packages With one binary executable offer… STRATEGY #2: Package Creatively Limited Functionality License Models: • 15 day trial • Locked + Permanent Student Edition Most Functionality License Models: • 30 day trial • Locked + Permanent • Floating + Expiring Engineer Edition All Functionality License Models: • 60 day trial • Locked + Permanent • Floating + Expiring • Project Pricing Based on Usage Accountant Edition

  20. EVIDENCE: Autodesk Case Study STRATEGY #2: Package Creatively

  21. Price intelligently Achieve deeper account penetration by aligning price with value Package creatively Appeal to new market segments with configurable product packages Prevent unlicensed use Protect your IP and convert unlicensed users into paying customers Given their growth challenges, software vendors are adopting 3 revenue strategies: 1 1 2 2 3 3 All enabled by strategic use of licensing throughout the product lifecycle

  22. Complexity = Non-Compliance STRATEGY #3:Prevent Unlicensed Use >50% of software customers in medium and large companies are managing more than 40 software contracts 33% are managing more than 70 70% say the complexity of managing these contracts has increased in the last year

  23. Customers admit that there is no way they can be 100% compliant Magnitude of the Compliance Problem STRATEGY #3:Prevent Unlicensed Use Vendors estimate non-compliance at 20% This amounts to a $40B problem 41% of the largest software vendors are relying on the honor system to ensure compliance.

  24. Prevent Unlicensed Use…. STRATEGY #3:Prevent Unlicensed Use Segment C $ Revenue Segment B Segment A

  25. Unlicensed Usage Prevent Unlicensed Use…. …And Convert Into Paying Customers STRATEGY #3:Prevent Unlicensed Use Segment C $ Revenue Segment B Segment A

  26. Level of Security Depends on theNature of Your Customer Base STRATEGY #3:Prevent Unlicensed Use Hackers—provide extreme technology to prevent copying Casual Copiers—provide enough resistance to thwart copying Honest Users—help keep honest customers honest

  27. EVIDENCE: Macromedia Case Study STRATEGY #3:Prevent Unlicensed Use

  28. EntitlementManagement System Software Activation request License Product ActivationIntegrate Installation and Licensing BONUS STRATEGY #4:Automate License Distribution Publisher Enterprise Customer

  29. 3 Revenue Strategies + Bonus Price intelligently • Gain deeper account penetration by deploying multiple license models Package creatively • Appeal to new market segments with configurable product packages Prevent unlicensed use • Protect your IP and convert unlicensed users into paying customers Combine installation and licensing • Create a great end user experience for licensing 1 1 2 2 3 3 4 4

  30. THANK YOU! www.Macrovision.com

  31. MACROVISION BACKGROUND • NASDAQ: MVSN, founded 1983 • Digital Value Management Solutions (software, movies, music) • $85B+ software protected • 50,000+ customers • On 500,000,000 desktops … 90%+ of market • Worldwide support & professional services • 700+ patents worldwide in licensing & DRM • Global Leader in Software Value Management

  32. Software Development Management Software Inventory Management Software Value Management Track, Manage & Retire Publisher Build Market Sell Distribute Service Renew Track, Manage & Retire Enterprise Prepare &Deploy Buy Maintain Renew SOFTWARE VALUE MANAGEMENT S o f t w a r e L i f e c y c l e M a n a g e m e n t

  33. Market Sell Distribute Service Renew Market Sell Distribute Service Renew Prepare &Deploy Buy Maintain Renew Prepare &Deploy Maintain Renew Buy SOFTWARE VALUE MANAGEMENT Publisher Enterprise

  34. Market Sell Distribute Service Renew Partner Apps Installation Connector Utility Pricing Enhanced Security Promo- tions Licensing Operations Updates Connector Repack- aging LicenseMgt Reporting PartnerApps Prepare &Deploy Maintain Renew Buy COMPREHENSIVE SOLUTION FOR SVM Publisher Common FLEXnet Platform Enterprise

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